The Law That Requires That All Tax Clients Review a Privacy Notice Is

Tax Return Preparers: Data Thefts and Protecting Client Tax Information

The Internal Revenue Service reminds tax render preparers that they are prime targets for identity thieves who seek information to use on fraudulent tax returns.

The IRS recommends preparers create a security programme. Publication 4557, Safeguarding Taxpayer Information, offers many helpful suggestions including a check list.

Safeguarding Taxpayer Data

Equally part of that security plan, the publication recommends preparers have:

• Height-notch security software that includes a firewall, anti-malware and anti-virus programs; brand sure they are set to automatically update then that the software can stay current confronting the latest threats; and consider having firewalls for both hardware and software.
• An education program for all employees to ensure they understand the dangers of phishing emails and other threats to taxpayer data. Publication 4557 has several items related to employees such as halting their access to the preparer's calculator systems if they go out employment.
• Strong passwords that are inverse periodically; consider having different levels of password protection. For example, have one password to access the computer arrangement and a separate password to access tax software or client files. That mode, if the computer arrangement is breached, maybe not all of the information will be exposed.
• Secure wireless connectedness. If Wi-Fi is used, protect taxpayer data by making sure information technology is password protected and encrypted email programs to commutation PII information with taxpayers.

Return preparers should also be certain to:

• Back up taxpayer data frequently, perhaps on an external hard drive, and ensure that the hard-bulldoze is kept in a secure location with express access past others.
• Store any paper files in a secure location.
• Access IRS due east-services weekly during the filing flavor and periodically throughout the year to see the number of returns filed using the preparer's EFIN. If the number is excessive, contact the e-Aid Desk for east-Services immediately.

Federal Laws Apply

Preparers too should exist aware of the federal laws that require safeguards.

In the Gramm-Leach-Bliley Act, the "Safeguards Rule" requires individuals involved in providing financial products or tax training services to ensure the security and confidentiality of customer records and information.

The Act's "Fiscal Privacy Rule" requires return preparers and others to requite their customers privacy notices that explain the financial establishment's data collection and sharing practices. In turn, customers have the correct to limit some sharing of their data.

Section 7216 of the Internal Revenue Code (IRC) imposes criminal penalties on taxation preparers who make unauthorized disclosures or uses of data furnished to them in connection with the preparation of an income tax render.

IRC Section 6713 imposes monetary penalties on the unauthorized disclosures or uses of taxpayer data by any person engaged in the business of preparing or providing services in connection with the preparation of tax returns.

Develop Information Theft Plan

The IRS also recommends preparers create a data theft program that they could enact should they experience a data loss.

The Federal Trade Commission outlines best practices for businesses that feel data theft. Its main guidance is bachelor at "Data Compromise and the Risk of Identity Theft: Guidance for Your Business." They include notifying:

• Law Enforcement — If local police are non familiar with investigating information compromises, contact the local part of the FBI or the U.S. Secret Service. As well, contact local IRS Stakeholder Liaison and so they tin contact IRS Criminal Investigation.
• Affected Businesses — For example, alerting the major credit bureaus that a data theft involving Social Security Numbers has occurred and that clients will be advised to place fraud alerts on their accounts.
• Individual Clients — This is the hard part, but the earlier clients are notified, the faster they can take activity to mitigate any damage. Likewise:
  • Discuss the timing with law enforcement to avoid impeding the investigation;
  • Designate a person responsible for releasing data. Communications is disquisitional. The FTC has a model letter that can exist used every bit a template to notify clients virtually the data theft.
  • Describe in any notice to clients what is known about the compromise, including how it happened, what data was taken and what deportment have been taken to remedy the situation.
  • Consider additional steps such as offering free credit monitoring for clients.

Contact

The IRS has updated its guidance to preparers including new procedures should they suffer a information theft. Preparers should contact the IRS Stakeholder Liaison for their land. Contact information is available on IRS.gov, keyword search Stakeholder Liaison.

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Source: http://www.nsacct.org/blogs/nsa-admin/2015/12/09/tax-return-preparers-data-thefts-and-protecting-client-tax-information

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