Lock in "cyber security" word circle and other dot circles

Cybersecurity Ignorance is No Excuse for Tax Professionals

Image Credit: Pete Linforth from Pixabay

Co-authored with Lily Li and Kenny Kang. Mr. Kang is a Certified Public Accountant (CPA), Charted Global Management Accountant (CGMA), and Certified Fraud Examiner (CFE) with a wealth of experience in public accounting and industry.

CPAs and other tax professionals collect their client’s crown jewels: sensitive financial data. This makes them prime targets for cybercriminals. For hackers looking to make a quick buck, or engage in more sophisticated identity theft and tax fraud schemes, tax professionals are a treasure trove of social security numbers, tax ID numbers, bank account numbers, confidential agreements, and other personally identifiable information. Consequently, 3-5 tax practitioners get hacked each week, according to a 2017 webcast by the IRS criminal investigations unit – a number that has likely increased over the last couple of years.

In July 2019, IRS released its own statistics relating to identity theft:

IRS Individual Filing Article “Identity Theft Information for Tax Professionals”

[Page Last Reviewed or Updated: 24-Jul-2019]

An estimated 91 percent of all data breaches and cyberattacks begin with a spear phishing email that targets an individual. The criminal poses as a trusted source, perhaps IRS e-Services, a tax software company or a cloud-storage provider, or the criminal poses as a potential client or professional colleague. The objective is to get the tax professional to open a link or PDF attachment. This allows the thief to steal passwords or download malware that tracks keystrokes or gives the thief control of your computer. 

In light of the rise in cyberattacks against tax practitioners, the IRS has taken notice. For this year’s PTIN renewal season, the IRS has revised Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) (Rev. October 2019) by adding Line 11, which included a mandatory checkbox for tax preparers, requiring them to confirm their awareness of their data security responsibilities. Line 11, Data Security Responsibilities, states:

 As a paid tax return preparer, I am aware of my legal obligation to have a data security plan and to provide data and system security protections for all taxpayer information.  Check the box to confirm you are aware of this responsibility.

This affirmative checkbox applies to licensed tax attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, state regulated tax return preparers, certifying acceptance agents, and it should not come as a surprise for tax professionals.

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