As easy as technology has made it to file taxes quickly and get that all-important rebate deposited right into your bank account, it has also made it easier for thieves to steal your identity to commit tax fraud. Tax professionals are on the hook as well. They must follow scrupulous security procedures to ensure their clients’ data isn’t exposed.
The IRS has launched several initiatives to crack down on tax identity theft, but forewarned is forearmed. Here is what you can do ensure your data is secure when you hand it over to a tax professional.
In 2017, the IRS received 242,000 reports of tax identity theft. Tax identity theft is defined as someone using your social security number to file a tax return so they can receive your refund through fraud. Unfortunately, you won’t know what happened until you file your own return. It will be rejected by the IRS since it will look like someone else already filed under that name and social security number.
Tax identity fraud also occurs if someone gets a job using your social security number. The income isn’t taxed, so you wind up getting audited for unreported income.
Once you find out about all this, you have to spend time proving you’re you to the IRS and that other person isn't you. You get to fill out a form (of course), Form 14039 Identity Theft Affidavit. You may receive an identity protection personal identification number to prove you’re you afterward.
All this rigmarole delays your return and creates a ton of paperwork. It may take a year or more to fix everything.
The good news is that the number of cases has dropped by almost 66% since the IRS began a couple of programs to help taxpayers keep their records safe.
The Security Summit is a partnership between the IRS and state tax agencies, and the community of tax professionals. The initiative to fight identity theft formed a public awareness campaign called “Protect Your Clients; Protect Yourself.”
The intent is to let tax professionals know what their responsibilities are in the case of tax identity fraud perpetrated on a client. Also, the community is provided with ways to protect their clients from the theft, thereby protecting their business.
The initiative is exceptionally timely as tax and identity thieves have identified tax firms as rich veins of personal information to mine. Continuing to find ways to keep your information safe, the IRS also has added tax return preparer fraud to their “Dirty Dozen” list of tax scams.
It’s unfortunate that the technology that makes everything so much easier for us all helps bad actors as much as it does everyone else. Computers and digitization without appropriate security have made it quite easy for thieves to steal your personal information.
Consider how many ways your data can be exposed from the time you receive your W-2 and other forms through preparing and filing your return.
What If Your Tax Professional Get Hacked? Who’s Responsible?
Tax preparers have a legal responsibility to maintain, transmit, share, or store taxpayer data using competent safeguards. Taxpayer data isn’t limited to your social security number. It includes any information obtained or used in tax return preparation.
According to IRS.gov your tax professional is expected to:
In short, your tax professional, whether a tax preparer or a tax attorney, is responsible for keeping any data you give him or her safe. If the worst should happen, the firm or individual that exposed or lost your data has several steps to take.
The security experts’ jobs are to determine the cause and scope of the data breach, stop it, and prevent future breaches. In some places, the tax professional is required to offer free credit monitoring and identity theft protection to victims.
So, how do you know the tax preparer you select can be trusted? Do your research before giving over any of your personal information. Whether you are hiring one for the first time or have worked with a tax professional for years, do your due diligence.
Resources to check:
Tax season shouldn’t be open season on taxpayers. You can take steps to ensure your personal data is secure with your tax professional. Also, you are due various reparations if everything goes pear-shaped anyway.
Do your homework and ask all the critical questions before handing your life over to someone else.