Cybersecurity for Accountants and Tax Professionals

Tax Season is over! As you know, taxes were officially due in the past few weeks, and if you’re an accountant or tax professional, chances are you’re still helping people and businesses complete last minute tax filings. As a matter of fact, roughly one-third of taxpayers file three weeks before they’re due! Within this time, accountants and tax professionals are handling millions of people’s personal financial data – data that is sensitive and prone to cyberattacks.

And, when considering the fact that many professionals work from home now,  the risk of data breaches among tax professionals is much higher than ever before.

Due to the extreme risk and sensitivity of billions of data from millions of people, the Federal Trade Commission has established strict cyber regulations and standards to follow in order to remain compliant.

That’s why it is mandatory for every tax professional to take the time to create a data security plan in 2022.

Map Out Your Accounting Firm Data Security Plan

Creating a data security plan for accountants may be overwhelming at first, but it doesn’t have to be. Your data is high risk, but planning your security will significantly reduce that risk.

The first step toward planning out your data security for tax professionals is establishing an information security program and assigning a coordinator and team. This needs to include employees who are well-versed in the data and know how to manage and control it.

Next, you want to identify data risks and evaluate measures to mitigate it. There are several types of clients you may work with as an accountant or  tax professional, which can include everyone from individual taxpayers to businesses. For this, we recommend organizing your firm’s data into four categories, and assessing the risk based on each one.

The Four Data Types For Accountants

The four types of data that tax professionals and accounts must use include:

  • High Priority Data
  • Medium Priority Data
  • Low Priority Data
  • Public Data

High priority data has the highest sensitivity, and, if compromised, would yield not only monetary complications, but legal complications as well. This might include financial information of large businesses that could seriously hurt them if their data was compromised. Breaches of this data would create irreparable harm for your firm and clients alike.

Medium priority data, while not as sensitive as high priority, still poses a risk of harm to the firm along with monetary and legal consequences. Data like this might include small to medium sized business information, as well as individual taxpayer data.

Low priority data is that of which poses minimal to no consequential risk, and could easily be repaired with effort and resources.

Public data, is as the name suggests, is data that is either available to the public, or would be harmless in the event that it got into hands outside of your accounting firm.

By creating these data categories, you get a better sense of your data environment and establish a database than can be protected accordingly. This organization also allows you and your colleagues to access accounting data more efficiently, and view only the information they need at the right time.

In the event of a breach, you can also easily pinpoint what type of data was breached, and follow the appropriate steps to fix the situation.

Develop a Plan of Action for Accounting Cyber Breaches

Once you have your data organized, your accounting firm should design and implement a safeguard program for your employees to ensure they are handling data properly. To do this, we recommend working with a cyber security expert for accountants to establish and maintain safety measures, and consistently test and update this program.

For an in-depth guide on how to create your plan, check out the Safeguarding Taxpayer Data guide provided by the IRS.

How to Follow Through With Your Tax Professional Cyber Security Plan

You have your data security plan, now it’s time to implement it into your organization. The easiest way to get your colleagues to follow through with the plan is to commit to the CIA. No, we’re not talking about the Central Intelligence Agency; the CIA we’re talking about stands for Confidentiality, Integrity, and Availability (CIA).

CIA is a three-pillar concept that serves as the foundation for all cybersecurity functions.

Confidentiality ensures that data is only being accessed by authorized viewers. Maintain the confidentiality of the data by following best practices of who has access to the data, how the data is stored and being aware of what physical and virtual storage types you are utilizing , how the data is accessed, and how the data is protected. This can be done through various methods, such as encryption, and security settings.

Integrity is when the data is kept in its original state, with no alterations. This is crucial for accountants and tax professionals, as you are constantly transferring financial information which could be easily edited, either intentionally and unintentionally. Protect the integrity of the data from becoming compromised by limiting who can make edits to files, keeping track of details and creation date of the file, along with edits, if any were made.

Availability maintains complete access to authorized users 24/7. In the event a client needs to access their data, it’s important to make sure they have the means to do so efficiently. Constantly review hardware and software that contains important data, along with your security settings, or work with a cyber security professional for accountants to ensure there isn’t anything preventing authorized users from viewing their data.

Keeping these three core aspects of cybersecurity in mind – Confidentiality, Integrity, and Availability (CIA) –  whenever your accounting team is dealing with sensitive data allows everyone to be alert to their actions, ensuring client data remains confidential, uncompromised, readily accessible and available.

Protect Your Accounting Data

Using the thoughts above, your accounting business can feel secure in its cyber security. To take it a few steps further, we also recommend the following:

  • Review IRS and FTC guidelines. A great place to start is the Data Resource Guide for Tax Professionals provided by the IRS.
  • Discuss cyber security with tax professionals and other business owners. Discuss your plan and theirs, and learn what other accountants are doing to protect their data, as well as the cyber security professionals they’re working with.
  • Learn the signs of data theft. Data theft can include denied filings due to duplicate social security numbers, clients who didn’t file receiving refunds, slow computers. Keep an eye out for these warning signs.
  • Stay vigilant. Constantly monitor your activity, such as making sure eFile acknowledgements match the number of returns, track your weekly EFIN usage, and remove authorization for taxpayers who are no longer clients.
  • Report lost or stolen data to the IRS. In the event that your accounting data iis breached, you must notify the IRS. You should also contact a cyber security expert for tax professionals, in order to move forward with a recovery plan.

Need further help or information to boost your data security for your accounting business? Give our team at Red Panda Systems a call with any questions – we’ve got you covered!

Bonus, keep an eye out for our tax professional webinar coming in September! Use the form below to sign up to be one of the first to know about this great event!

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