Decades ago, tax return security referred to precautions when mailing in IRS tax returns. Instead of dropping returns in your own mailbox, security experts advised to drop them directly at the post office. Better yet, experts recommended requiring a signature upon delivery.
Times have changed, but security concerns have not.
Today, only a fraction of taxpayers still submits paper returns. Instead, they are using electronic filing systems direct through the IRS or third-party tax preparers. Tax return security is still a significant consideration for businesses and individuals.
John Joyce, co-owner of CRS Technology Consultants, recently shared tax return security tips on a TechBytes segment airing on Gulf Coast ABC.
“Security should be a concern no matter what we’re doing,” John says. “and this is not a new problem.”
Filing IRS Tax Returns
April 15 is Tax Day in the U.S. It’s the federal government’s deadline to submit income tax returns for the prior calendar year. This deadline applies to businesses, nonprofits and individuals.
The federal government implemented pilot programs for electronic filing in the 1980s. However, e-filing became available to most businesses and individuals in the early 2000s.
Approximately 94% of corporations filed their federal income tax returns electronically in 2021, the latest data available, according to the IRS. That’s higher than the 91% rate for individuals.
Many small businesses and organizations rely on outside tax preparers to complete tax returns. John advises that businesses should not assume tax professionals have proper tax return security protocols in place. After all, they are tax experts – not cybersecurity experts. In fact, tax preparers often are targets of cyberattacks because their computer network can host hundreds, or even thousands, of tax returns on their computers.
“They’re a bigger target than you are as an individual,” John notes. “I’m one person. If that accountant serves 1,000 people or more, they are 1,000 times a larger target.”
Even the nation’s largest tax preparation services are subject to cyberattacks.
“They’re not immune; they make mistakes and have breaches,” John says. “But they have other safety measures in place to mitigate those risks.”
Tax returns contain confidential information, including revenue, expenditures, profits and other financial data, including bank account and/or credit card data.
“Always think about who has access to your data,” John says. “If you’re filing online, use a reputable source, a known company. Then do your homework and make sure they’re safe.”
Takeaway: Ask your tax preparer about their firewalls, antivirus programs and security measures.
Tax Return Security
Protecting financial records is paramount for businesses, individuals and nonprofit organizations. This includes IRS tax returns.
The IRS offers a set of tax return security tips that mirror what IT professionals, including John, preach on a daily basis:
- Use multi-factor authentication.
- Use a VPN to encrypt your data.
- Wipe or destroy old hard drives and computers that were used to file tax returns.
- Track your activity: check return status even if you haven’t filed yet.
Many small business owners, including solopreneurs, use software programs through TurboTax, H&R Block, Jackson Hewitt and other providers. These are more DIY-based programs and often are suitable for those without complex tax situations.
For DIYers, John notes to avoid using public Wi-Fi to complete tax returns. Additionally, password security is a critical component of a filer’s overall tax return security procedures. John’s password security tips include:
- Establish a new password each tax year.
- Do not use the same password that’s been used on other sites or platforms.
- Create complex passwords that contain at least one uppercase letter, one lowercase letter, one numeral and one symbol.
- Use at least 12 characters, preferably more, and even consider a unique phrase.
Taxes in the Workplace
Not every employee has a computer at home to complete their taxes. Security experts also advise not to use public computers, such as those in a library or coffee shop, to access confidential records. In turn, some employees will use their work computer to complete taxes. Whether it’s during the workday or after hours, businesses should discourage this practice.
Three devices have the potential to be misused during tax season:
- Computers: Today’s connected workplace likely means all files saved on desktops or hard drives are backed up somewhere on a server or the cloud. This can include an employee’s tax return.
- Printers: Many businesses have one printer for a department or the entire office. Sending a W-2 or completed tax return to a shared printer is a risk because another employee could pick up the printout. A paper jam might mean a tax return is stuck inside the printer for anyone to see.
- Scanners: Scan-and-send technology quickly digitizes printed copies, but sending confidential documents via email comes with risks. Hitting the wrong recipient or mistyping an email address can send documents to the wrong person.
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