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ASK THE EDD ATTORNEY – TAX PROFESSIONALS - WHAT WOULD YOU DO IF YOUR CLIENT INFORMATION SYSTEM OR DATA WAS BREACHED? PART 1

By Robert S. Schriebman

2018

Introduction

This is part 1 of a two-part series alerting tax professionals to increasing fraud activity during this year’s tax filing season. I recently attended a tax controversy symposium. I attend the same symposium every year with the usual topics devoted to tax fraud, recently developments within the IRS, and lectures on audits and collections. The 2017 symposium was a bit different in that we were all treated to a lecture by representatives of the IRS identity theft unit. They asked the audience several questions about what they had in place to protect them from hacking and identity theft. Very few members of the audience had even the basic safeguards in place. The IRS representatives made it very clear that it was not a matter of "if," but "when," a security breach will occur in their practice.

In this article I will discuss the latest IRS bulletin warning of heightened fraud activity as this year’s filing season approaches. I will set forth some of the examples of baiting issues by the IRS and will conclude with directing you what to do should you have a security breach in your office.

IRS Press Release – IR-2818-2 (January 9, 2018)

Hackers may try to steal client identities and other data that will allow them to impersonate your clients and file fraudulent tax returns seeking refunds. Tax professionals have been contacting the IRS at an increasing rate to report attempts at hacking into their systems. Hackers are posing as potential new clients or even existing clients. Some of the tactics have been reported in previous IRS press releases such as IR-2017-03, the use of phishing emails to trick practitioners into opening bogus links.

Here are some of the examples of baiting schemes that have been reported to the IRS and set forth in IR-2018-2:

"Happy new year to you and yours. I want you to help us file our tax return this year as our previous CPA/account passed away in October. How much will this cost us?...hope to hear from you soon."

"Please kindly look into this issue, A friend of mine introduced you to me, regarding the job you did for him on his 2017 tax. I tried to reach you by phone earlier today but it was not connecting, attach is my information needed for my tax to be filed if you need any more Details please feel free to contact me as soon as possible and also send me your direct Tel-number to rich (sic) you on."

"I got your details from the directory. I would like you to help me process my tax. Please get back to me asap so I can forward my details."

(The typos and improper use of grammar are not mine!)

If you click on any of these scams you can be certain that you will receive a second email that contains either a phishing URL or an attached document with a phishing URL. Once you enter your credentials and respond, you and your clients may be in a world of hurt, including damaging viruses. The scammer is after secured accounts and sensitive data. You also run the risk of the crooks taking over your computers by remote control.

In part 2 we will continue our discussion of fraudulent attempts to gain access to a professional’s sensitive and confidential client information. We will also give you information about where you can go if you have a data breach or other security incident. All of this information comes directly from the IRS.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

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