ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – IDENTITY THEFT ON THE RISE – IRS OFFERS GUIDANCE
By Robert S. Schriebman
The IRS and its Security Summit partners do not have good news. Data theft incidents, reported by tax professionals, are on the rise. For the first half of 2021 there have been 222 data theft reports. In 2020 there where only 211, and in 2019 there were only 124. Now, these numbers may look small to you, but each incident may involve hundreds to thousands of taxpayers and clients. When you take this into account, we have a huge problem! Unfortunately, many of these reports involve tax professionals who failed to use multi-factor authentication.
Why are these data thefts of such concern to the Security Summit? The stolen data and taxpayer identity information is used by crooks to create bogus tax refund returns. Because the phony refund claims are in the names of real taxpayers, they are very difficult for the IRS to detect the reality that the refund claims are bogus. When the actual taxpayer subsequently files a legitimate refund claim, the IRS rejects it because the refund has previously been issued. Needless to say, this is a mess for all concern.
On July 21, 2021 the IRS published IR-2021-155, a press release advising both the public and tax professionals how to use multi-factor authentication. IRS Commissioner Chuck Rettig made the following statement:
“Using the multi-factor authentication feature available on tax preparation products is one of the easiest and cheapest security measures any tax pro can take. It’s offered for free by the tax software providers. As people continue to get vaccines, we urge tax professionals as well as taxpayers to boost their security immunity and help in the battle against theft.”
This article will discuss the latest IRS press release and the recommendations set forth by both the IRS and the Security Summit.
IR- 2021 – 155
For the past several years, the IRS and its Security Summit partners held a series of meetings to discuss the latest security breaches for both the public and private sectors. Out of these meetings comes solutions and recommendations. This year the Conference discussed the importance of multi-factor authentications for tax professionals and the public in general. Multi-factor authentication is only one step to take. The Conference suggested other steps as follows:
- The importance of anti-virus software. This should be used on both computers and cell phones.
- Use a firewall
- Back up your data and store it in a safe location. This will protect you from a ransomware attack.
- Use drive encryption.
- Create Virtual Private Networks. Use a legitimate VPN vendor.
Federal law requires all professional tax preparers to create and use a data security plan and also to create a data theft response plan.
In my reading of the latest IRS press release, I did not find anything new or unique to the current Summit Conference. What surprised me was the increase in data theft from professionals whose business it is to protect data and to protect the identity of their clients. The Summit has offered these protective measures for several years.
The IRS offers help to professionals in the following two publications:
- IRS Publication 4557, Safeguarding Taxpayer Data, and Small Business Information Security:
- Publication 5293, Data Security Resource Guide for Tax Professionals
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 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.
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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