Ask The California Employment Tax And Payroll Tax Attorney – Irs Issues Latest Advice To Tax Practitioners On How To Minimize Client Identity Theft

By Robert S. Schriebman

2019

Introduction

On July 10, 2019 the IRS and its Security Summit partners issued IR-2019-122 listing a step-by-step approach for the prevention of client and data identity theft. The IRS had some good news. The number of taxpayers reporting identity theft incidents fell by 71% in 2018! The IRS received only 199,000 identity theft affidavits compared to 677,000 in 2015. The number of identity thefts is declining, and that is a very good thing indeed.

The number of confirmed filed identity theft returns stopped by the IRS declined by 54%. In 2015 1.4 million fraudulent returns were filed, but in 2018 only 649,000 phony returns were filed. Let’s not lose sight of the fact that 649,000 returns is a lot of returns!

These encouraging results by no means allow the IRS or the professional tax return preparer community to relax their vigilance. As long as there are tax returns, and as long as data is stored electronically, crooks will stay awake all night and attempt new hacking techniques. It’s never going to completely end; it can only be controlled

The IRS and the Security Summit have developed a 5 point broad checklist that all of us professionals need to take seriously and implement. This article will set forth the details of the 5 point checklist set forth in the latest IRS news release.

IRS – Security Summit Master Checklist

Deploy the Security Six Measures

Here is what the IRS recommends:

• Install and activate anti-virus software.
• Use a firewall.
• Establish more than a one-factor authentication.
• Backup your software and files.
• Use Drive encryption.
• Establish secure Viral Private Networks (VPN).

Create a Data Security Plan

• The IRS reminds all tax return preparers that federal law requires you to create and maintain an information security plan for your clients and their data.
• The federal information security plan is flexible enough to fit your business whether it is large or small.
• Focus on the key risk areas of your unique practice. This may include employee management and training, and the detection and management of system failures

If you have a data breach or a security incident, you are advised to report it to the following agencies:

• IRS
• FBI
• Local Police
• California Attorney General
• Your insurance company

Educate Yourself and Be Alert to Key Email Scams, a Frequent Risk Area Involving

Here is what the IRS recommends:

• Educate yourself about spear phishing emails
• Beware of ransomware

Recognize the Signs of Client Data Theft

• You know your client has a problem if he/she receives a letter from the IRS about a suspicious tax return with their name on it.
• Your client receives an IRS transcript that they did not order or that you did not order.
• You know you have a problem if more tax returns are filed using your electronic filing identification number (EFIN) than you actually submitted.

Create a Data Theft Recovery Plan

Here is what the IRS recommends:

• If you suspect a data breach you must contact the IRS Stakeholder Liaison immediately.
• Work with the IRS and its security partners in protecting your client’s accounts.
• Have the name and contact information of a reputable cyber security expert and work with that person to prevent theft.

Conclusion

In the weeks that follow the IRS and its security partners will be publishing a detailed series of recommendations that tax professionals should take very seriously. As these press releases cross my desk I will pass them on to you. We tax practitioners must never lose sight of the bottom line – when you protect your client from identity theft, you also protect yourself and your firm’s reputation.

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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. 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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