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Ask The California Employment Tax And Payroll Tax Attorney – Tax Professionals – Protect Yourself And Your Client From Identity Theft

By Robert S. Schriebman
2023

 Introduction

On August 8, 2023, the IRS issued a special publication designed to protect tax professionals and their clients from aggressive attempts to hack into their computers and to steal highly prized client identity information.  This information is used by crooks to perpetrate all kinds of identity theft and to steal client tax refunds.  IR-2023-143

The bulletin set forth typical warning signs gathered from tax professionals who were the victims of client identity theft.  In this article I will set forth both the warning signs and offer instructions on how to report hacking attempts and data theft.

Typical Hacking Warning Signs

Tax professionals should be on the lookout for these critical warning signs from their clients:

  • Clients receive notices that an IRS Online Account was created without their consent or that:
    – Someone accessed their IRS Online Account without their knowledge.
    – The IRS disabled their Online Account.
  • Clients receive a tax transcript they didn’t request.
  • Balance due or other notices from the IRS are received that are not correct based on the tax return filed.
  • Clients respond to calls or emails the tax professional didn’t make.
  • Clients receive refunds without filing a tax return.

Tax professionals should also watch for these red flags when their business experiences:

  • Slow or unexpected computer or network responsiveness such as:
    – Software or actions take longer to process than usual.
    – Computer cursor moves or changes numbers without touching the mouse or keyboard.
  • Unexpectedly being locked out of a network or computer.
  • Client tax returns being rejected because their Social Security number was already used on another return.
  • IRS authentication letters (5071C, 6331C, 4883C, 5747C) being received even though a tax return hasn’t been filed.
  • Getting more e-file receipt acknowledgements that the tax professional filed.

Reporting Identity Theft Attempts

If a tax professional or their firm are the victim of data theft, they should:

  • Report it to their local IRS Stakeholder Liaison. https://www.irs.gov/businesses/small-businesses-self-employed/stakeholder-liaison-local-contacts.  Speed is critical.  IRS Stakeholder Liaisons will ensure all the appropriate IRS offices are alerted.  If reported quickly, the IRS can take steps to block fraudulent returns in the client’s names and will assist tax professionals through the process.
  • Email the Federation of Tax Administrators at [email protected]. They will provide guidance on reporting to state tax agencies.  Most states require that the state attorney general be notified of data breaches.

Conclusion

The IRS and its Summit partners have created a 28-page document entitled, “Written Information Security Plan” (WISP).   In addition, you should also consult IRS Publication 5293, Data Security Resource Guide for Tax Professionals.

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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 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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