As easy as technology has made it to file taxes quickly and get that all-important rebate deposited right into your bank account, it has also made it easier for thieves to steal your identity to commit tax fraud. Tax professionals are on the hook as well. They must follow scrupulous security procedures to ensure their clients’ data isn’t exposed.

The IRS has launched several initiatives to crack down on tax identity theft, but forewarned is forearmed. Here is what you can do ensure your data is secure when you hand it over to a tax professional.

Tax Identity Theft - A Growing Problem

In 2017, the IRS received 242,000 reports of tax identity theft. Tax identity theft is defined as someone using your social security number to file a tax return so they can receive your refund through fraud. Unfortunately, you won’t know what happened until you file your own return. It will be rejected by the IRS since it will look like someone else already filed under that name and social security number.

Tax identity fraud also occurs if someone gets a job using your social security number. The income isn’t taxed, so you wind up getting audited for unreported income.

Once you find out about all this, you have to spend time proving you’re you to the IRS and that other person isn't you. You get to fill out a form (of course), Form 14039 Identity Theft Affidavit. You may receive an identity protection personal identification number to prove you’re you afterward. 

All this rigmarole delays your return and creates a ton of paperwork. It may take a year or more to fix everything. 

The good news is that the number of cases has dropped by almost 66% since the IRS began a couple of programs to help taxpayers keep their records safe.

The Security Summit: “Protect Your Clients; Protect Yourself”

The Security Summit is a partnership between the IRS and state tax agencies, and the community of tax professionals. The initiative to fight identity theft formed a public awareness campaign called “Protect Your Clients; Protect Yourself.”

The intent is to let tax professionals know what their responsibilities are in the case of tax identity fraud perpetrated on a client. Also, the community is provided with ways to protect their clients from the theft, thereby protecting their business.

The initiative is exceptionally timely as tax and identity thieves have identified tax firms as rich veins of personal information to mine. Continuing to find ways to keep your information safe, the IRS also has added tax return preparer fraud to their “Dirty Dozen” list of tax scams.

How Do the Thieves Get Your Data?

It’s unfortunate that the technology that makes everything so much easier for us all helps bad actors as much as it does everyone else. Computers and digitization without appropriate security have made it quite easy for thieves to steal your personal information.

• Phishing is a popular pastime for identity thieves. They pose as the IRS or your employer and send an email or phone you asking for your W-2 forms or other data. 
• Electronic filing issues have multiplied as more tax returns are e-filed. You need to have a strong firewall to keep your computer secure. Take advantage of every security practice you can from strong passwords to anti-virus software.
• Many identity thieves set themselves up as tax preparers. If you aren’t careful about who does your taxes, you could be serving yourself up for a helping of identity theft and tax fraud. 
• Fraudsters also identify tax professionals with weak security policies and practices.

Consider how many ways your data can be exposed from the time you receive your W-2 and other forms through preparing and filing your return. 

What If Your Tax Professional Get Hacked? Who’s Responsible?

Tax preparers have a legal responsibility to maintain, transmit, share, or store taxpayer data using competent safeguards. Taxpayer data isn’t limited to your social security number. It includes any information obtained or used in tax return preparation. 

According to IRS.gov  your tax professional is expected to:

• Preserve the confidentiality and privacy of taxpayer data by restricting access and disclosure.
• Protect the integrity of taxpayer data by preventing improper or unauthorized modification or destruction.
• Maintain the availability of taxpayer data by providing timely and reliable access and data recovery.

In short, your tax professional, whether a tax preparer or a tax attorney, is responsible for keeping any data you give him or her safe. If the worst should happen, the firm or individual that exposed or lost your data has several steps to take.

• Contact the IRS and law enforcement. Liaisons notify the IRS Criminal Investigation Division and others. Contact should be done quickly.
• Contact the states where the preparer did returns, so the state taxing agencies can follow up.
• Speak to a security expert such as an insurance company, the Federal Trade Commission, credit and identity protection agencies, credit bureaus, and specialized security experts.

The security experts’ jobs are to determine the cause and scope of the data breach, stop it, and prevent future breaches. In some places, the tax professional is required to offer free credit monitoring and identity theft protection to victims.

Steps to the Safety Dance - Tax Professional Edition

So, how do you know the tax preparer you select can be trusted? Do your research before giving over any of your personal information. Whether you are hiring one for the first time or have worked with a tax professional for years, do your due diligence.

• Ask your preparer if they have a Preparer Tax Identification Number - PTIN. All tax professionals preparing federal returns must have one.
• Don’t get taken in by a string of letters after the preparer’s name. Understand the various types of preparers available. 
• Check out the fee structure. It should be straightforward and transparent.
• Determine if your potential preparer seems organized and can tell you how long it will take to prepare and deliver your return.
• Find a tax professional that is available year-round, in case an issue comes up with the taxes he or she prepared.
• Ask if the professional knows how to deal with an audit or exam. 

Resources to check:

• The IRS Preparer Directory - look for the preparer’s name.
• Your state licensing board website to find proof your preparer’s license is valid and in good standing.
• The Better Business Bureau website search to look for complaints against the professional.
• Local tax preparer regulators to learn about regulatory actions, complaints, or claims against the preparer. 
• Check references from trusted friends and family members.

Tax season shouldn’t be open season on taxpayers. You can take steps to ensure your personal data is secure with your tax professional. Also, you are due various reparations if everything goes pear-shaped anyway. 

Do your homework and ask all the critical questions before handing your life over to someone else.