Here’s who tax pros should contact if their business suffers a data theft or loss

Tax Tip 2022-150, September 29, 2022

Tax professionals are big targets of skilled cybercriminals scamming to get access to sensitive client information. Sometimes, no matter how careful and prepared a tax pro is, their systems can be hacked. If a tax pro or their office is the victim of data or information theft, they must deal with it thoroughly and efficiently.

Here are some people they should contact immediately to help minimize damage and protect against future data and theft or losses.

IRS and law enforcement:

  • Internal Revenue Service – The tax preparer should report client data theft to their local Stakeholder Liaison. The Stakeholder Liaison will notify IRS Criminal Investigation and others within the agency on the tax professional's behalf. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in clients' names.
  • Local police – The taxpayer should contact police to file a report on the data breach.
  • File a complaint with the FBI's Internet Crime Complaint Center.

The states in which they prepare state returns:

  • Any breach of personal information could have an adverse effect on the victim's tax accounts with the states as well as the IRS. To help tax professionals find where to report data security incidents at the state level, the Federation of Tax Administrators has created a special page with state-by-state listings.
  • The preparer should contact the State Attorneys General for each state in which the tax professional prepares returns. 

Other experts:

  • Security expert – Tax preparers should consult an expert who can help determine the cause and scope of the breach, to stop the breach, and to prevent further breaches from occurring.
  • Insurance company – The preparer should report the breach to their insurance company and to check if the insurance policy covers data breach mitigation expenses.
  • Federal Trade Commission – Preparers and other businesses can go to the FTC for guidance. For more individualized guidance, preparers can email the FTC.
  • Credit and identity theft protection agency – Certain states require that preparers offer credit monitoring and ID theft protection to victims of ID theft.
  • Credit bureaus – Preparers should notify them if there is a compromise and clients may seek their services.

Their clients:

Preparers should send an individual letter to all victims to inform them of the breach, but they should work with law enforcement on when to send the letter.

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