Safeguarding Taxpayer Data – How to Get Started

Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

IRS Protect Your Clients; Protect Yourself Tax Tip Number 3, December 21, 2016

Tax professionals must safeguard taxpayer data by law. It is also critical to tax preparers’ business success. Protect your clients and yourself by taking a few common sense steps.

You can seek advice from security consultants or insurance companies. IRS Publication 4557 PDF, Safeguarding Taxpayer Data, also offers tips on how to get started.

These best practices include:

  • Take responsibility yourself or assign someone to be responsible for safeguards;
  • Assess the risks to taxpayer information in your office. Make sure to include your operations, physical environment, computer systems and employees, if applicable;
  • Make a list of the locations where you keep taxpayer information (computers, filing cabinets, and containers taxpayers may bring you);
  • Write a plan of how to safeguard taxpayer information. Put appropriate safeguards in place;
  • Use service providers who have policies to maintain an adequate level of information protection; and
  • Monitor, evaluate and adjust your security program as your business or circumstances change.

To safeguard taxpayer information, determine the appropriate security controls for your environment based on the size, complexity, nature and scope of your activities. Security controls are the management, operational and technical safeguards you may use to protect the confidentiality, integrity and availability of your customers’ information.

Examples of security controls include:

  • Locking doors to restrict access to paper or electronic files
  • Requiring passwords to restrict access to computer files
  • Encrypting electronically stored taxpayer data
  • Keeping a backup of electronic data for recovery purposes
  • Shredding paper containing taxpayer information
  • Removing sensitive or personal information before mailing items

This is one in a series of special security awareness tax tips for tax professionals. The “Protect Your Clients; Protect Yourself” campaign’s goal is to raise awareness among tax professionals. It is an initiative of the Security Summit, a joint project by the IRS, states and the tax community to combat identity theft. Because of the sensitive client data held by tax professionals, cybercriminals increasingly are targeting the tax preparation community.