Tax Preparers: Take these Steps After a Data Loss

Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

IRS Tax Tip 2018-23, February 13, 2018

The IRS warns tax professionals that cybercriminals are at work now that the nation’s tax season is here. Thieves file fraudulent tax returns and use the stolen information to get tax refunds using their victims’ information. Tax preparers who experience a data theft can follow these steps.

Contact the IRS and law enforcement:

  • IRS – Report client data theft to the local IRS Stakeholder Liaison. Liaisons will notify IRS Criminal Investigation and other appropriate offices within the agency on behalf of the preparer. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in a preparer’s clients’ names.
  • Federal Bureau of Investigation – Contact your local office.
  • Local police – File a police report on the data theft.

Contact state agencies where they prepare state returns:

Contact experts:

  • Security expert – They can determine the cause and scope of the theft. They can also figure out how to prevent further losses.
  • Insurance company – Preparers should check to see if their insurance policy covers expenses related to the data loss.

Contact clients and other services:

  • Federal Trade Commission – They offer tips and templates for businesses that suffer data compromise. They even have suggested language for informing clients.
  • Clients – Send a letter to victims letting them know about the theft. Preparers should work with law enforcement on timing. A preparer who has prior-year data in their system may need to contact former clients.
  • Tax software provider – The provider may need to take steps to prevent inappropriate use of the compromised account for e-filing.
  • Website and client portal provider – Thieves may have stolen passwords. The preparer and provider would need to reset these
  • Credit and identity theft protection agency – Certain states require credit monitoring and identity theft protection to victims of ID theft.
  • Credit bureaus – Notify them if there’s a compromise. The preparer’s clients may seek their services.

The IRS reminds tax professionals that toll-free assistors cannot accept third-party notification of tax-related identity theft. Clients should file a Form 14039 PDF, Identity Theft Affidavit, only if their electronic return is rejected as a duplicate, or they’re directed to do so.

More Information: