What Tax Professionals Should Do After a Data Theft or Loss

 – September 30, 2021
What Tax Professionals Should Do After a Data Theft or Loss

If a tax pro or their firm is the victim of data or information theft, they must deal with it thoroughly and efficiently. Here are some actions they should take immediately to help minimize damage and protect against future data and theft or losses.

Contact the IRS and law enforcement

  • IRS – The tax preparer should report client data theft to their local Stakeholder Liaison. 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.
  • Federal Bureau of Investigation or the United States Secret Service – The preparer should contact a local office of either the FBI or the USSS.
  • Local police – The taxpayer should contact police to file a report on the data breach.

Contact states in which the tax professional prepares 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.

Contact 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 contact the FTC at idt-brt@ftc.gov.
  • 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.

Contact 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.