Tax professionals are key targets of criminal syndicates that are tech-savvy, tax-savvy and well-funded. These scammers either trick or hack their way into tax professionals’ computer systems to access client data. They use stolen data to file fraudulent tax returns that make it more difficult for the IRS and the states to detect because the fraudulent returns use real financial information.
IRS highlighted recommendations will be to:
- Use multi-factor authentication to protect tax preparation software accounts. All tax software providers now offer multi-factor authentication options, which require more than just a username and password to access accounts. This feature is offered on tax preparation products for both tax professionals and taxpayers. This is a key step to securing sensitive financial data. Multi-factor authentication is in addition to traditional actions such as using anti-virus software, strong password phrases and virtual private networks to protect connections between telework locations and offices – all critical steps for tax pros
- Sign up clients for Identity Protection PINs. The IRS now offers IP PINs to all taxpayers who can verify their identities online, on the phone with an IRS employee after filing a Form 15227 or in person. The IP PIN is a six-digit number that is known only to the taxpayer and the IRS. It helps prevent an identity thief from filing a fraudulent return in the taxpayer’s name. Tax professionals cannot obtain an IP PIN for their clients. Clients must verify their identities to the IRS. The easiest way is at the Get an IP PIN tool on IRS.gov.
- Help clients fight unemployment compensation fraud. One of the larger scams of 2020 involved identity thieves using stolen identities to file for unemployment compensation benefits with the states during the pandemic-induced economic downturn. States issue Forms 1099-G to taxpayers and the IRS to report taxable unemployment income. For 2020, some taxpayers received multiple Forms 1099-G from states as thieves used their names to steal benefits.
- Avoid spear phishing scams. One of the most successful tactics used by identity thieves against tax professionals is the spear phishing scam. Thieves take time to craft personalized emails to entice tax professionals to open a link embedded in the email or open an attachment. For 2020, tax pros were especially vulnerable to spear phishing scams from thieves posing as potential clients. Thieves might carry on an email conversation with their target for several days before sending the email containing a link or attachment. The link or attachment may secretly download software onto the tax pros’ computers that will give thieves remote access to the tax professionals’ systems.
- Know the signs of identity theft. Many tax professionals who report data thefts to the IRS also say that they were unaware of the signs that a theft had occurred. There are many signs that tax pros should be aware. These include multiple clients suddenly receiving IRS letters requesting confirmation that they filed a tax return deemed suspicious. Tax professionals may see e-file acknowledgements for far more tax returns than they filed. Computer cursors may move seemingly on their own.
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