Tax season is a chaotic time for filers and preparers alike. Unfortunately, threat actors understand this dynamic and are increasingly targeting tax companies and their customers with identity fraud and cybersecurity attacks. Threat actors leverage lax data privacy standards, haphazard digital communications, and other vulnerabilities to perpetrate fraud at scale.
Tax professionals have several reasons to take steps that better prevent data breaches and privacy violations. Most prominently, as the Internal Revenue Service (IRS) succinctly explains, “protecting taxpayer data is the law.”
Notably, the Gramm-Leach-Bliley Act (GLBA) requires tax preparers to “implement security plans to protect client data,” codifying the legal and professional responsibility to protect customer data.
Whether managing an expansive organization or a small tax service, incorporating the latest technology can ensure that customers enjoy the greatest level of protection without compromising convenience or privacy.
Additionally, fraud is a costly and consequential crime. In 2021, the last year with fully reported data, consumers submitted nearly three-million fraud complaints totaling nearly $6 billion in losses. At the same time, the cost of a data breach is soaring, approaching $9.5 million in the US last year.
Combating identity fraud and cybercrime requires tax preparers and filers to work together, implementing best practices to protect their data and financial assets.
Here are three ways accounts, CPAs and tax preparers can achieve that this year:
#1 Prioritize Security But Don’t Compromise Convenience
Tax season is stressful enough without the omnipresent risk of identity fraud, tax fraud or data breaches. People are attuned to this dynamic, and they are counting on companies to keep protecting their information.
According to a recent consumer digital identity study, 68% of consumers say that a secure onboarding process is the “most important” factor when opening new accounts online, while 32% report a quick or easy process as their top priority.
Confusingly, 45% said they “strongly dislike companies requiring additional security checks” to determine if a high-risk transaction, like sending tax information, is legitimate.
Simply put, protecting customer data requires advanced security functionality without compromising convenience.
This is uniquely challenging because basic identity matching using static attributes, such as birth date or social security number, are no longer effective identity verification markers. With data breaches impacting 42% more Americans year-over-year, these static identity markers are often readily available on the Dark Web or online marketplace.
This tax season, preparers can best guard against fraud by leveraging a multi-layered identity verification system that brings together dynamic identity markers, including mobile device data, to ensure that files are legitimate.
Today’s technology allows tax preparers to verify filer identities without eroding the customer experience, a rare win-win benefiting companies and their customers.
#2 Educate Customers & Employees
While cyber threats can feel inevitable and esoteric, Verizon’s "Data Breach Investigations Report" found that data breaches and fraud attempts have a common cause: people.
In total, 82% of data breaches involve the human element, including social attacks, errors, and misuse. This actually is good news for tax preparers and filers because teaching and training people to identify the latest threat trends is a low-cost, high-reward way to reduce the risk of a data breach or effective fraud attempt.
This should include:
- Phishing scam awareness training. These malicious messages can be especially convincing during a busy tax season when employees and customers are less prone to carefully evaluate a message's efficacy.
- Digital hygiene best practices. Most people fail to protect their accounts with strong, unique passwords. Ensure that all employees follow this directive, and remind customers to do the same.
- Account security standards. Requiring employees and customers to secure their accounts with two-factor authentication can keep threat actors out of sensitive accounts. Additionally, tax preparers should prompt all customers to communicate through a secure portal protected by advanced identity verification tools that keep sensitive transactions secure.
Companies should not assume that employees or customers are ready to respond to the latest threats. While 59% of consumers say they are more careful with their personal information, 40% are unsure if their data is already available for purchase online, and 69% are unfamiliar with synthetic identity fraud.
Most importantly, stay on top of the latest trends. For example, cybersecurity researchers identified a novel phishing attack integrated in documents emailed to tax professionals. When unsuspecting recipients interact with this document, it enables a tool capable of collecting confidential information, putting companies and customers at risk.
#3 Incorporate the Latest Technology
Advanced software like machine learning (ML) and artificial intelligence (AI) can assist tax preparers in detecting fraud and protecting against data breaches.
Although it's impossible for individuals to guarantee complete prevention of all security threats, these technologies can analyze large amounts of data and identify unusual patterns or anomalies that may suggest fraudulent activity.
They also can expedite the verification process by notifying tax experts of any suspicious behavior. By incorporating the latest technology, organizations of any size can provide customers with top-notch security while still ensuring their privacy and convenience.
However, companies must manage the risks associated with AI by using a balanced approach that combines transparent, rule-based systems with human intelligence. When implemented with human supervision, AI can be very powerful.
Human-supervised AI is improved by the expertise of analysts who monitor incoming data and outputs. These analysts can identify both new and established fraud trends, including those that AI solutions alone may miss. In addition, combining human and artificial intelligence can expedite customer onboarding and authentication, particularly for thin-file customers who may not pass digital verification otherwise.
Whether managing an expansive organization or a small tax service, incorporating the latest technology can ensure that customers enjoy the greatest level of protection without compromising convenience or privacy.
Secure Together
Tax season is a prime target for identity fraud and cyber attacks due to the high volume of sensitive financial information being handled. Tax preparers, CPAs and filers must work together to protect their data and financial assets by prioritizing security without compromising convenience, educating customers and employees on the latest threat trends and incorporating the latest technology.
The combination of these efforts will result in a secure tax season, protecting both tax preparers and their clients from the costly consequences of identity theft.
Christina Luttrell is CEO for GBG Americas (Acuant and IDology), the premier identity verification, regulatory compliance and fraud prevention provider and partner of choice for establishing digital identity trust worldwide.
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