Tax Season’s Best Practices to Avoid Identity Fraud – 2023 

protecting against identity theft

Tax Season’s Best Practices to Avoid Identity Fraud – 2023 

Tax preparers and filers must work together to secure their data and financial resources in order to combat identity theft and cybercrime.

Every year, tax season is stressful. Tax preparers are inundated by frantic clients who want to assist them in filing on time as the dreaded tax deadline approaches.

Nevertheless, this tax season, it is essential to pause and consider your data privacy standards, digital communication norms, and potential vulnerabilities. Although tax preparers are required by law to safeguard taxpayer data, the rising costs and repercussions of a cybersecurity or data privacy breach for taxpayers and preparers give everyone millions of reasons to improve this year.

Tax preparers and taxpayers need to work together and use effective strategies to protect their data and financial resources in order to combat identity theft and cybercrime. During this tax season, accountants, certified public accountants, and tax preparers can use these three strategies.

1) Give Security Priority but Don’t Forget to Give Convenience. 

During the busy and often stressful tax season, tax professionals and their customers are especially vulnerable to data breaches and attempts at identity fraud. Customers today rely on their tax preparers to safeguard their information because they are aware of the risks.

Prompting all customers to communicate and send documents through a secure portal protected by advanced identity verification tools is frequently part of securing customer data. While this is an industry standard, preparers must balance convenience with security for it to be effective.

According to the most recent IDology Consumer Digital Identity Study, 68% of consumers surveyed consider the security of the onboarding process to be the most important aspect when opening new online accounts. In contrast, 32% place a high value on a quick and straightforward procedure.

It’s worth noting that 45% of respondents said they “strongly dislike companies requiring additional security checks,” implying that businesses must strike an unwavering balance between convenience and security.

Tax preparers will need to improve their identity verification protocols in order to adapt to this trend. This is now more difficult because traditional methods that rely on static attributes like birth dates or social security numbers are no longer reliable. More specifically, these static identity markers are now easily accessible on the Dark Web or online marketplaces. As a result of the year-over-year increase in data breaches, which affect 42% more Americans.

Implementing intelligent, multi-layered identity verification that uses dynamic identity inputs, such as mobile device data, to distinguish legitimate users from fraudsters is the best way for tax preparers to protect themselves from fraud.

2) Teach Effective Security Strategies to Employees and Customers.

Human error remains the main cause of successful fraud attempts and data breaches, despite the numerous cybersecurity challenges.

This is good news for tax preparers because they can take into account the human element. By teaching customers and employees efficient security techniques. In 2023, these efforts ought to instruct individuals:

  • Best digital hygiene practices. People frequently neglect their digital hygiene even though there are always risks online. However, even the most fundamental digital hygiene practices, such as using strong, one-of-a-kind passwords for each account and updating software, can deter a data breach or attempt at fraud.
  • Protocols for communication. Tax preparers should promote secure portals with advanced identity verification measures to safeguard sensitive transactions.

Do not assume that your customers or employees are already aware of these details. Despite the fact that 59% of consumers claim to be more cautious with their personal information. 40% are unsure whether their data can be purchased online, and 69% are unaware of synthetic identity fraud.

3) Allow Technology to Help 

While individuals cannot guarantee that all attempts at fraud and data breaches will be prevented. Advanced software like machine learning (ML) and artificial intelligence (AI) is assisting tax preparers in detecting fraud and protecting data.

These technologies analyse vast amounts of data to identify unusual patterns or anomalies that may indicate fraud. Additionally, by alerting tax professionals to any suspicious activity, they can speed up or streamline the verification procedure. Cutting-edge technology ensures top-level customer protection while preserving privacy and usability, irrespective of organization or tax service size. However, businesses must balance an implementation that combines human intelligence with transparent, rule-based systems to manage AI’s inherent risks.

AI can be extremely useful when implemented under human supervision. Experts in charge of monitoring input data and output benefit human-supervised AI. Trained fraud analysts complement AI-based solutions by detecting emerging fraud trends and novel threats that AI may overlook. Combining human and artificial intelligence expedites customer onboarding and authentication, benefiting thin-file customers who may struggle with digital verification.

Safe and Secure 

In tax season 2023, prioritize safeguarding financial data to prevent identity theft and cybercrime for tax professionals.

Tax professionals can ensure a safe and secure tax season for themselves and their clients by making security the top priority without sacrificing convenience, teaching employees and customers effective security strategies, and incorporating the most recent technology.

By prioritizing data security, tax preparers and filers offer peace of mind to clients and prevent costly data breaches.

The tax laws are very complex. Our short blog articles cannot fully cover all the rules and nuances. Your specific facts may hold various opportunities and possible risks that only trained, and highly qualified tax specialists can spot. We encourage you to find such help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.

If you are a licensed tax professional interested in helping others either part or full-time, or ad hoc, come on in! Happy to have you. Our marketplace has the full suite of tools to communicate with clients including compliance calendars, task and message management, and billing. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here.

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[…] Tax preparers and filers must work together to secure their data and financial resources in order to combat identity theft and cybercrime.  […]

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