We can file tax returns electronically, meet with clients remotely, and solve advanced calculations in a single click. Technology allows us to be more productive and connected than ever before. Unfortunately, it can also put our employees and customers at greater risk.
While no industry is immune to identity theft, accounting firms and tax preparers face more danger than most. Let’s take a closer look at why this is the case and what brokers can do to protect their clients in the accounting industry.
Identity theft and data breach statistics in the accounting industry
In 2017, the professional services sector experienced 130 confirmed data breaches — an 18 percent increase from the previous year. Many of these cases involved accounting firms and tax preparers. That same year, tax refund fraud ranked as the second most common form of identity theft.
While the federal government and industry analysts have yet to release comprehensive statistics for data breaches and security incidents in 2018, the information that is available highlights the many challenges accounting firms and tax preparers face.
In total, the IRS caught nearly $10 billion in various tax-related fraud last year. Unfortunately, identity thieves, hackers, and cybercriminals show no signs of slowing down. In fact, the agency currently receives three to five new data theft reports from tax practitioners each week.
Why do identity thieves target the accounting industry and its employees?
Identity thieves target accounting firms due to the types of data they process. Federal and local laws require firms to collect the personal details of clients and employees. This often includes Social Security numbers, addresses, employment details, banking information, and other highly sensitive data.
Tax practitioners aren’t just targeted because of the types of data they collect; they’re targeted due to the sheer volume of data they process. It’s not uncommon for accounting firms to store data on thousands of clients and employees.
Cybercriminals realize they can increase their profit and reduce their risk by making fewer, highly targeted attacks. This is why identity thieves are increasingly targeting businesses over individuals.
This approach also explains why evil-doers have set their sights on accounting firm employees. If cybercriminals can successfully phish just one worker, they can typically gain access to a firm’s entire client database.
Phishing is particularly effective, and it’s growing in popularity. In 2018, the IRS reported a 60 percent increase in emails designed to steal a victim’s financial or tax information.
How do cybercriminals use compromised information?
Thieves have many options when it comes to monetizing stolen data.
First, they can use the information to personally assume a victim’s identity. In addition to taking out new lines of credit and depleting any existing accounts, cybercriminals can also receive medical care, apply for government assistance, and create synthetic accounts using the compromised information.
Second, thieves can sell the stolen data in bulk on the dark web. Although this brings in less money per record, the many illegal marketplaces provide an easy and quick way to unload thousands (or even millions) of records in a single transaction.
Third, identity thieves can use a stolen identity to claim a victim’s tax refund. This poses one of the greatest challenges for accounting firms and the IRS. Of course, the most significant burden is placed on the employee or client who has their identity compromised. It often takes victims more than a year to receive the refund they’re owed.
The good news is, there are steps organizations can take to protect their employees from these risks.
Identity protection as an employee benefit
One of the most effective actions for accounting firms and tax preparers is offering their employees an identity protection benefit. This helps organizations ensure that their employees’ finances, as well as their physical and mental wellbeing, are protected. A quality identity protection benefit, like the kind employees receive with PrivacyArmor Plus, will also safeguard employees’ tax refunds and investment accounts.
To discover even more ways InfoArmor can protect your clients and their employees, you can download our complimentary accounting one-sheet.