The Internal Revenue Service said a one-year grace period for enforcing new security, privacy and business standards for online tax processors will be ending next week.

The IRS mandated six new security, privacy and business standards effective Jan. 1, 2010. The mandate included a one-year enforcement grace period due to expire Dec. 31, 2010. Compliance with the standards will be monitored and enforced effective Jan. 1, 2011.

The new standards are intended to supplement the Gramm-Leach-Bliley Act and the implementing rules and regulations promulgated by the Federal Trade Commission in protecting taxpayer information collected, processed and stored by online providers of individual income tax returns. Individual income tax returns generally refer to the 1040 family of returns. Tax professionals can refer to IRS Publication 3112, “IRS e-file Application and Participation,” for the IRS’s definition of online provider.

The security and privacy objectives of these standards are:

• setting minimum encryption standards for transmission of taxpayer information over the internet and authentication of Web site owner/operator’s identity beyond that offered by standard version SSL certificates;

• periodic external vulnerability scan of the taxpayer data environment;

• protection against bulk-filing of fraudulent income tax returns;

• and the ability to timely isolate and investigate potentially compromised taxpayer information.

The standards also address certain business and customer service objectives such as instant access to a Web site owner/operator’s contact information, and the online provider’s written commitment to maintaining physical, electronic, and procedural safeguards of taxpayer information that comply with applicable law and federal standards.

For further details, refer to the following articles on

IRS e-file Security, Privacy and Business Standards Mandated as of Jan. 1, 2010

Publication 1345 Web Content under Safeguarding IRS e-file

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