Cybersecurity risks are at an all-time high. In an era of phishing, malware, password attacks, and other schemes, sensitive client data is more at risk than ever before. Professionals who routinely deal with personally identifiable information need to be diligent about protecting that data, and tax preparers are certainly no exception. The IRS recently issued a warning to tax preparers to increase their security measures in light of a widespread new scam designed to steal taxpayers’ refunds using compromised data from tax preparers’ offices.

From simple human errors to unsecured software systems to inadequate retention policies, there are many ways you could be putting tax documents at risk without even realizing it. The following are four common areas of risk and how to avoid them.

1. Electronic document delivery and exchange

The ability to electronically exchange documents has revolutionized the way we do business, but it also opens the door to potential fraud and security breaches if the proper precautions aren’t taken. Sending and receiving tax documents using unsecured, unencrypted email makes them an easy target for scammers who intercept emails, spoof email addresses, and steal unprotected data. These email programs can also place limits on document size, which could lead to important information being bounced back, lost, or misplaced.

As a more secure alternative to email, firms should consider using portals to deliver and exchange tax documents. Portals not only provide crucial encryption during transfer and storage, they also limit access to only specific approved individuals. Additionally, you’ll benefit from having an organized structure for document collaboration, because portals support Windows-friendly filing structures.

You should also investigate document management solutions that offer encrypted email systems. These solutions allow you to send messages and documents using links that encrypt downloaded or uploaded data, protecting it from would-be hackers.


2. Human error

We’re all human. Tax season brings with it long hours and mountains of work. Even the most competent, diligent CPA is bound to make a mistake. Unfortunately, when it comes to something as sensitive as tax information, a seemingly harmless error can have huge consequences.

If tax documents are accidentally deleted or moved from their proper places, it can severely impact your productivity and put timely filing at risk. The same is true of misnaming documents – the time you lose searching for them or resending them can jeopardize the filing process.

The right technology solutions can go a long way toward alleviating these errors. Your software should recognize your documents and automatically file them to prevent accidental deletion. It should also offer full document searchability, so you can search your documents’ entire contents and not just their titles. Finally, it should give you the ability to easily retrieve deleted documents. No one wants the embarrassment of having to ask your client to resend data.

3. Competing versions of documents

It’s common for documents to undergo multiple revisions before they’re finalized. Problems arise, however, when people mistakenly work off different versions of the same document. This can happen when there are multiple copies of the same file or when multiple people are able to access a document with the same permissions at the same time. Not only does this create a risk for errors, it can also impede your productivity and create unnecessary confusion.

These needless errors can be prevented by employing a software solution that gives you control over the different versions of your documents, so you can manage them in a way that ensures everyone is always working on the most current and accurate version, while retaining the ability to access previous versions in case improper changes are made.

While it’s important to permit multiple people to access your documents, there should be a formal check-in and check-out function that only allows one person to work on a document at any given time. All others should have read-only access, so people aren’t simultaneously entering competing edits.

4. Document storage and retention

While a lot of attention is rightfully paid to avoiding errors and ensuring security while documents are being prepared, the concerns don’t end once the documents are finalized and tax season is over.

Maintaining tax documents is critical. Documents must be archived in such a way that they can’t be altered and can be easily searched. Delays in locating important data can pose real risks. There needs to be a firm-wide standard for naming conventions and file storage locations enforced by technology, otherwise data will be lost. Leaving naming up to individual preferences allows room for error, resulting in files that are difficult or impossible to locate.

Do keep in mind that software changes and licenses expire all the time. Your documents need to exist in a format that you can access regardless of the software you currently have.

Your firm should have a formal document retention policy that outlines how long client files are stored and when they should be deleted. Technology reinforces that policy, either automatically deleting files at the appropriate times or alerting staff members to do so. You want to be able to provide a client with past filings for an appropriate amount of time if requested. However, you also want to protect your firm from burdening your IT systems with terabytes of unnecessary data and incurring unnecessary costs for storage.

Remember too that in today’s litigious world, any firm can find itself having to produce documents in court. If you can point to a clear and appropriate retention policy and show that you have a system in place for enforcing it, your professional judgment or whether you properly handled and archived your documents will rarely be questioned.

The way forward

There’s no escaping the fact that we live in a time when cybersecurity breaches are a real threat for tax preparers. The good news, though, is that many of the most common potential risks relating to tax documents are avoidable. By implementing software solutions that give you secure workflows and document storage, you can remove many of the everyday errors and security weaknesses that put sensitive client tax information at risk. Armed with the right technology, tax preparers can rest easy, knowing that their tax documents are secure.

Don Emery

Don Emery

Don Emery, CPA, CA, is Doc.It’s director of client solutions.