Protecting Sensitive Data Ahead of Tax Season

As tax preparation increasingly takes on digital dimensions, financial service professionals must ensure they are not trading data security for administrative efficiency when work piles up. Compliance expectations, in-house protocols and third-party contractor relations will all need to be examined before accountants can confidently approach the seasonal rush.

Protecting the practice
Whether operating as a sole proprietor or in a collaborative setting, more tax professionals are taking their workloads to-go as the April 15 filing deadline looms large. Laptops are an important enabler for round-the-clock productivity, but all too often they become the weak link in the data security equation. Powerful, portable hardware has always been a top target among thieves, but the sensitive information written onto the hard drive could exponentially multiply a machine's value.

"Laptop security is particularly important for accountants at tax season," Accounting Web columnist Frank Byrt explained. "The loss of a laptop containing clients' personal financial data will mean weeks of lost work and missed deadline and, if an identity theft occurs, the ruin of a reputation and likely lawsuit."

Forensic accountant and fraud investigator Brad Sargent echoed these sentiments in an interview with Byrt, advising all practitioners to deploy full disk encryption on their laptops. This approach ensures sensitive information is only accessible to authorized key managers - and that the hardware is effectively useless to would-be identity thieves. However, data encryption software is the crucial complement which affords accountants truly comprehensive security. As tables, charts and spreadsheets are transferred from the laptop to separate machines or hosting environments, users need to know that file-level protections are making the journey as well.   

Tracing data travel
As more accountants migrate data to the cloud in search of anytime, anywhere availability and multi-device workflows, they must recognize that the onus of data security still rests on their shoulders. Although regulators and legislators are starting to enforce a greater sense of accountability among third-party data hosts, the consequences of a data breach will always fall more heavily on the original owner from at least an operational - if not also economic - standpoint.

As a result, accountants must employ scalable strategies and tools that protect sensitive data across both physical and virtual environments. According to CPA Practice Advisor, practitioners would also be wise to keep an eye on cyber insurance options and other measures that could emerge in this quickly evolving area to promote security and limit liability.