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You just wrapped up your last tax form for the quarter; now your filing responsibilities are over, right? Not necessarily. Your responsibilities don’t end at submission, nor do they begin when filling out a form — and it’s all because of data.

Whether you’re filing a 1099, 941, or another form, you’re handling sensitive data that needs protection. That’s why it’s crucial to verify your e-file provider has strong security practices in place.

So, what should you look for? Let’s explore five security practices your e-file provider should have.

Data Encryption

You wouldn’t leave your Social Security number on a busy restaurant’s table for anyone walking by to see. Likewise, filing data shouldn’t be easily accessible to unauthorized parties. Encryption helps make sensitive data unreadable to those who shouldn’t have access. 

When evaluating an e-file provider, check whether they encrypt data both in transit and at rest:

• In transit: Data is moving between devices or systems, such as when information is transmitted during e-filing.
• At rest: Data is stored within a database or other system.

Also look for additional exposure safeguards, such as taxpayer identification number (TIN) masking.

Ensuring your provider encrypts data is like putting your SSN in a safe. The information is still there, but only those with a key can access it.  

Access Controls and Authentication

Of course, data should be protected from strangers, but what about team members? To limit unauthorized access risk, staff should have access only to what’s needed for their role. 

Look for an e-file provider that uses safeguards like two-factor authentication (2FA) to add a layer of protection beyond a password, making it harder to log in as someone else. 

Additionally, ensure they limit access to sensitive systems and information based on roles and responsibilities so only authorized users can access it.

Ongoing Employee Security Training

Security technology matters, but so do the people using it. Simply clicking a link in the wrong email can result in a major data breach, and cybercriminals know this and may focus attacks on employees.

As such, a provider’s employees should be trained on identifying:

• Phishing
• Social engineering scams
• Malware 
• Physical security risks

There are constantly new cybersecurity threats, making security an ongoing conversation with training on how to recognize threats, handle sensitive information, and follow security policies. 

Before trusting your data to an e-filer, review their training policies for consistant security awareness procedures.

Continuous Monitoring and Security Testing

Cybersecurity risks are nothing if not persistent, meaning security preparation must be just as constant. 

E-file providers should regularly monitor systems for suspicious activity and potential vulnerabilities through methods like:

• Vulnerability scanning: evaluates IT assets or networks for security weaknesses or flaws.
• Penetration testing: a simulated cybersecurity attack by an expert to find and fix vulnerabilities.
• Application monitoring (APM): tracks application activity and performance to help identify unusual behavior or potential issues.
• Event logging: chronological records of system errors, actions, status, and warnings.

Together, these practices can help providers identify vulnerabilities earlier and respond before issues escalate — making these ideal processes to look for in your provider.

Security Standards and Incident Preparedness

Finally, ask yourself, “Does this e-file provider follow established security standards and has a plan in case of a security incident?”

The answer can appear by them following independent frameworks or standards, such as SOC 2. These practices offer assurance that the provider uses established controls for protecting data.

Likewise, the platform should also have procedures for responding to incidents, protecting against data loss, and backing up information.

Having security standards or incident response procedures helps keep an organization prepared for threats, which, in turn, assist with better protection of your data. 

Note: Unsure what SOC 2 is? Read our security terminology article for a breakdown. 

Conclusion

Protecting the data behind filing doesn’t end at “submit.” Before choosing an e-file provider, take time to understand how they protect sensitive information through encryption, access controls, employee training, ongoing monitoring, and established security standards. Because with the right safeguards in place, you can file knowing your provider takes the security of your tax data just as seriously as you do.

Curious about how TaxBandits protects your data? Check out our security page.