Why is Multifactor Authentication Essential for Tax Professionals?

reading time: 16 minute(s)

The IRS and the Security Summit partners emphasize implementing multifactor authentication (MFA). Not only is it a critical safeguard for protecting sensitive client data, but it is now a federal requirement for tax professionals. This blog explores the significance of MFA, best practices for its implementation, and other key steps to secure your business.

What is Multifactor Authentication?

Multifactor authentication is a cybersecurity best practice that adds an extra layer of security to your accounts. You must verify your identity through two or more factors before gaining access. These factors typically fall into three categories:

• Passwords or PINs.
• Smartphone, security token, or an authentication app.
• Biometric identifiers like fingerprints or facial recognition.

For example, many smartphone users rely on biometric authentication (fingerprint or facial recognition) and a password or PIN to secure their devices and apps. This approach is also widely used by online banking platforms, financial applications, and payroll services to protect sensitive information and transactions.

Why You Must Use Multifactor Authentication

You should implement MFA across all your services and data access points to provide an additional layer of security. Offering an array of authentication factors ensures you can adapt to your clients’ diverse needs while keeping their sensitive information secure.

It’s also essential to regularly evaluate your current MFA methods, industry standards, and emerging technologies. Staying proactive helps you defend against the latest cyber threats and keeps your security practices up to date.

Enabling MFA within your tax software and cloud storage services, especially where client data is stored, should be your top priority. This step protects sensitive information and demonstrates your commitment to safeguarding your clients’ trust.

Benefits of Multifactor Authentication 

• Enhanced security against unauthorized access: You deal with a wealth of sensitive client information that cybercriminals actively seek to exploit. MFA adds an extra layer of protection by requiring two or more verification methods before granting access to your systems. Even if a hacker manages to steal a password, MFA ensures they can’t access your accounts without additional authentication, such as a fingerprint, a one-time passcode, or a physical security key.
• Compliance with Regulations: MFA is not just a security measure—it’s a federal requirement. By implementing this, you adhere to IRS regulations and safeguard client data from breaches. Compliance with IRS standards protects your practice from potential legal consequences while showcasing your commitment to data security.
• Building trust with clients: Your clients trust you with their financial data. When you implement robust security measures like MFA, you demonstrate your dedication to protecting that trust. Your clients are more likely to remain loyal when they feel confident that their information is secure.

Additional Steps to Protect Your Business

Beyond implementing MFA, you can further safeguard your businesses with these measures:

Review key IRS publications

• Publication 5293: A comprehensive resource guide on data security for tax professionals to avoid data theft.

• Publication 4557: This publication offers best practices for safeguarding taxpayer data and avoiding identity theft.

Explore external security resources

• Small Business Information Security: The Fundamentals: An essential guide for building robust security measures.
• Cybersecurity and Infrastructure Security Agency (CISA): Provides insightful recommendations on implementing effective MFA.

Stay informed with IRS updates

Subscribe to e-News for tax professionals and follow the IRS’s verified social media accounts to receive timely updates and security tips.

How to Respond to a Data Breach

A data breach involving your client’s sensitive information is a serious matter that requires immediate action. Promptly reporting the incident helps minimize potential damage and prevents fraud. Here’s how you can handle this situation effectively:

1. Notify a local IRS stakeholder liaison:

The first step is to report the breach to your local IRS Stakeholder Liaison. These liaisons are your direct connection to the IRS and are trained to assist tax professionals in addressing incidents like data breaches.

• Why speed matters: Acting quickly allows the IRS to take preventive measures, such as blocking fraudulent tax returns that criminals might attempt to file using stolen information. The faster you report the breach, the more effectively the IRS can protect your clients.
• How to find your liaison: You can find your IRS Stakeholder Liaison by visiting the IRS website or contacting your local IRS office.

2. Contact state tax agencies:

Notifying the IRS and the appropriate state tax agencies is also necessary. Data breaches often have implications at both the federal and state levels.

• Federation of Tax Administrators (FTA): Visit the Federation of Tax Administrators (FTA) website to find contact details for your state tax agency.
• Report a data breach page: The FTA provides a dedicated “Report a Data Breach” page that guides you in sharing information with the relevant state tax authorities. This ensures that state-level fraudulent activities can also be mitigated.

TaxBandits: Trusted Partner for Secure E-filing

Adding an extra step to your login process might seem like a bother, but safeguarding your tax information with MFA isn’t just smart—it’s essential!

At TaxBandits, we prioritize your data security above all else. Our secure e-filing platform includes 2FA to protect your sensitive information while keeping the authentication process simple and user-friendly. This enhanced security gives you peace of mind and ensures compliance with strict industry standards and IRS regulations.

Ready to experience the ease and security of TaxBandits? Sign up today and take the first step towards a safer e-filing experience!