P-1 Preparing Returns (Data Protection and Identity Theft)

Question 1

What is publication 5293?

Answer 1

Publication 5293 is the Data Security Resource Guide for Tax Professionals.

Question 2

What is the Safeguard rule?

Answer 2

This Federal Trade Commission (FTC) Rule, (otherwise known as the Safeguards Rule) requires financial institutions, as defined, which includes professional tax preparers, data processors, affiliates, and service providers to ensure the security and confidentiality of customer records and information.

Question 3

What is the IRS publication 4557?

Answer 3

IRS publication 4557 is a checklist for safeguarding client information

Question 4

Authorized E-file providers must follow the IRS six security, privacy, and business standards to better serve taxpayers and protect their individual income tax information collected, processed, and stored. T/F

Answer 4

True,
Authorized E-file providers must follow the IRS six security, privacy, and business standards to better serve taxpayers and protect their individual income tax information collected, processed, and stored.

Question 5

What are the standards of the IRS’s mandatory security practices based on for E-file providers?

Answer 5

The standards are based on the Gramm-Leach-Bliley Act.

Question 6

What are the six requirements for IRS E-file security?

Answer 6

The six requirements are:
1. Extended Validation SSL Certificates
2. External Vulnerability Scan
3. Information Privacy and Safeguard Policies
4. Protection against bulk filing of fraudulent income tax returns
5. Public Domain Name Registration
6. Reporting of Security Incidents

Question 7

What website should clients be referred to if their identity is stolen?

Answer 7

Refer clients to identitytheft.gov for general recommendations for your clients.

Question 8

When a complaint is filed through identitytheft.gov what government agency is the report going to?

Answer 8

The report is going to the FTC, Federal trade commission.

Question 9

What must a tax preparer have to inquire about a client’s return information with IRS?

Answer 9

The tax preparer must have a power of attorney on file, and the tax payer must authenticate the their identity with the IRS customer service representative.

Question 10

When requesting a copy of a fraudulent return, if the fraudulent information used is listed as a dependent, can the authorized preparer request a copy?

Answer 10

No,
Due to federal privacy laws, the victim’s name and SSN must be listed as either the primary or secondary taxpayer on the fraudulent return; otherwise, the IRS cannot disclose the return information.

Question 11

As described in Publication 4600, what does the Gramm-Leach-Bliley Act require?

Answer 11

It requires that financial institutions (including return preparers) provide clients with privacy notices that explain that institution’s practices for collection and sharing information.

Question 12

What does the financial privacy rule involve?

Answer 12

The financial privacy rule requires financial institutions, including tax return preparers, to give their customers privacy notices.

Question 13

What is the main requirement of the FTC safeguards rule for tax return preparers?

Answer 13

The main requirement is the develop, implement and maintain an information security program.

Question 14

When setting up a tax practice, what are three things that must be done to safeguard security?

Answer 14

1. Implement effective technologies to protect website against bulk filing of fraudulent income tax returns
2. Run weekly vulnerability scans in accordance with PCI DSS.
3. Website must be registered with a domain registrar in the US accredited by ICANN.

Question 15

If an individual’s SSN has been compromised and they receive notice via the IRS, what form should they file?

Answer 15

The taxpayer should file form 14039 (Identity theft Affidavit).