Tax season is a busy time for individuals and businesses, and this increased activity creates more opportunities for cybercriminals. Unfortunately, this is also a time of increased scrutiny from tax and security regulators, adding compliance risks to the list of things to worry about in April.
For small businesses, even a minor incident during tax season can lead to serious, irreversible consequences. Your IT systems and security practices can reduce the risks of financial data breaches and failed audits, but only if it is utilized correctly.
Here, we will go over what you should watch out for and what you can do to minimize threats, maintain compliance, and avoid disruptions during tax season.
Which security risks are most dangerous during tax season?
Cybercriminals ramp up their attacks during tax season, knowing your team is under pressure and more likely to slip up.
Tax season phishing attacks
Phishing attacks remain one of the most common online threats you’ll face, and they increase significantly this time of year. Cybercriminals send emails posing as accountants, tax agencies, or internal finance staff, often requesting urgent action, such as reviewing tax forms or updating payment information.
If an employee clicks a malicious link or enters credentials into a fake portal, attackers can steal data or launch ransomware. Other phishing attacks are disguised as invoices, hoping that you’re too distracted to notice and authorize the fraudulent transaction.
To reduce these risks, require secondary approval for sensitive financial requests, implement email protection tools, and deploy mult-factor authentication to limit the impact of stolen login credentials.
Ransomware woes
Ransomware is another major concern during tax season. Attackers know your business depends on financial data, making you more likely to pay to regain access. These attacks often start with phishing emails or compromised credentials and can quickly encrypt critical files.
Regular patching, endpoint protection, and secure backups help you recover quickly and minimize disruption due to ransomware. Testing your backups before tax deadlines ensures you can restore data if necessary.
Supply chain attacks and third-party risks
You should also watch for unauthorized access and supply chain attacks facilitated inadvertently by third parties.
Temporary employees, accountants, or finance staff may need expanded access during tax season. However, without proper controls, this increases the risk of data exposure and stolen credentials. If you rely on enterprise financial software and provide the vendor access to your critical data, attackers can gain access by attacking the vendor, which may be an easier target.
To stay secure, implement the principle of least privilege and review user permissions regularly. Remove unnecessary access once tasks are complete, and thoroughly vet any provider or partner with access to your financial data.
Tax season compliance risks
As if cyberattacks weren’t enough, tax season also raises financial data security compliance concerns. This time of year, your business may be handling personally identifiable information (PII), payroll records, financial statements, and tax documentation, all of which are subject to regulatory requirements.
You need to be ready for both a data security audit and a standard tax audit, which both require proof of compliance and documentation.
Tax document compliance risks
Improper storage or sharing of tax documents can lead to compliance violations. For example, sending sensitive files through unsecured email or storing them in publicly accessible folders may expose confidential information.
To avoid this, use secure file sharing platforms with encryption and access controls. Restrict document access to authorized personnel and enable audit logging to track activity.
Audit readiness
Audit readiness is especially important during tax season because your compliance efforts are useless unless you can prove it. Regulators require proof of access controls, security measures, and data handling procedures in document form.
Maintain logs of user activity, document access, and system changes. These records help you respond quickly to audit requests and demonstrate responsible data management.
If your business provides tax preparation services or related financial services, you are subject to more numerous and complex rules. Work with a knowledgeable compliance consultant to ensure that you are aligned with the additional taxpayer data security regulations imposed by the IRS and FTC.
Contact Koretek Solutions for professional guidance with strengthening security controls, managing data access, and ensuring proper data handling practices. Our veteran consultants will help keep your financial systems secure and compliant during one of the most critical periods for your business.