Tax Return Data – Privacy Issues
I read an interesting article the other day on the privacy of your tax return.
Everyone, of course, needs to be aware that your tax-return information can reside in many places, whether you are doing just your own taxes or those of others.
The IRS share information with state tax agencies, law enforcement and others, which is sometimes required by law, other times not. However, it says that it tries to limit sharing to the relevant needed information.
As you know, all tax preparers, including CPAs who prepare and sign returns for clients, have strong privacy and ethics rules. Many state boards and the AICPA specify a minimum number of years’ tax return information must be maintained but there is little discussion concerning a maximum period.
If you file electronically, the files are transmitted to the IRS by the use of outside firms such as Intuit (Turbo Tax) and H&R Block or commercial firms such as Thomson Reuters.
According to the IRS, different transmissions have different retention policies but again no limit on how long these tax software companies and others can retain the information. A good question to consider, is if you change software vendors, when does that first vendor stop holding onto the data and what do they do with it?
It doesn’t sound like that big a deal but given the treasure trove of data and information and the recent success of so many cyber thieves, it is something to consider. So, where does that leave you?
Honestly, on a desert island by yourself. Rules on data breaches and data privacy are generally covered by state rules and regulations and there are a lot of differences within some states. Some State Boards of Accountancy discuss deliberate privacy violations, in their ethics rules, but the area of retention by third parties, electronic transmissions and data breaches is just beginning to be discussed.
Just food for thought – if you do taxes for clients, you may want to explore your state rules and regulations a bit and understand your responsibilities.