Client data security for the tax practitioner.

• Author: Black, Barton

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THE SAFETY AND ACCESSIBILITY OF CLIENT data is a high-priority issue for tax practitioners, who handle a vast amount of data in processing tax forms for individuals, businesses, trusts, and estates. How practitioners safeguard and transmit this data can have a significant impact on the reputation of CPAs in general and of individual practitioners in the local community.

Many practitioners may have developed a backup system that seems to work well but may not measure up to current technology. Over the years, they may have become accustomed to routinely emailing information to clients. With the increased use of laptops comes the responsibility of protecting the private data stored on them. The emergence of cloud computing (internet-based) technology presents a new set of challenges in data security.

This column takes a brief look at some practices CPAs should consider when handling data security. Proper planning and initial setup are important because changing established protocols may be quite burdensome.

Backup

Most practitioners know--from direct or indirect experience--that they must regularly back up their data. Backups provide for a quick recovery when a problem occurs with an office computer. With a complete backup at hand, the office can be up and running in a matter of minutes or a few hours in the event of a computer disaster.

Some practitioners perform a manual backup daily or weekly. This is done with a wide variety of media such as tape, CD/ DVD, external hard drive, or online. Some online backup services provide software to handle this chore on a continual basis by automatically backing up each new file as the user creates or amends it.

The tax practitioner should design an overall backup policy for the office and make certain that it is implemented. The policy should cover all aspects of the system, including a detailed list of what should be backed up, who is responsible, the location of backup files, and a time schedule for backups.

Selecting data to back up: Determine what data on which computers should be backed up. In offices where there is a network, the data to be backed up should be stored on one or more network drives. In smaller offices with no network server, the data can be stored in a centralized data folder, with subfolders for each software application on each computer. Tax and accounting software can be configured to save the data to a standard location. This facilitates easy automated backups of the entire inventory of important firm and client data.

Many tax software providers now provide a means of paperless file retention of not only tax forms but also the documents used in their preparation. A similar system can be created in Windows Explorer by creating a main folder...