Introduction: When Technology Fails During Tax Season
Imagine it’s 9:00 PM during the height of tax season. Your staff is burning the midnight oil to meet filing deadlines when suddenly your network goes down. Client files become inaccessible, tax software won’t connect to e-filing services, and your phones start ringing with panicked clients. This scenario is not hypothetical—it happens in accounting firms across the country, causing not only technical headaches but also damaging client relationships, regulatory compliance, and the firm’s reputation.
In today’s digital age, accounting and tax professionals face unprecedented technical and security challenges. With over 790,000 registered tax return preparers in the United States alone, according to the IRS Return Preparer Office statistics, safeguarding sensitive client data is imperative. Cyberattacks targeting accounting practices have surged by 300% since 2020, according to reporting from the Texas Society of CPAs, and the global average cost of a data breach has reached $4.45 million in 2023, as documented in IBM’s Cost of a Data Breach Report. As IRS Commissioner Danny Werfel states, “Tax pros are the first line of defense when it comes to protecting taxpayer information” (IRS National Tax Security Awareness Week, 2024).
This guide explains why dedicated managed IT services are essential—drawing on industry reports, regulatory documents, and real-world case studies to demonstrate how the right technology partner can elevate your firm’s security, compliance, and trust.
Unique Technology Challenges in Accounting and Tax Practice
Navigating the Regulatory Maze: The Ever-Increasing Compliance Burden
Accounting professionals encounter unique IT challenges. During tax season, your systems are pushed to process 3–5 times the normal workload, run for extended hours, and support simultaneous access by multiple staff—all while facing increased security risks. Even a single system failure can result in missed deadlines and irreparable reputational damage.
Regulatory compliance adds another layer of complexity. The IRS mandates that tax practitioners maintain a Written Information Security Plan (WISP), as outlined in IRS Publication 5709. In addition, the FTC’s Safeguards Rule (detailed in the AICPA’s GLBA Safeguards guidelines) requires robust security measures—including encryption and multi-factor authentication (MFA)—to protect client data. The IRS further emphasizes these requirements in Publication 4557, “Safeguarding Taxpayer Data,” urging professionals to implement comprehensive data protection controls. Non-compliance can lead to severe penalties and legal ramifications, as the AICPA has documented in their compliance guidance materials.
As Jatin Narang has pointed out in his CPAacademy.org webinars, “Regularly updating your WISP and implementing MFA is not just a best practice—it’s a necessity in today’s threat landscape.”
Complex Software Ecosystem and Integration Requirements
Accounting firms operate on a diverse array of software—from tax preparation platforms (Drake, ProSeries, Lacerte, UltraTax CS) to accounting systems (QuickBooks, Sage) and practice management solutions (OfficeTools, TaxDome). Coordinating these disparate systems requires specialized IT management to ensure seamless integration, security, and consistent performance.
The Growing Cybersecurity Threat Landscape for Accounting Professionals
Why Accounting Firms Are Prime Targets
CPA firms aggregate vast amounts of financial data and PII, making them attractive targets for cybercriminals. “Hackers have always found CPA firms particularly attractive because they are, in essence, aggregators of data – both financial and PII,” explains Sherry Bambrick, a cybersecurity specialist with the AICPA’s insurance program. Smaller firms are especially vulnerable, as they often lack robust security defenses, according to ICAEW research on why small accounting firms are prime targets for cybercriminals. The IRS and law enforcement confirm that identity thieves frequently target tax professionals to steal client data and file fraudulent returns, as reported in their Security Summit advisories.
Escalating Attack Frequency and Costs
Recent data indicates that in 2024, the IRS received over 250 reports of data breaches at tax professionals’ offices, affecting approximately 200,000 clients. According to Statista, the proportion of financial organizations that encountered ransomware attacks rose significantly from 34% in 2021 to 65% in 2024. In 2023, ransomware incidents in the financial services sector grew by 64%, as reported by the ABA Banking Journal. Beyond immediate monetary losses, firms incur significant costs from forensic investigations, legal fees, and lost productivity.
Jane Smith, an independent cybersecurity consultant, asserts, “Over 80% of security incidents in professional services involve phishing, which is why proactive training and MFA implementation are crucial.”
Recommended Read: Dedicated Cloud Server for CPA Firms – Why Does It Matter?
Real-World Case Studies: Cautionary Tales
Mid-Size CPA Firm Ransomware Attack: Sarah, managing partner at BST & Co. CPAs in New York, discovered one Monday that her network was completely locked by a sophisticated ransomware variant—believed to have entered via a phishing email. As documented by KnowBe4, the attack exposed 170,000 client records and led to class-action lawsuits. One client remarked, “How can I trust them with my financial information if they can’t protect it and won’t even tell me when it’s compromised?”
Small Practice Email Compromise: In a five-person firm, an email containing a fraudulent invoice triggered the CryptoLocker ransomware. Within 30 minutes, every computer was taken hostage by a demand for $50,000 in Bitcoin. According to eSudo’s case study, the firm eventually spent around $84,000 on recovery efforts, covering ransom, downtime, and system restoration costs. Tom, the firm’s owner, later stated, “We lost more than money—we lost clients who couldn’t wait for us to recover our data.”
Enterprise-Level Security Failure: Even a giant like Deloitte isn’t immune. An incident involving the lack of MFA on an administrator account allowed hackers access to confidential emails for months, affecting major clients, as reported by Healthcare IT News. As one executive noted, “A data breach can unravel 20 years of hard-earned reputation in just 20 minutes.”
An analysis by the Illinois CPA Society concludes it’s not if, but when a CPA firm will be targeted by cyberattacks.
The Value of Specialized Managed IT Services for CPAs
Industry-Specific Technology Expertise
Consider your IT infrastructure as the engine of your practice. Just as you wouldn’t trust a general mechanic with a high-performance sports car, you shouldn’t settle for generic IT support. Specialized IT providers understand the unique software, compliance requirements, and seasonal demands of accounting firms. This expertise minimizes disruptions and ensures seamless integration of essential tools.
Comprehensive Security Implementation
Effective IT management means layered defenses:
- Firewalls, IDS/IPS, and Endpoint Security: Protect every entry point.
- Encryption: Use AES-256 encryption for data both in transit and at rest—an essential requirement under the FTC Safeguards Rule, as detailed in their business guidance resources.
- Multi-Factor Authentication: Prevent unauthorized access with MFA across all systems, now mandated by the FTC Safeguards Rule for financial institutions, including tax preparers.
- Regular Backups and Disaster Recovery Plans: Ensure rapid recovery after an incident.
- Security Awareness Training: Train staff regularly to recognize phishing and other social engineering attacks, as recommended by the AICPA in their CPA cybersecurity checklist.
As the AICPA succinctly puts it in their cybersecurity guidance, “You’re only as strong as your weakest link.”
Regulatory Compliance Management
Keeping up with evolving regulations is challenging. Dedicated IT advisors help by conducting regular risk assessments, drafting and maintaining a WISP, and ensuring all technical controls are in place. This proactive approach not only meets regulatory requirements but also builds client trust. As one CPA practice owner noted in an AICPA cybersecurity forum, “We need to handle all our client data in a way that meets regulations while giving us peace of mind.”
Risk Management and Cyber Insurance
Robust IT management reduces the likelihood of breaches—but no system is foolproof. Specialized IT providers assist with cybersecurity risk management, helping you secure lower cyber insurance premiums by meeting stringent security standards. As Cathy Whitley, a senior risk advisor with the AICPA, warns in their cyber insurance guidance, “No policy can replace proactive defenses.”
John Lee, an independent IT advisor, emphasizes, “A dedicated managed IT service transforms reactive IT issues into proactive defense, ensuring smooth operations even during tax season.”
Essential IT Security Best Practices for Accounting Professionals
- Implement Multi-Factor Authentication and Encryption: Every device and cloud application should require MFA and use AES-256 encryption to secure data, as mandated by the FTC Safeguards Rule. This is a baseline in today’s threat landscape.
- Establish Robust Backup and Disaster Recovery Systems: Automatic daily backups and a tested disaster recovery plan can reduce downtime and limit losses during an incident, as demonstrated in OFFSITE’s cybersecurity case study of a major accounting firm ransomware attack.
- Provide Ongoing Security Awareness Training: Regular training sessions are essential to educate staff about phishing, malware, and safe remote practices, as emphasized in the AICPA’s cybersecurity resources.
- Maintain Current Software and Systems: Keeping operating systems and accounting software updated is crucial—remember the Equifax breach as a stark reminder of what happens when patches are delayed.
- Implement Strong Access Controls and Vendor Management: Adopting a least privilege approach and regularly reviewing user accounts and vendor security measures are critical steps outlined in IRS Publication 4557.
- Develop and Test an Incident Response Plan: A well-practiced incident response plan can drastically reduce the impact of a breach, preventing it from snowballing into a full-scale disaster, as noted in the FTC’s Safeguards Rule guidance.
Selecting the Right IT Partner for Your Accounting Firm
When choosing an IT partner, consider these key factors:
- Industry Experience and Expertise: Look for providers with a track record in accounting IT, who understand your software and compliance needs.
- Security and Compliance Capabilities: Ensure they implement robust security measures, including MFA, encryption, and regular compliance audits.
- Support Availability and Response Times: Opt for a provider that offers 24/7 support—especially during tax season—with rapid response times and multiple support channels.
Conclusion: IT Management as a Strategic Asset
Drawing on years of firsthand experience with accounting firms, it’s evident that specialized IT solutions are not luxuries—they are essential. Robust IT management not only protects sensitive client data but also ensures compliance and enhances operational efficiency. By leveraging specialized IT services and adhering to industry best practices, you can build a resilient IT defense that stands up to the challenges of today’s digital landscape.
Don’t wait for a crisis to force your hand. Contact a specialized IT provider this week to assess your firm’s security posture and start building a resilient IT defense for tax season and beyond.
About the Author
Jatin Narang is the Founder and CEO of Verito Technologies and a Microsoft Certified System Engineer with over two decades of experience in IT service delivery for accounting and tax professionals. A member of the Forbes Technology Council, Jatin has spoken at CPAacademy.org on topics such as “Keeping Taxpayer Data Secure” and “Cybersecurity: The Must-Have Measures for Tax and Accounting Professionals.” His extensive experience and industry recognition make him a trusted advisor to accounting firms seeking secure, compliant IT solutions.
About Verito Technologies
Verito Technologies specializes in managed IT and private cloud hosting solutions tailored for the accounting industry. With over 9 years of experience, a client satisfaction rate of 98%+, and more than 1,000 satisfied clients, Verito is dedicated to eliminating technology headaches and ensuring that accounting firms can operate securely and efficiently—even during peak tax season.
References
- Internal Revenue Service. “Return Preparer Office Federal Tax Return Preparer Statistics.” https://www.irs.gov/tax-professionals/return-preparer-office-federal-tax-return-preparer-statistics
- Texas Society of CPAs. “Today’s CPA Magazine on Cyber Trends and Statistics.” https://www.tx.cpa/docs/default-source/communications/2024-today’s-cpa/july-august-2024/spotlight-on-cyber-insurance.pdf?sfvrsn=d55783b1_1
- IBM Security. “Cost of a Data Breach Report 2023.” https://www.upguard.com/blog/cost-of-a-data-breach-2024
- Internal Revenue Service. “National Tax Security Awareness Week News Releases.” https://www.irs.gov/newsroom/national-tax-security-awareness-week-day-5-tax-pros-urged-to-guard-against-identity-theft-with-updated-written-information-security-plan
- Internal Revenue Service. “Publication 5709: WISP Guidelines for Tax Professionals.” https://www.irs.gov/pub/irs-pdf/p5709.pdf
- AICPA. “GLBA Safeguards Rule Requirements.” https://www.aicpa-cima.com/resources/landing/gramm-leach-bliley-act-glba-and-the-safeguards-rule
- Internal Revenue Service. “Publication 4557: Safeguarding Taxpayer Data.” https://www.irs.gov/pub/irs-pdf/p4557.pdf
- ICAEW. “Why small accounting firms are prime targets for cybercriminals.” https://www.icaew.com/insights/viewpoints-on-the-news/2024/oct-2024/why-small-accounting-firms-are-prime-targets-for-cybercriminals
- Statista. “Global financial ransomware attack rate 2024.” https://www.statista.com/statistics/1460896/rate-ransomware-attacks-global/
- ABA Banking Journal. “Ransomware in the financial sector.” https://bankingjournal.aba.com/2024/08/ransomware-in-the-financial-sector/
- KnowBe4. “Ransomware Criminals Hack An Accounting Company And Cause A Data Breach For Their Customers.” https://blog.knowbe4.com/heads-up-ransomware-criminals-hack-an-accounting-company-and-cause-a-data-breach-for-their-customers
- eSudo. “Accounting firm hit with $300,000 ransomware twice.” https://esudo.com/resources/accounting-firm-hit-with300000-ransomware-twice/
- Healthcare IT News. “Deloitte breach tied to lack of multifactor authentication for admin account.” https://www.healthcareitnews.com/news/deloitte-breach-tied-lack-multifactor-authentication-admin-account
- Federal Trade Commission. “FTC Safeguards Rule: What Your Business Needs to Know.” https://www.ftc.gov/business-guidance/resources/ftc-safeguards-rule-what-your-business-needs-know
- AICPA. “CPA cybersecurity checklist.” https://www.aicpa-cima.com/resources/download/cpa-cybersecurity-checklist
- OFFSITE. “Cybersecurity Case Study – Ransomware Attack.” https://off-site.com/case-study-cybersecurity-ransomware-attack/
