Securing client information matters to accounting firms of all sizes. Federal and state rules address how people who hold financial data protect it. Below is what the main sources say, and where a secure client portal fits. How each rule applies to your firm is a question for your own adviser.
Federal and state rules address how firms protect client data
What IRS Publication 4557 says about protecting client data
IRS Publication 4557, Safeguarding Taxpayer Data is the IRS’s guide to protecting client data. It is written for tax professionals. It says: “Protecting taxpayer data is the law.” On email, it says: “Send only password-protected and encrypted documents if you must share files with clients via email or use Secure File Transfer Protocol (SFTP) to transmit files instead of email.” Read what Pub 4557 says about client file sharing.
What the Gramm-Leach-Bliley Act (GLBA) and the FTC Safeguards Rule say
The Gramm-Leach-Bliley Act (GLBA) gives authority to the Federal Trade Commission (FTC). Under it, the FTC can set data safeguard rules for financial institutions. The FTC Safeguards Rule, issued under the GLBA, covers professional tax return preparers. Pub 4557 puts it this way: “According to the FTC Safeguards Rule, tax return preparers must create and enact security plans to protect client data.” It points to IRS Publication 5708 for creating a written information security plan. It adds that failure to do so “may result in an FTC investigation.”
Some states, such as California, have their own privacy laws
Several states, such as California, have their own privacy laws. The California Consumer Privacy Act (CCPA) is one example. It sets rules for how covered businesses handle personal information. The California Attorney General’s CCPA page explains who it covers. Where you and your clients are affects whether a state law applies to your firm. The law’s thresholds matter too. Ask your own adviser.
Clients pay more attention to how their data is protected
Today’s clients are more aware of and more concerned about their data security. A secure client portal shows them you take it seriously. That can build their trust and satisfaction.
A secure client portal does not make a firm compliant
Compliance depends on your firm’s own safeguards and plan. Your own adviser can tell you how the rules apply. A portal gives clients one place to send and receive documents instead of email. That shows clients you are committed to their security and their trust. Want a client portal that is both secure and convenient? Read The Definitive Guide to Client Portals for Accountants.