Tax season can be daunting for both employees and employers alike. As an employer, not only do you have to file your taxes, but you are also responsible for protecting your employee's personal information - including their W-2 forms.
During the 2022 tax filing season, the IRS flagged more than one million tax returns totaling $6.3 billion in refunds as potentially fraudulent. These alarming figures underscore the significance of safeguarding employees' information, particularly their W-2 form, which contains confidential details such as their Social Security numbers and income data, making them a prime target for cybercriminals.
The Risks of W-2 Information Falling into the Wrong Hands
There are several ways that criminals can obtain W-2 information and use it to their advantage. One common tactic is through phishing emails or phone calls, where scammers pose as IRS agents or company executives requesting W-2 information under the guise of "verifying" employee data. Another method is hacking into company databases or obtaining physical copies of W-2 forms.
The consequences of a successful attack on an employer's W-2 records can be devastating for both the employees and the company. Not only can it lead to identity theft and financial loss for individual employees, but it can also result in legal and financial repercussions for the company, such as fines and damage to its reputation.
Steps Employers Can Take to Protect W-2 Information
Fortunately, there are several measures that employers can take to safeguard their employee's W-2 information and prevent cybercriminals from accessing it.
Educate Employees on Cybersecurity Best Practices
A well-informed and vigilant workforce is the first line of defense against cyberattacks. By providing regular cybersecurity training, workers will know how to secure personal information, spot phishing scams, and report suspicious activity. Real-life simulations can help staff understand these scams, making applying what they have learned to practical scenarios easier. Likewise, regular refresher courses must be offered to ensure cybersecurity remains top-of-mind.
Implement Multi-Factor Authentication
Utilizing multi-factor authentication (MFA) for employee accounts mitigates the risk of unauthorized access to company systems. MFA functions on the principle of requiring multiple forms of identification from the user, thereby adding several layers of security. For instance, after entering their password (something the user knows), the employee may be required to enter a unique code sent to their smartphone (something the user has) or authenticate their identity through a fingerprint scanner (something the user is). This means that even if a cybercriminal obtains an employee's password, they will find it challenging to bypass the additional layers of verification provided by MFA.
Limit Access to W-2 Information
Employers should also carefully control access to W-2 forms within the company. This can be accomplished by storing information securely and only granting access to authorized personnel. Companies should have clear policies outlining who within the organization can handle these sensitive documents. This may include members of the HR and accounting departments, but even within these groups, access should be restricted to those requiring this information to perform their roles. Additionally, employers should ensure the secure disposal of old W-2 forms. Documents should be thoroughly shredded or otherwise destroyed to prevent the information from falling into the wrong hands. Digital copies, too, should be securely deleted when no longer needed.
Encrypt W-2 Forms
Encrypting electronic copies of W-2 forms can provide extra protection for sensitive information, making it more difficult for hackers to decipher. When you encrypt a document, you scramble the data into a code that can only be deciphered with a specific key. This means that even if a cybercriminal gains access to an encrypted W-2, they won't be able to understand or use the information without the decryption key. When encrypting data, employers should ensure that the encryption software adheres to industry standards, regularly update the software to protect against new threats and vulnerabilities, and securely store and manage encryption keys to ensure they are only accessible to authorized personnel.
Employers should regularly review and update their cybersecurity policies and procedures to stay ahead of evolving threats. This includes implementing software updates, conducting regular security audits, and staying informed about the latest tactics used by cybercriminals. Cybersecurity is not a one-and-done deal; it requires constant attention and adaptability. As digital threats evolve, so must the strategies employed to combat them. By staying informed and proactive, employers can significantly reduce the risk of a data breach, safeguarding their employees' W-2 information and tax refunds.