Navigating tax season safely: an overview of credential security risks

The tax season has always been a critical time for both individuals and businesses, but it has never been quite as fraught with cyber threats as it is these days. The hard shift to digital filing—along with a constantly evolving threat environment—has turned this annual ritual into a prime time for cybercrime.

In 2024 alone, the Internal Revenue Service (IRS) uncovered $9.1 billion in tax fraud cases and received nearly 300,000 reports of identity theft. Whether it’s phishing emails designed to trick filers into disclosing personal details or sophisticated malware operations targeting tax professionals, cyber crooks during this period are disturbingly active. Today, we dive into the scope of these threats, examine their real-world implications, and provide practical steps to help mitigate them.

The landscape of tax season cyber threats

Tax season generally stretches from January to mid-April, when an estimated 165 million Americans and numerous businesses hustle to prepare and file tax returns. About 80 million of those returns are prepared by Certified Public Accountants (CPAs), according to recent industry data. Unfortunately, cybercriminals treat this turn to digital transactions as an annual opportunity and launch tailored attacks that aim to exploit both individuals as well as companies.

Phishing campaigns 

One of the most common attack vectors is phishing—where criminals send bogus emails designed to trick recipients into unsuspectingly providing sensitive personal data. These emails may appear to be from the IRS or reputable tax prep services, complete with official logos or references to “overdue payments.” A 2024 Hornetsecurity report pegged phishing at 39.6% of all email-based attacks, a trend amplified during tax season.

Malware and ransomware 

Tax forms often contain everything a hacker needs for identity theft: Social Security numbers, addresses, and banking details. And once cybercriminals gain access to your system—often via hidden malware in an attachment labeled “tax form” or “software update”—they can install spyware, key loggers, or even launch a full ransomware attack. Faced with a major filing deadline, victims might be more inclined to pay a ransom rather than miss the cut-off for submission.

“Ghost” preparers and fake platforms

Cybercriminals have also found success posing as tax professionals. In such a scenario, an unsuspecting taxpayer hands over a trove of personal information—bank account details, W-2 forms, Social Security numbers—only to see fraudulent returns filed in their name. The IRS warns that these “ghost” preparers usually vanish after submitting false forms and pocketing refunds—with identity theft-related tax fraud costing American taxpayers $5.5 billion in 2023.

Business-focused threats 

For small and midsize businesses, there’s another layer of complexity. Employee data—including Social Security numbers, addresses, and payroll information—often reside on shared drives or distributed networks. A single compromised password can open the door to large-scale identity theft or financial fraud. Given that many businesses rely on internal accounting departments or external consultants, the rate of data exchange grows. Each endpoint—whether an employee’s laptop or a tax preparer’s login credentials—can become a gateway to a breach if not safeguarded properly.

Why credential security matters

Data breaches don’t usually happen because a hacker brute-forces encryption algorithms. More often, criminals follow the path of least resistance, which tends to be simple or stolen passwords. Verizon’s 2024 Data Breach Investigations Report found compromised credentials behind 74% of financial sector attacks. And so tax season, with its sudden surge in data transmissions, provides an even bigger opportunity.

Credential stuffing attacks

Cybercriminals purchase stolen username-password pairs on the dark web and systematically test them on popular platforms. If you’re in the habit of reusing passwords, a single breach on one platform can open up multiple high-value accounts to intrusion—including those used for taxes.

Email account takeover

If hackers gain access to an email account, they can reset passwords on numerous services, intercept 2FA codes (if poorly implemented), or conduct spear-phishing attacks against your contacts. During tax season, access to a CFO’s or finance manager’s inbox is a potential gold mine.

Shared passwords for personal and work accounts

A surprisingly large number of incidents stem from people using the same or slightly modified passwords across multiple sites. If an attacker compromises your personal social media password, they can try variations of that password on your business or tax accounts.

With so many potential vulnerabilities arising from insecure credentials, having a robust and systematic approach to password management is critical. Employing a tool like NordPass helps create, store, and even share unique, complex passwords across a network of trusted employees or family members without the friction that leads to risk-laden “shortcut” practices.

Real-world repercussions of tax season breaches

Cyber threats may sound abstract until you experience them firsthand, unfortunately. So let’s consider a few scenarios that can easily play out during tax season.

Hijacked refunds

Criminals who gain access to your tax software account can alter returns, inflate refunds, and have the money deposited into their own accounts. Not only are you left without the anticipated refund, but you could be flagged for fraudulent activity by the IRS. Correcting these records requires time-consuming phone calls, paperwork, and sometimes legal counsel.

Identity theft and financial fraud

Tax documents typically hold Social Security numbers, addresses, and full legal names—crucial data for identity thieves. Armed with this information, cyber crooks can open credit lines, apply for loans, and even file additional fraudulent tax returns under your identity. The IRS estimates that scammers committed $5.5 billion in tax fraud in the last year alone, much of it fueled by stolen credentials.

Operational disruption and ransomware

If a ransomware attack locks down your systems during peak filing season, you may be faced with the unenviable choice of paying the ransom or missing the filing deadline. When your business’s entire payroll system is frozen, you stand to lose not only money but also the trust of your employees, clients, and partners.

Legal and regulatory trouble

Businesses are required by law to protect employee data. Should a breach involving W-2 forms occur, state and federal regulators might levy hefty fines, and employees could file lawsuits. For small businesses, these legal battles can negatively impact public reputation or even outright ruin the business financially. 

Tips for protecting credentials and mitigating risk

Given the scale of digital threats, securing your online identity during the tax filing process necessitates proactive strategies. Below are tangible measures for individuals and organizations.

Use strong, unique passwords

Avoid dictionary words, common phrases, or personal references. Never reuse passwords across services, especially for tax prep, payroll systems, and personal email accounts.

Consider adopting a trusted password manager such as NordPass, which can generate intricate passwords and store them securely.

Enable multi-factor authentication (MFA)

Whenever available, activate MFA on all platforms connected to your finances or email. This extra verification layer can help thwart criminals who may have stolen or guessed your password.

Stay wary of suspicious links and attachments

Phishing remains the easiest door into your personal or corporate systems. Even a single click on a malicious link or attachment can deliver spyware or ransomware. So make sure to always check the email sender’s address carefully, and manually visit official IRS or tax software sites by typing in the address rather than clicking a link.

Conduct routine account monitoring

Regularly review bank statements, credit reports, and your IRS tax account. If you see unfamiliar activity, act immediately. If you’re a business, schedule monthly or quarterly audits of software access logs to identify potential anomalies.

Update software and systems

Ensuring your operating system, antivirus, and tax software are current can close known vulnerabilities that criminals might aim to exploit. Encourage employees to run updates as soon as they’re available, rather than postponing them.

Limit access privileges

In a business environment, not every staff member needs access to all financial or payroll details. Adopt the principle of least privilege to shrink your attack surface. 

For additional protection, consider segmenting your network so that critical tax data is walled off from the rest of the organization’s operations.

Verify tax preparers’ credentials

Legitimate preparers must have a Preparer Tax Identification Number (PTIN). A lot of Americans entrust CPAs and other pros to handle their tax returns, so it’s vital to confirm the authenticity of anyone who deals with your finances. “Ghost preparers” who refuse to sign returns or demand unusual payment methods are immediate red flags.

Maintain an incident response plan

Outline the steps you’ll take if a breach does occur: who will you call first? How will you isolate infected systems? For businesses, having a tested response plan can drastically minimize downtime and financial loss in a worst-case scenario.

Security-first culture

Technical defenses cannot fully compensate for employees or household members who lack security awareness. Training and vigilance must become habits. When staffers comprehend the risks of phishing emails—or why weak passwords are a liability—they usually become active participants security-wise.

Tax season, with its tightly packed deadlines and sudden influx of external correspondences, is especially prone to mistakes. Criminals place their bets on hectic schedules and the assumption that nobody reads the fine print in a rush. By fostering an environment where it’s standard practice to confirm suspicious queries or check unplanned attachments, you reduce the chance of inadvertent leaks.

Of course, tools like NordPass help avoid the pitfalls of shared spreadsheets or stray Post-it notes with login data by providing secure credential storage and encrypted sharing, drastically reducing the friction that leads people to reuse or create weak passwords. 

Beyond tax season: building a resilient foundation

Keeping digital attackers at bay during tax season shouldn’t be a last-minute scramble. It must be part of a larger, year-round approach to cybersecurity. Tax season simply throws these issues into the spotlight because the stakes—and the volume of targeted scams—are higher.

View security as ongoing

While certain threats may peak from January to April, scammers work continuously. Make sure your security protocols— from patch management to employee training—are consistent and not just “tax-time activities.”

Leverage intelligence and reports

The IRS publishes alerts on emerging scams. Likewise, major cybersecurity outlets offer real-time threat briefings. By staying updated on known risks, you can proactively adjust or harden policies.

Invest in infrastructure

For businesses, upgrading legacy systems and implementing advanced threat detection can prevent criminals from exploiting outdated software. For individuals, maintaining secure Wi-Fi networks and establishing personal firewalls can be an impactful step.

Strengthen vendor and partner relationships

If your business deals with external tax preparers or payroll service providers, insist on strong security practices and confirm that they uphold data-protection protocols. Transparent discussions about cybersecurity responsibilities can avert confusion or blame in the event of a breach.

Encourage swift reporting

If something does go wrong—like an employee clicking a suspicious link—delays in reporting can allow malware to spread or cyber crooks to siphon off data unnoticed. Cultivate a culture where immediate reporting, rather than fear of reprimand, is the norm.

Wrapping up

Amid the hustle of calculating deductions, aligning your statements, and meeting deadlines, it’s all too easy to underestimate the value of robust credential security. Yet, in the end, the difference between a secure, worry-free filing and a catastrophic breach often hinges on consistent, disciplined adherence to fundamental security principles. As you gather receipts, consult accountants, or log in to tax software, remember that each login credential is a potential gateway. By making calculated, informed decisions, you maintain control over your security.