Knowledge-based Authentication, Compliance, and Tax Season: What Your Accounting Firm Needs to Know

As the 2023 tax season approaches, we know your workload is about to start ramping up—but your worries about compliance, data privacy, and cybersecurity for your clients don’t also need to increase as well.  But if you are concerned, you have good reason. For accounting firms, security is essential: with large amounts of sensitive client data, financial information, and personal identification details, it is vital that this data is protected from unauthorized access and potential data breaches. Additionally, keeping firm data secure online is critical to staying in line with IRS compliance requirements in light of the expansion of online tax filing and e-signatures. One part of compliance is deploying appropriate security measures, especially during tax season. While there are numerous steps that accounting firms should take, don’t overlook the importance of protocols such as KBA (knowledge-based authentication).

KBA can help to prevent unauthorized access and ensure the security and integrity of sensitive financial information. In fact, KBA is specifically required by the IRS to complete IRS e-file Signature Authorization forms, such as 8879 and 8878. Read on to learn about knowledge-based authentication, why it is an important feature for accounting firm software, its role in compliance for tax season and IRS e-file Signature Authorization, and how Mango can support your firm with robust security measures during tax season and beyond.  

What is knowledge-based Authentication (KBA)?  

Knowledge-based authentication (KBA) is a method of verifying an individual’s identity by asking them to provide information that only they are likely to know. This information is typically stored in the form of “security questions,” which are specific questions the user must answer to prove their identity.  

Some examples of KBA queries include: 

• Their date of birth 
• Their Social Security number 
• The name of their first pet 
• The make and model of their first car 
• Their mother’s maiden name 

It is worth noting that KBA should ideally be used in conjunction with other security measures, such as strong password policies and multi-factor authentication, to provide sufficient defense against unauthorized access and potential data breaches.  

Why is KBA an important feature for accounting firm software? 

Security and privacy of sensitive financial information is mission critical for accounting firms. KBA provides a vital level of security when sending documents securely and making eSignature requests. KBA helps safeguard this information from unauthorized access, which could have severe consequences for both the firm and its clients.   

Additionally, KBA can help to protect against identity theft and other types of cybercrime by making it more difficult for attackers to gain access to sensitive information. 

What is KBA’s role in compliance for tax season? 

KBA is an important feature for accounting firms during tax season for several reasons, namely ensuring best security practices and staying in line with IRS requirements for submitting forms like Form 8879.  

Keeping ahead of best security practices 

During tax season, accounting firms deal with a large volume of sensitive financial information, including personal information about clients and confidential business data. Strong security measures are necessary to protect this information and ensure compliance with relevant laws and regulations. 

KBA can support compliance during tax season by helping to ensure that only authorized individuals have access to sensitive financial information. By using KBA to verify the identity of users before granting them access to the software, firms can help prevent unauthorized access and protect sensitive data by following relevant laws and regulations.  

The role that KBA plays in compliance with IRS requirements is just as important, though.  

KBA and Form 8879 

Form 8879 is an IRS e-file Signature Authorization form, which authorizes e-filing for tax returns. When a taxpayer e-files their tax return, they will be asked to complete Form 8879 and provide their personal information, such as their name, address, and Social Security number. This information is used to verify the taxpayer’s identity and ensure that the tax return is signed correctly and authorized. 

KBA is required for Form 8879—specifically, it’s needed when electronically submitting the form. (For clients wishing to use a wet signature, KBA requirements do not apply.) 

By requiring taxpayers to provide personal information when signing their tax returns electronically, KBA helps to ensure the security and integrity of the tax filing process and prevent fraud. 

How does IRS e-file signature authorization use KBA? 

The IRS e-file Signature Authorization allows individuals and businesses to file their tax returns electronically using the IRS e-file system. However, taxpayers must obtain an e-file signature authorization to use this system. This authorization is granted after the individual or business successfully completes a knowledge-based authentication (KBA) process. 

During the KBA process, the individual or business will be asked to provide information only they are likely to know, such as the answers to security questions. This information is used to verify the identity of the individual or business and ensure that they are authorized to use the IRS e-file system.  

Once the KBA process is complete and the e-file signature authorization is granted, the individual or business can use the IRS e-file system to file their tax returns electronically. 

Stay secure during tax season with Mango 

Mango’s security features are baked into the software because Mango was made by accountants, for accountants. Our team knows exactly what you need to protect your clients’ sensitive information.  

Other robust security features offered in Mango include: 

• The bank-level SHA-256 encryption algorithm 
• Secure file sharing straight from your email 
• Optional client portal for additional password protection 
• Unlimited secure storage space and file size 
• Legally-binding e-signatures with a digital audit trail 
• SSL-encrypted payments in our client portal 

Mango’s security defenses are only one part of its robust practice management system. Get every piece of software you need in one place so you don’t lose time jumping between different programs. Boost your security and set your accounting practice up for tax season success with help from the expert accountants at Mango—schedule a demo with us today.