RealNews

IRS sets timetable for encrypting tax returns

The IRS will require professional tax preparers, software vendors and third-party transmitters to use approved encryption methods when sending individual and business tax return information over dedicated lines, beginning in 2005. Encrypting the transmissions between trading partners and the IRS will complete the existing security provided by the trading partners’ systems and by the IRS security zone, the IRS said in a notice in Monday’s Federal Register. The encryption options strengthen the security of financial information as it travels over software vendors’ and third-party transmitters’ dedicated lines to the IRS. Previously, taxpayer information could be encrypted over dedicated lines but was unlocked before it entered IRS systems. Beginning with the 2005 filing season, trading partners will need, at minimum, a 128-bit Federal Information Processing Standard encryption method to transmit tax information. With encryption written into tax software packages, professional tax preparers also will have the option to transmit directly to the IRS via the Internet or through their software vendors. Full Story

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