Everything you need to know about cybersecurity investment tax credits

Everything you need to know about cybersecurity investment tax credits

Cybersecurity is a top priority for all types of businesses. For tax professionals, the increasing threat of cyberattacks means that protecting your clients’ sensitive information has never been more important. However, investing in cybersecurity measures can be expensive. Fortunately, the government offers tax credits to incentivize businesses to invest in their cybersecurity.  

In this article, we will cover everything you need to know about cybersecurity investment tax credits, including what they are, their benefits and more. 

What are cybersecurity investment tax credits?

Cybersecurity investment tax credits are a type of tax incentive offered by the government to encourage businesses to invest in cybersecurity measures. These tax credits provide a financial benefit to companies that take steps to protect their sensitive information against cyber threats. 

Such incentives motivate businesses to contribute to strengthening national security by securing their operations. Cybersecurity tax credits serve as an incentive for businesses to invest in education and technologies for their staff that is best suited for their specific needs. This enables them to choose the most appropriate solution for their business while also ensuring the protection of their operations. 

For tax firms and professionals, this means that not only can cybersecurity tax credits lead to protection for your firm, but they can also be a good investment for your clients. 

Benefits of cybersecurity investment tax credits 

There are numerous benefits to the cybersecurity investment incentive tax credit. For starters, the tax credit allows businesses to reduce their tax liability, which means that companies can invest more in their cybersecurity measures or in other important areas knowing that an incentive awaits them during tax season. For instance, Maryland offers a 33% tax credit for investments of up to $250,000. 

The tax credit also helps businesses to stay competitive in their respective industries. By investing in cybersecurity measures, companies can reassure their clients that their sensitive information is safe and secure. This can help build trust and improve the company’s reputation. 

Additionally, investing in cybersecurity measures can also reduce the risk of cyberattacks — which often result in significant financial losses. By reducing the risk of cyberattacks, businesses can save money by avoiding the costs associated with data breaches and cyberattacks — not to mention the potential fines faced by businesses in highly regulated industries. 

How to keep clients safe from cybersecurity threats 

Tax practitioners are frequently targeted by cybercriminals because they have access to important client information, including names, addresses, birth dates, social security numbers and bank account information. To safeguard sensitive data, the following measures should be considered as part of your firm’s cybersecurity services and procedures:

Maintain antivirus software 

Ensure that antivirus software is up-to-date and regularly scans all local computers, network drives and mobile phones to protect against malware.  

Establish a powerful password protocol 

Require unique passwords for every program and website. Ensure passwords are strong and consist of a minimum of 12 characters, including uppercase and lowercase letters, special characters and numbers. A strong password policy should also require that they be changed every 90 days. 

Protect your network with a firewall 

Defend your clients’ most sensitive data by installing and maintaining a firewall to defend against external attacks. 

Consistently backup your data 

Establish a robust backup protocol that saves vital files off-site numerous times daily, allowing for their retrieval in case of a ransomware attack. 

Encrypt your computer drives 

Use sophisticated encryption models on all computer drives to prevent unauthorized access. 

Encourage clients to sign up for the identity protection PIN opt-in program 

Investing in cybersecurity measures is only one part of protecting your clients’ sensitive information. It is also important to educate your clients about cybersecurity threats and encourage them to take steps to protect their own information.  

One way to do this is to encourage clients to sign up for the identity protection PIN opt-in, which is part of a new IRS program. This program provides clients with a unique PIN that can help protect their sensitive information from identity theft. Accessible to all individuals who can authenticate their identity, the main purpose of the program is to prevent fraudulent activity. Its goal is to prevent an unauthorized person to file a tax return using the taxpayer’s Social Security number.  

To use this service, taxpayers need to acquire their exclusive six-digit IP PIN, which must be kept confidential and only shared with their trusted tax preparer. The tax preparer must enter this unique number while filing the electronic tax return to verify the taxpayer’s identity. 

By encouraging your clients to sign up for this program, you can help to reduce the risk of a cyberattack and protect your clients’ sensitive information. 

Protect your business and your clients 

Cybersecurity investment tax credits are an important tool for clients looking to protect their sensitive information against cyber threats. By taking advantage of these tax incentives and credits, these businesses can reduce their tax liability and invest more in their cybersecurity measures.  

It’s important to work with a cybersecurity expert to determine which measures are necessary to protect your sensitive information and to educate your clients about cybersecurity threats. By doing so, you can help to reduce the risk of a cyberattack and protect your clients’ sensitive information. 

If you’re considering continuing professional education, review Surgent’s course catalog. With more than 10,000 credit hours of course material available, Surgent offers CPE programming in a variety of formats on data and cyber security and all topics relevant to tax professionals.