Data Backup Plan for Tax Preparers
Security Six requirement #5: Regular backups of all client data with offsite storage. Ransomware, hardware failure, or natural disaster — backups are your recovery lifeline.
The 3-2-1 backup rule
The IRS recommends the 3-2-1 backup strategy as the foundation of your data protection plan:
Critical: All backups must be encrypted. An unencrypted backup is a complete copy of every client’s sensitive data sitting in one place. And test your restores regularly — a backup you can’t restore from is worthless.
Backup best practices for tax offices
Automate your backups
Manual backups get forgotten. Use automated backup software that runs daily (or more frequently during tax season) without requiring human action.
Encrypt everything
Both local and cloud backups must be encrypted. Use AES-256 encryption and store encryption keys separately from the backup data.
Test restores quarterly
Verify you can actually restore from your backups. Pick random files and restore them to confirm the process works. Document each test in your WISP.
Retain for 7 years
The IRS requires tax preparers to retain client records and related security logs for a minimum of 7 years. Plan your backup retention accordingly.
Backup FAQ for tax preparers
Daily at minimum. During tax season, consider backing up multiple times per day. The goal is that if something goes wrong, you lose no more than one day’s work. Automated backup solutions can run continuously in the background.
No. An external hard drive connected to your computer can be encrypted by ransomware along with your main drive. You need at least one offsite or disconnected backup. The 3-2-1 rule requires different media types and an offsite copy. A local drive plus encrypted cloud backup is a good minimum setup.
Tax software cloud backups cover the data within that application, but not everything else: client documents, emails, scanned forms, and your WISP/compliance documentation. You need a comprehensive backup strategy that covers all client data, not just what’s in one application.
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Schedule a free consultation to assess your firm's security posture.