The tax-law layer
Before any offshore access, the 7216 regulations require written consent from the taxpayer, signed and dated, and for Form 1040 series returns the SSN must be redacted or masked unless the exception in 301.7216-3(b)(4)(ii) applies.
Offshore Accounting Data Security: Controls to Require | HelloBooks Offshore accounting data security for US firms: SSN masking under 7216, Safeguards Rule encryption and MFA, access control, and reporting obligations.
Outsourcing · data security
Data security for offshore accounting teams
An offshore team adds distance between you and the data. The controls have to be stronger by design, because you cannot walk over and check a screen.
Free Plan with invoices within 200 transactions, bills & quotes — no credit card.
Smarter accounting for growing businessesBefore access
- Signed 7216 consent from each affected client
- SSN masked on 1040 series data
- Contract with Safeguards Rule terms
On every login
- Multi-factor authentication
- Access limited to assigned clients
- Encrypted connection only
Ongoing
- Periodic provider assessment
- Incident reporting path to your Qualified Individual
- Data disposal at contract end
The Safeguards Rule layer
Your information security program must protect customer information with encryption at rest and in transit over external networks, and require multi-factor authentication for anyone accessing an information system. Those duties do not stop at your office door; 314.4(f) requires you to contract for them with service providers and assess providers periodically.
The FTC guide also says customer information should be securely disposed of no later than two years after its most recent use to serve the customer, subject to exceptions. Put the disposal duty into the offshore contract’s exit terms.
Design out the downloads
Most offshore incidents start with a file copied somewhere it should not be. Having the offshore team work inside HelloBooks, under the six-role access model with record-level scoping and an audit trail on every action, removes the need for local copies of client books.
FAQ
Frequently asked questions
- Does the FTC need to hear about an offshore breach?
- If the event involves unencrypted information of at least 500 consumers, the FTC guide says notice is due as soon as possible and no later than 30 days after discovery, wherever the breach happened.
- Who reports data theft to the IRS?
- Publication 4557 tells firms to report data theft or loss to the appropriate IRS Stakeholder Liaison.
Related
Keep exploring
Sources
- 26 CFR 301.7216-3, disclosure or use permitted only with consent — checked 2026-10-21
- 16 CFR Part 314, FTC Safeguards Rule (eCFR) — checked 2026-10-21
- FTC, Safeguards Rule: what your business needs to know — checked 2026-10-21
- IRS Publication 4557, Safeguarding Taxpayer Data (Rev. 6-2024) — checked 2026-10-21
General information for tax and accounting professionals, not legal advice. Rules are summarised from the primary sources listed on the date shown; read the current text before relying on it.
Start automating your books today
Free Plan with full access to the AI accountant — no credit card, no time limit.