Tax season is a time of increased financial activity, with businesses handling payroll, tax documents, and client financial data. Unfortunately, it’s also a time when cybercriminals become more aggressive, looking for opportunities to exploit vulnerabilities in businesses of all sizes. From phishing scams and fraudulent tax filings to ransomware attacks, cyber threats are heightened during this period. However, these risks do not disappear once tax season ends. Every business, regardless of industry, needs year-round protection against cyberattacks. That’s why cyber liability insurance is a critical safeguard, providing financial and legal support to help businesses recover from a cyber event.
The Growing Cyber Threat During Tax Season
Cybercriminals take advantage of tax season, targeting businesses, accountants, and tax professionals who handle sensitive data. According to the IRS, thousands of tax-related identity theft cases are reported each year, with hackers using stolen Social Security numbers and other personal details to file fraudulent tax returns. Businesses are particularly vulnerable as they process and store payroll records, bank account information, and tax documents.
Common cyber threats during tax season include:
- Phishing Scams – Cybercriminals impersonate the IRS, payroll services, or tax preparers to trick employees into sharing sensitive information.
- Ransomware Attacks – Hackers encrypt business files and demand a ransom to restore access, which can bring operations to a halt.
- Business Email Compromise (BEC) – Scammers pose as executives or accountants, requesting fraudulent wire transfers or unauthorized payroll changes.
- Data Breaches – If payroll records, Social Security numbers, or client tax details are exposed, businesses may face legal and financial consequences.
These threats are not exclusive to tax season, but the increased volume of financial transactions and data-sharing during this time makes businesses more susceptible.
Cybercrime Affects More Than Just Financial Businesses
Many business owners believe cybercriminals only target financial institutions, but every industry is at risk. If your business stores, processes, or transmits customer data, financial records, or payment details, you could be a target. Cybercriminals do not discriminate based on industry; they look for any weak point to exploit.
Industries that face significant cybersecurity risks include:
- Healthcare – Medical records are highly valuable on the dark web, making hospitals and private practices frequent targets of cyberattacks. A breach can result in HIPAA violations and legal action.
- Retail & E-Commerce – Point-of-sale system breaches expose customer payment details, leading to financial losses and reputational damage.
- Agriculture & Farming – Ransomware attacks on agribusinesses have disrupted operations during harvest season, costing farmers millions.
- Education & Schools – Schools store large amounts of student and faculty data, making them prime targets for cyber extortion.
- Construction & Manufacturing – Wire fraud schemes trick companies into sending payments to fraudulent accounts, resulting in significant financial losses.
Even if your business does not handle Social Security numbers or banking details, you are still at risk if you store customer contact details, employee payroll records, vendor and supplier payment information, or proprietary business data. Cyber liability insurance ensures that businesses in every industry are protected against cyberattacks and data breaches.
For more details on cyber liability coverage and data breach response, check out Grinnell Mutual’s Cyber Liability Resource.
Why Cyber Liability Insurance Matters
No matter how strong a company’s cybersecurity measures are, no system is entirely immune to cyber threats. Cyber liability insurance provides businesses with the financial protection they need to recover from an attack. A comprehensive policy typically includes coverage for:
- Data Breach Response – Covers the cost of notifying affected parties, forensic investigations, and legal expenses.
- Cyber Extortion Protection – Helps cover the cost of ransomware attacks and negotiations.
- Business Interruption Losses – Reimburses lost revenue if a cyberattack disrupts business operations.
- Legal & Regulatory Support – Covers fines, penalties, and compliance costs resulting from a data breach.
- Reputation Management – Provides resources to rebuild customer trust and manage public relations after an attack.
With the average cost of a data breach in the U.S. exceeding $9 million, many businesses cannot afford to recover from a cyberattack without proper insurance coverage.
Cybersecurity Best Practices for Business Owners
While cyber liability insurance provides financial protection, businesses should also implement strong security practices to reduce their exposure to cyber risks. Business owners can protect their company’s financial data and sensitive information by:
- Enabling Multi-Factor Authentication (MFA) – Adds an extra layer of security for tax software, payroll systems, and banking portals.
- Training Employees on Phishing Scams – Educates staff on how to recognize suspicious emails before clicking links or sharing sensitive data.
- Keeping Software & Security Systems Updated – Regular updates prevent cybercriminals from exploiting outdated security vulnerabilities.
- Securing Remote Access – Using a VPN (Virtual Private Network) protects business financial systems when accessed remotely.
- Limiting Data Access – Restricting employee access to tax-related data on a need-to-know basis minimizes exposure in the event of a breach.
- Backing Up Critical Data – Regular backups of tax records, payroll data, and financial files ensure businesses can recover quickly in case of ransomware attacks.
- Monitoring for Suspicious Activity – Setting up alerts for unusual login attempts, unauthorized wire transfers, or payroll changes helps detect potential fraud.
- Partnering with a Cyber Liability Insurance Provider – Even with strong cybersecurity practices, businesses remain vulnerable to unpredictable threats. Cyber liability insurance provides coverage for legal, financial, and operational costs in the event of an attack.
For more tips, check out the Federal Communications Commission’s Cybersecurity Guide for Small Businesses.
Stay Protected with Compass Insurance
Tax season presents a heightened risk for cyberattacks, but businesses must remain vigilant throughout the year. Cyber risks do not disappear after April—they continue to evolve and threaten businesses in every industry. Having a cybersecurity strategy that includes cyber liability insurance is essential for protecting your company’s data, reputation, and financial stability.
At Compass Insurance, we provide tailored cyber liability insurance solutions to help businesses stay ahead of cyber risks. Don’t wait until a cyberattack occurs—protect your business today. Contact one of our agents to learn more about cyber liability coverage and how it can help keep your business secure.
