Tax Software Hosting Risk Guide

The Cybersecurity Risk of Running TaxAct Professional / Enterprise on a Local Network

Software: TaxAct Professional / Enterprise | Vendor: TaxAct

Key takeaway

TaxAct Professional and Enterprise on a local network turn the firm's entire client dataset into a shared resource whose security depends on every endpoint and every credential in the office.

Who this applies to

Tax preparation firms, CPA firms, EAs, bookkeepers, EROs, and accounting offices that run TaxAct Professional / Enterprise on local PCs, mapped network drives, peer-to-peer shares, or an in-office file server.

TaxAct Professional / Enterprise is commonly used by tax professionals, and many firms run it as a desktop or local-network install because it is familiar, fast, and convenient. The tradeoff is that local convenience can create serious cybersecurity exposure when sensitive taxpayer data lives on office PCs, shared drives, mapped network paths, or an in-office file server.

What TaxAct Professional / Enterprise is

TaxAct Professional and TaxAct Professional Enterprise, from TaxAct, are used by independent preparers, mid-sized firms, and multi-location practices. TaxAct also sells consumer / cloud-based products, but this article focuses on firms running TaxAct Professional or Enterprise as a desktop or networked install where the application and return data live on the firm's own systems.

How local TaxAct Professional / Enterprise setups usually work

A typical TaxAct Professional or Enterprise install places the program on each workstation and points everyone at a shared client data folder on a host PC, server, or NAS over the office LAN. Multiple preparers open returns concurrently. Enterprise installs may extend across multiple offices through VPN or remote access tools. Backups are typically handled by an external utility or USB drive in the same office.

Quick definitions

Mapped drive — a Windows drive letter (like T:\ or Z:\) that points to a shared folder on another computer or server.
Local server / file server — a computer in the office that hosts shared files for other workstations.
Hosted server — a server in a controlled hosting environment (cloud or properly hardened internal) that users reach through controlled remote sessions.
MFA — multi-factor authentication; requires a second factor (app code, hardware key) in addition to a password.
WISP — Written Information Security Plan, expected of tax professionals under IRS Publication 4557 and FTC Safeguards Rule expectations.
Ransomware — malware that encrypts files and demands payment for a decryption key.

Why taxpayer data inside TaxAct Professional / Enterprise is so valuable

Return data inside professional tax software typically includes:

Names, addresses, and dates of birth
Social Security numbers and dependent information
Employer information and W-2, 1099, and K-1 details
Bank account and routing numbers used for refunds and payments
Prior-year return data and carryforwards
Tax credits, deductions, and filing status
Identity verification information
E-file submission data

That combination is exactly what attackers need for identity theft, refund fraud, business email compromise, extortion, and ransomware. It is a major reason tax offices are repeatedly targeted, particularly during filing season.

Risk summary

Local setup element	Why it creates risk	Better hosted-server control
Shared / mapped tax data folder	Malware on one workstation may reach all shared files	Keep tax data inside a controlled hosted session
Shared Windows credentials	Hard to prove individual accountability	Require unique user accounts with MFA
Local workstation storage	Data may remain on laptops and desktops	Centralize data on a secured, segmented server
Local backups	Backups may be reachable by ransomware	Use protected, segmented, monitored backups
Uncontrolled remote access	Attackers may abuse exposed RDP / remote tools	Use MFA-protected remote sessions only

The inherent problem with local network sharing

When TaxAct Professional / Enterprise data is shared over the office LAN, the security of the tax database effectively depends on the weakest workstation, weakest password, weakest Windows account, weakest remote access tool, weakest backup process, and weakest shared-folder permission in the office. Common risks include:

Compromised Windows logins and phishing attacks on staff
Malware on a single workstation that reaches all shared data
Ransomware encrypting mapped drives and reachable backups
Weak, reused, or shared passwords; no individual MFA on app access
Local admin rights granted too broadly
Exposed RDP or poorly secured third-party remote access tools
Unencrypted or co-located backups
Old workstations and missing patches during busy season
Inconsistent endpoint protection across the office
Over-permissive file shares with no centralized audit trail
No clear evidence of access controls or written security plan

Realistic attack scenarios

A workstation is compromised via phishing; ransomware encrypts the shared TaxAct client data folder before staff notice.
A weak password on the host PC is brute-forced through an exposed remote tool, exposing live returns to an attacker.
A multi-office Enterprise install is reached over a flat VPN, allowing malware on one branch laptop to reach client data at HQ.
A single shared Windows login is used by multiple seasonal preparers, eliminating individual accountability.
Local backups on an external drive in the same office are encrypted along with the live data.

Why "we have antivirus" is not enough

Antivirus, endpoint protection, firewall appliances, spam filtering, and backups are useful — but they are not the same thing as a secure architecture. A TaxAct Professional / Enterprise office can still be exposed if a user is phished, a workstation is compromised, a mapped drive is reachable, a backup share lives on the same network, an attacker gains local admin rights, users share credentials, the tax app does not require individual MFA on every access, or the firm cannot prove who accessed which client file and when.

IRS, WISP, and the compliance angle

Tax professionals are expected to protect taxpayer data and to maintain a Written Information Security Plan (WISP). IRS Publication 4557 and the FTC Safeguards Rule frame this expectation in general terms: a firm needs more than good intentions. It needs documented controls, access management, incident response planning, employee training, backup and recovery planning, and security monitoring. This article is not legal advice — it describes architectural patterns that are easier or harder to defend during a review.

Why hackers target tax offices

Small and mid-sized tax firms are attractive targets because they:

Hold uniquely valuable identity and financial data
Often do not have full-time IT or security staff
Frequently rely on older local-network software workflows
Use seasonal preparers and rush operations during tax season
Sometimes delay patches and upgrades until "after April"
Commonly use multiple remote access tools
Allow a single compromised workstation to expose all shared tax data

A more defensible architecture: hosted server model

A more defensible architecture for TaxAct Professional / Enterprise runs the application inside a controlled hosted-server environment with per-user MFA accounts, segmented backups, no flat-VPN exposure to remote laptops, and centralized logging that the firm can show during a WISP review.

In a properly designed hosted-server model: TaxAct Professional / Enterprise runs on a controlled server, users access it through secure remote sessions, each user has an individual account, MFA is required, local desktops do not directly store or freely browse the tax database, access is logged, backups are centralized and segmented, permissions are enforced, security updates are managed centrally, and the environment is segmented from the rest of the office network. That is materially easier to document for WISP and compliance purposes than a peer-to-peer or mapped-drive LAN.

Important nuance

A "hosted server" can be either a reputable remote tax software hosting provider or a properly secured local server environment that is designed to behave like a hosted system — users authenticate individually with MFA and access the tax software through controlled sessions, instead of opening raw shared data from ordinary office desktops. The architecture matters more than the address.

Schedule a TaxAct Professional / Enterprise security review

If your firm runs TaxAct Professional / Enterprise from local desktops, mapped drives, peer-to-peer shares, or an office file server, EasyWISP can help you understand the risk, document your WISP, and plan a safer hosted-server model with individual access controls and MFA.

Schedule a Tax Software Security Review See How EasyWISP Helps Tax Firms

Frequently asked questions

TaxAct Professional functions on local networks, but the architecture leaves the firm's entire dataset exposed to the weakest workstation and credential in the office. Without MFA, segmentation, and protected backups, that is hard to defend.

Yes. In a desktop / network install, return data including SSNs, dependents, W-2 / 1099 details, and refund deposit information lives on the firm's own systems.

A VPN secures the network tunnel, but it does not enforce per-user MFA into the application or prevent a malware-infected branch laptop from reaching shared client data. A hosted-session model is generally stronger.

Yes. Any data writable by the compromised account can be encrypted, including shared TaxAct data and reachable local backups.

Antivirus is a baseline control but does not address phished credentials, over-permissive shares, exposed remote tools, or shared logins, which are common in small tax offices.

For most multi-user firms, yes. A hosted environment with MFA, segmentation, and centralized controls is significantly easier to defend under IRS Publication 4557 and the FTC Safeguards Rule.

EasyWISP helps document the firm's WISP, evaluate the existing TaxAct environment, and plan a safer hosted-server architecture suited to the firm's size and number of offices.

Conclusion

TaxAct Professional / Enterprise is not automatically unsafe, and many firms have used it for years. The issue is that the local-network architecture gives attackers too many paths to taxpayer data when a single workstation, password, remote access tool, or mapped drive is compromised. For firms handling sensitive taxpayer information, the more defensible model is to move TaxAct Professional / Enterprise access into a controlled hosted-server environment with MFA, centralized backups, logging, segmentation, and documented WISP controls.