Audit & Compliance Awareness

An Introduction to IRS 4812: What You Need to Know

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Like any other agency, the IRS works with a network of technology providers and third parties to support its mission of managing sensitive financial data. These relationships present unavoidable security risks. IRS 4812 helps address these security challenges by outlining security requirements and best practices for contractors working with the IRS to handle specific forms of data. 

 

Understanding IRS 4812

IRS 4812 (“Contractor Security & Privacy Controls”) is a publication that outlines the security and privacy requirements for contractors and subcontractors working with the Internal Revenue Service. Its primary purpose is to ensure that Sensitive But Unclassified (SBU) data, such as Federal Tax Information (FTI), Personally Identifiable Information (PII), and Protected Health Information (PHI), is handled and protected appropriately.

 

What Are the Key Provisions of IRS 4812?

The key provisions of IRS 4812 align with specific NIST security controls, especially those outlined in NIST Special Publication 800-53.

These include:

  • Scope and Applicability: IRS 4812 affects organizational controls, applying to cloud systems, encryption, perimeter and network security, training, configuration management, and other control families. 
  • Training and Awareness: Contractors must ensure that all employees are adequately trained in handling SBU data and know the specific requirements of IRS 4812. Continuous training and updates are necessary to keep pace with evolving threats and compliance requirements, which can be logistically challenging.
  • Incident Response: Developing and maintaining an effective incident response plan that meets IRS 4812 standards can be challenging. Contractors must establish protocols for detecting and responding to incidents and ensure that these protocols are regularly tested and updated to handle new security threats.
  • Data Encryption and Management: Ensuring that all SBU data is encrypted both in transit and at rest requires robust encryption mechanisms and secure key management practices. Implementing these measures can be technically challenging and resource-intensive, particularly in large or complex IT environments.
  • Cloud Computing Compliance: Many contractors store or process SBU data using cloud services. Ensuring that cloud service providers comply with IRS 4812 requirements, such as data segregation and encryption, adds another layer of complexity. Contractors must also manage access controls and incident response protocols in cloud environments.
  • Regular Audits and Compliance Checks: Continuous monitoring and regular audits are essential for maintaining compliance with IRS 4812. Conducting these audits can be resource-intensive, and identifying and rectifying compliance gaps requires ongoing effort and expertise.
  • Documentation and Reporting: Maintaining detailed documentation of security controls, compliance activities, and incident reports is critical for demonstrating adherence to IRS requirements. The administrative burden of keeping comprehensive records and reporting to the IRS can be substantial, especially for smaller organizations.

 

What Are the Assessment Types for IRS 4812?

There are several types of assessments for IRS 4812:

  • Contractor Security Self-Assessment: The contractor must submit an evaluation and verification that it meets the requirements of this standard regarding IRS cybersecurity related to high-risk controls. 
  • Follow-Up Security Assessment: After a contract award, if significant issues need to be addressed during any other post-award assessment, there may be a follow-up IRS assessment to address those issues.
  • Ongoing: Depending on the contractor’s work, the IRS may conduct periodic assessments to determine the continued adherence of IT systems to IRS requirements. 
  • End of Contract: The IRS will sometimes conduct post-contract assessments to determine the state of SBU (specifically, whether it has been destroyed). 

Common Challenges for IRS 4812 Compliance

Like any other compliance framework, several challenges come with meeting IRS 4812 requirements. These stem from the complexities of working with intricate IT systems and sensitive data. 

Some challenges include:

  • Complexity of Security Controls: IRS 4812 mandates the implementation of a wide range of security controls, many of which align with NIST Special Publication 800-53. The complexity and breadth of these controls can be overwhelming for organizations, particularly smaller contractors, without extensive security resources.
  • Resource Allocation: Ensuring compliance with IRS 4812 requires significant resources, including time, money, and personnel. Small to mid-sized businesses may struggle to allocate sufficient resources to meet all the requirements, especially regarding regular audits, continuous monitoring, and maintaining detailed documentation.
  • Technical Challenges: Implementing technical measures such as data encryption in transit and at rest, maintaining detailed logs, and setting up multi-factor authentication can be technologically demanding. Ensuring that all systems and processes meet the required standards can be a significant hurdle

 

Stay on Top of IRS 4812 with the Experts at Lazarus Alliance

To learn more about IRS 4812 and how we can help with audits and compliance, contact us. 

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