New Report Finds IRS Failing to Protect Confidential Tax Information

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Posted by Alexander Hendrie on Wednesday, October 22nd, 2014, 2:30 PM PERMALINK

A new report by the Treasury Inspector General for Tax Administration released yesterday found that the IRS has been failing to safeguard federal tax information, drawn mostly from the tax returns of Americans everywhere.

The IRS provides confidential information to over 280 federal, state and local agencies and has responsibility for oversight over the safe use of the information. But according to the report “The IRS’s Internal Revenue Manual does not require the performance of on-site validation of an agency’s ability to protect (federal tax information) prior to its release to the agency”. Instead, the IRS will examine the ability to protect federal tax information after it has given away confidential information.

As if that wasn’t bad enough, the IRS does not set any guidelines for an agency’s background investigation policy as a requirement of accessing information.

Federal tax information provided to other agencies must remain confidential by federal law. But apparently it doesn’t matter to the IRS if another agency has a sufficient background investigative policy or even if any investigations occur.

Of 15 agencies surveyed that receive federal tax information, the report found that none of them conducted sufficient background checks on employees handling the data. Just one agency conducted national background investigations, four fingerprint employees and only one checks the sex offender registry, while almost half of the agencies hire convicted criminals.

The IRS has said it will now develop appropriate background checks and will use a risk-based assessment before approving the release of federal tax information to other agencies. But given this is not the first time that the IRS has failed to provide adequate protection to sensitive information, taxpayers should continue to be concerned about the security of their personal information.

Photo Credit: John Morgan

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