IRS flubs show feds can’t protect your data

Here’s a distressing thought to start your week: Unauthorized IRS bureaucrats can get access to your financial records, according to a recent report from the Government Accountability Office.

The federal tax agency, the report says, lacks proper internal security controls on computer programs used to process sensitive information. The IRS’ “systems used to process tax and financial information did not effectively prevent access from unauthorized users or excessive levels of access for authorized users.”

The problem at the IRS is systemic, as its financial management systems don’t “substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996.” Among other things, the GAO faulted the IRS for “continuing to use unencrypted protocols for a sensitive tax processing application.”

This poor management of taxpayers’ information comes with a price. The IRS, despite making some improvements over the years, lacks precise knowledge of who is and is not paying all of their taxes. The GAO found that this ignorance resulted in some instances of “erroneous tax refund disbursements.”

IRS errors do not always work in taxpayers’ favor, either.

“In a number of cases we reviewed,” the GAO reported, “IRS erroneously recorded information in its master files that indicated the taxpayer had agreed with an unpaid tax assessment.”

One IRS data entry error “resulted in a tax assessment against the taxpayer for approximately $10.5 million when the taxpayer had reported a tax liability of $1 million.” Taxpayers also have suffered under protracted tax liens thanks to “processing delays and errors,” which have prevented the IRS from responding in a timely manner once the taxes were paid. Such delays can badly damage a taxpayer’s credit.

The IRS’ struggles with the security of private tax and financial information of hundreds of millions of Americans raise far-reaching concerns. It’s worth remembering that in 2008, unauthorized State Department employees pulled the passport files for then-presidential candidates Sens. John McCain, Hillary Clinton and Barack Obama.

That incident revealed that some government employees and contractors could, with relative ease, gain access to private information without permission.

The Treasury Department’s inspector general for tax administration has said that “implementing health care and other tax law changes” mandated by Obamacare presents the IRS with a “management challenge.” Although the exact number is subject to dispute, Republicans contended in 2010 that Obamacare could require the hiring of more than 10,000 new IRS employees just “to collect, examine and audit new tax information mandated on families and small businesses.”

Let’s not forget that the Department of Health and Human Services proposed recently to “centralize” every American’s most private medical records in Washington, D.C. Considering the government’s long-standing inability to safeguard our tax records, do we really want to entrust our most private health records to federal bureaucrats?

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