Expatriate Owl

A politically-incorrect perspective that does not necessarily tow the party line, on various matters including but not limited to taxation, academia, government and religion.

Tuesday, October 11, 2005

How Safe is Your Personal Information in the Hands of the Tax Collector?

The U.S. Treasury Inspector General for Tax Administration ("TIGTA") has released a report with the self-explanatory title "Increased IRS Oversight of State Agencies is Needed to Ensure Federal Tax Information is Protected." TIGTA Report No. 2005-20-184 is available on the Internet in pdf and html format.

By way of some very basic backgrounding, the Internal Revenue Service has certain sensitive information regarding each and every individual taxpayer in America. This information, if offered at public auction to the identity thief community, would no doubt command a very sumptuous price.

In order to enforce the tax laws, the IRS has a need to know personal information such as our names, addresses, social security numbers, names of our spouses and children, salaries, and employers. An IRS auditor who examines the books and records of a taxpayer is exposed to additional sensitive information about the taxpayer, including bank and brokerage account numbers, and account numbers of credit cards. And also the identities of the donees to whom the taxpayer made charitable contributions, which can give good insight as to the taxpayer's political, social and religious orientation, which leaves an opening for abuse if such personal sentiments differ from those of the IRS auditor.

The IRS shares this taxpayer information with the various state taxation authorities. So now, the TIGTA evinces great concern that at least some of the state tax departments with whom the IRS shares the tax info leave much to be desired as far as security is concerned. That's scary!

What is even scarier is that when TIGTA vetted its draft report to the IRS Office of Mission Assurance and Security Services ("MA&SS") for comment, MA&SS did not agree with TIGTA's recommendations because IRS takes the position that the state tax authorities are not bound by the requirements of the Federal Information Security Management Act ("FISMA"). Fortunately, the MA&SS has indicated that it grudgingly would effectively implement TIGTA's recommendations pending a definitive ruling on the applicability of FISMA to the state tax bureaucracies.

The whole thing does not leave us with any great sense of confidence or security in our tax collectors, state or Federal.

As a postscript, within a week after TIGTA released Report No. 2005-20-184, the United States Attorney for the Eastern District of Pennsylvania announced that a Philadelphia IRS contact representative now stands charged with abusing her access to the IRS data systems for personal financial gain. A copy of the criminal information document is available here.

If indeed the charges can be proven, this is a very serious criminal offense because, if left unpunished, it would give the public one more reason to not comply with the tax laws.

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