ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – IF YOU THINK YOUR IRS TAX INFORMATION IS SECURE – THINK AGAIN
By Robert S. Schriebman
Your IRS income tax returns, whether individual, LLC, or corporate, are filled with sensitive personal and financial data. You have the right to expect the IRS to protect this information. There are leaks in the system. Not so much with the IRS, but with its independent contractors, some 14,000 of them! These contractors are provided with your sensitive personal and financial information. The IRS has adequate internal controls to prevent systemic leaks. However, Congress has found that there are potential problems with IRS independent contractors. This article will discuss the latest Government Accountability Office (GAO) Study and Recommendations.
What the GAO Found
The IRS trains its people well. They have a 97% success rate with their employees access controls. When it comes to the 14,000 contractors, the training completion rates are well below that of the IRS: only 66%. This poses a serious risk of unauthorized disclosure of federal tax information known as UNAX – the willful unauthorized access, attempted access, or inspection of federal tax information. The current problem is that the IRS has the ability to monitor some contractors but does not have statutory authority to monitor all 14,000 of them.
Weaknesses in the IRS’ network information security controls present risks to taxpayer information. For example, the IRS did not assess the risks of its method for transferring taxpayer information to contractors. Until Congress addresses those weaknesses, it will have limited assurance that taxpayer information is appropriately protected.
The GAO and Treasury Inspector General for Tax Administration (TIGTA) have previously reported deficiencies in the IRS’ safeguards over tax information. Literally hundreds of recommendations have been made to strengthen IRS safeguards for taxpayer information, such as governance for protecting taxpayer information, authentication and access to tax processing systems, and IRS monitoring of programs that process taxpayer information. While some recommendations have been implemented by the IRS, some have not. Since fiscal year 2019, TIGTA has made 246 recommendations to the IRS related to protecting taxpayer information. As of April 2023, the IRS has addressed only 202 of them.
Congress needs to provide the IRS with additional statutory authority to inspect each and every one of its 14,000 contractors. Currently, the IRS does not have direct authority to inspect most agency-contractor safeguards. What is needed is legislation that will allow the IRS to fully monitor all of its 14,000 contractors.
The GAO is making 15 additional recommendations to the IRS as follows:
- Establishing agency-wide training completion goals for 14,000 contractors.
- Maintaining a comprehensive inventory of systems that store or process taxpayer information.
- Monitoring contractor UNAX and unauthorized disclosure cases and trends.
- Assessing risks of its method to transfer taxpayers’ data electronically to contractors.
So far, the IRS has agreed with 14 recommendations and disagreed with one. The GAO is insisting that all its recommendations be implemented.
The GAO has found weaknesses in training, information systems, contractor oversight, information sharing, and more. Many recommendations made to the IRS have not been implemented. This will keep me awake at night, and you should worry also.
MAD Magazine’s Alfred E. Newman said, “What, me worry?” Alfred needs to rethink his position.
Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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