The Internal Revenue Service is grappling with a surge in identity theft-based tax-refund fraud and identity theft. Such problems may even be turning into the newest growth industry.
As a senior official told a congressional hearing last week, the IRS is considering a pilot program to share tax information with the Tampa, Fla., police to get help from local law enforcement.
Apparently, Tampa is a surging hot spot for these sorts of thieves using abandoned homes or other phony addresses for delivery of the refunds from the IRS.
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Senator Bill Nelson, D-Fla., showed his concern by holding a hearing to highlight his new proposed legislation, which will allow sharing of information on taxpayers with the local police.
Can the IRS share a taxpayer's information? Is it a good idea?
According to various reports, Steven Miller, deputy IRS commissioner for services and enforcement, said that "Congress has treated tax return information as sacrosanct."
You believe that, don't you?
In 1976, as a result of the antics of President Richard Nixon, Congress enacted legislation to make any sharing of taxpayer information by the IRS a crime. A good idea if the computer systems are well secured.
Of course, you are right to have deep concerns about possible information leak of your tax (and soon to be medical records) information. Especially, if the IRS' computer systems may not be all that secure.
The Government Accountability Office (GAO) has said in reports in 2007, 2008, 2009, 2010, 2011, and in this year, that recurring weaknesses could expose sensitive taxpayer information and agency financial information.
Although IRS Commissioner Douglas Shulman disagreed with the recently issued GAO report, this computer security difficulty has been a systemic deficiency within the IRS.
These difficulties started long before Shulman assumed the difficult job of running an overburdened, undermanned, and underfunded critical agency with Congress piling on ever-more complex responsibilities.
To put it simply, the success of the IRS rises and falls on its computer systems. It relies on them to collect more than $2 trillion in federal tax payments and distributes about $400 billion in refunds. And all its audit and enforcement activities are dependent on the computer systems for the information they need.
So far, the IRS has addressed 29 of the previous 105 recommendations made by the GAO that deal with security-related issues. Mostly, each annual GAO report is merely is a carbon copy of the previous reports.
In spite of having done some things right, the GAO says the IRS "made limited progress in correcting information security weaknesses."
As reported by Nextgov.com, the key reason IRS computers are susceptible to tampering is that the tax agency has yet to institute a mandatory information security program which is required under federal cyber-security law.
With this being the case with the IRS, there is even less assurance that local law enforcement will be able to protect your confidential tax information any better.
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Of course, none of this would be necessary if a progressive consumption tax system was adopted in place of the current income tax system. But that isn't likely to happen any time soon. Far too rational for politicians and the majority of voters.
It looks like a sign of desperation on the part of the government to have to call 911 to help deal with the surge in federal identity theft and refund fraud.
Considering all the resources of the U.S. government — in money, people and law — it is puzzling why it is necessary to share "sacrosanct" tax information with local police to solve a federal problem.
May be your favorite senator or congressional member has the answer?
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