IRS Asking Private Companies for a Life Line

Tax season is always unpleasant for taxpayers, but this past tax season was also horrible for the IRS, which is sufficiently lax with regard to procedure and cyber security that more than 100,000 Americans had their identities stolen. In a surge, thieves stole as much as $50 million in federal funds based on taxpayer information hacked from the IRS website.

Now, IRS officials insist they are trying to do better to protect our information in the future.

Forgive me, if I’m not yet convinced that a massive, bumbling government agency is going to do much better, but at least they are finally singing the right tune.

It may be an implicit acknowledgement of big government ineptitude that the IRS is teaming up with private sector outfits to try to resolve the security issues.

Some 34 states and 20 tax preparation companies have signed on to this collaboration and more are reportedly expected to enroll.

The collaborative has reportedly tested more than 20 new safeguards and have agreed to start sharing details about suspicious tax returns as they are filed, enabling faster response and ability to catch fraud or suspicious activity. Private tax companies have also agreed to tighten login and validation requirements to cut down on the ability for criminals to take over a taxpayers’ accounts and steal their personal information.  In addition, software companies supposedly will alert customers when a change has been made to their account or if a second tax returns has been filed using their social security number. Some of these changes are helpful in preventing fraud but what happens if a tax return has already been filed before you legitimately file yours?

The Washington Post reports:

We have never had this level of cooperation or sharing,” IRS Commissioner John Koskinen said at a briefing Tuesday. “We will collect [information] in real time, and we will pull it together and share it back out so everyone has access to that information.”

Tax authorities and software providers have come up with a list of 20 data points about tax returns that could be shared to help the IRS and state tax agencies verify tax returns and spot fraud.

While declining to go into specifics, Koskinen said the kind of information that would be shared includes whether a return was submitted from a location or device where multiple tax returns were filed. The groups will also look at how long it takes to file and prepare tax forms to spot returns that may have been mechanically generated, he said.

…

Koskinen said the new safeguards will be as “non-burdensome as possible”  for tax preparers and require “relatively incremental steps” for taxpayers.

“Filing season is going to be much more secure than in the past,” he said.

Consumer advocates and security experts want government agencies to leverage greater control over software companies–ironic when you notice that it is the government which messed up, not the private companies.  

2016 is an election year and maybe, in light of the IRS' multiple problems (it has the time to target tea party groups but is slow to address its own technical issues), voters will want to consider a less intrusive tax system.