Treasury
Inspector General for Tax Administration
Office of Audit
TAXPAYER INFORMATION IS AT RISK WHEN
COPIES OF TAX RETURNS AND TRANSCRIPTS ARE ORDERED
Issued on September 22, 2009
Highlights
Highlights of
Report Number: 2009-40-140 to the
Internal Revenue Service Commissioner for
the Wage and
Investment Division.
IMPACT ON TAXPAYERS
Identity theft is the number one consumer complaint. Identity theft occurs when someone uses
Personally Identifiable Information, such as an individual’s name or Social
Security Number, to commit fraud and other crimes. Taxpayers need to be assured that the
Internal Revenue Service (IRS) is taking every precaution to protect their
private information from inadvertent disclosure. Taxpayers who submit Requests for Copy of a
Tax Return (Form 4506) or Requests for Copy of a Tax Return Transcript (Form
4506-T) are at risk of unauthorized disclosures of taxpayer information.
WHY TIGTA DID THE AUDIT
More
than 130 million taxpayers entrust the IRS with sensitive financial and
personal data. The objective of this audit
was to determine if measures could be taken to strengthen the controls over
requested tax returns and transcripts.
WHAT
TIGTA FOUND
The IRS Return and Income Verification Services units
process written taxpayer requests for copies of tax returns or
transcripts. From a judgmental sample of
120 taxpayer requests, 51 requests were processed incorrectly or not
in accordance with guidelines. This included
1 request resulting in an unauthorized disclosure of taxpayer information, 29 requests
containing errors that increased the risk of unauthorized disclosures, and 21 requests
that were not processed according to guidelines.
TIGTA auditors also submitted 33 transcript requests;
5 requests were incorrectly processed, increasing the risk of unauthorized
disclosures. These errors occurred
because employees did not always follow guidelines or the guidelines are
unclear, inconsistent, and insufficient to protect taxpayer information. The IRS also
did not respond to 5 of the 33 requests.
The IRS currently charges $57 for copies of both electronically
filed (e-filed) and paper-filed tax
returns. TIGTA believes the IRS incurs
significantly lower costs when processing requests for e‑filed tax returns as compared to the cost to process copies
of paper tax returns.
WHAT TIGTA RECOMMENDED
TIGTA
recommended the
Commissioner, Wage and Investment Division, clarify guidelines to require an
accurate name and Social Security Number before Forms 4506 and 4506-T can be
processed. Internal controls
should be developed and training provided to ensure that Return and Income
Verification Services units: 1) use the Transcript Delivery System automated
process to mail transcripts, 2) send copies of tax returns and transcripts only
to the address of record, and 3) properly maintain requests for copies of tax
returns and transcripts. Guidelines
should also be developed to process requests for taxpayers who are victims of
identity theft, the user fee for e-filed
tax returns should be reduced or eliminated, and IRS.gov and Form 4506-T should
be updated to prominently display the option and benefits of ordering a
transcript using the ICCE.
The
IRS agreed with four of the five recommendations. It plans to take action to ensure Return and Income Verification Services units are adhering to
established guidelines and maintaining required documentation. The IRS also plans to revise research
requirement guidelines, implement identity theft procedures, and take steps to
increase taxpayers’ awareness of the ICCE.
The
IRS did not agree with our recommendation to reduce or eliminate the user fee
for requesting copies of e-filed tax
returns or the associated outcome measure.
The IRS believes the costs to provide electronic printouts to taxpayers
justify the user fee. The IRS also did
not agree with the stated outcome measure for increasing taxpayer awareness of
the ICCE.
TIGTA believes that the cost to
process requests for a printout of an e-filed
tax return may be significantly lower than the cost to process copies of tax
returns submitted on paper. The cost of
providing printouts of e-filed tax
returns is comparable to providing printouts of transcripts, which are free.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2009reports/200940140fr.html.
Email Address: inquiries@tigta.treas.gov
Phone Number: 202-622-6500
Web Site:
http://www.tigta.gov