TREASURY INSPEcTOR GENERAL
FOR TAX ADMINISTRATION
REVIEW OF TAXPAYER REQUESTS FOR DIScLOSURE OF TAX INFORMATION
Reference No. 090804
Date: November 4, 1998
In fiscal year 1997, the Service received over 1.1 million requests for tax return information from the public. Requests are made for photocopies of tax returns or for transcripts of tax return information. Financial institutions and the Federal government generally request tax information for income verification purposes prior to granting loans.
Beginning October 1, 1994, the Service offered to provide taxpayers with transcripts of return information free of charge as an alternative to providing photocopies of returns at a cost to the taxpayer of $14. Providing transcripts of return information has increased the potential for unauthorized disclosure of tax information.
The Service is extremely vulnerable to unauthorized disclosure of tax return information.
Four significant issues warrant managementís attention:
Internal Audit submitted invalid written requests for tax return transcripts and the Service made an unauthorized disclosure in 46% of the requests. Tax return transcripts were sent to third parties based on requests that were not signed by the taxpayer. Other unsigned requests were honored and transcripts were sent to addresses other than the taxpayerís Master File address.
Individuals can obtain tax return information of a taxpayer even if they do not know the taxpayerís Social Security Number (SSN). Internal Revenue Service guidelines allow research to add information missing from the written requests, including the SSN. Individuals only have to provide the taxpayerís name and address and sign the request as the taxpayer to obtain the information. Internal audit submitted signed requests without taxpayersí SSNs and received 83% of the tax return transcripts requested.
Management could not locate 5% of the written requests for tax return information. Such documentation is necessary to support employee computer accesses for all tax returns and transcripts issued.
We also found that required letters are not consistently issued to taxpayers when their requests for tax information are not processed within 30 days.
The following summarizes the specific recommendations contained in this report. The Service should:
Management Response: Management has agreed to take appropriate corrective action in response to each recommendation in the report. Managementís actions are summarized in the body of the report and the entire response is included as Attachment II.