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Securing taxpayer data is the IRS' biggest challenge

I'm a big believer in lists. I can't grocery shop without my piece of paper detailing all the edibles the hubby and I need or want. Yes, I still buy things that don't make the list, but if I forget it, I always have to make another trip to pick up a critical comestible I forgot.

My grocery listYes, that's my current grocery list on an Earned Income Tax Credit notepad I picked up at an IRS Nationwide Tax Forum. No judging, please, of our food choices.

I also keep track of my story assignments via a computer spreadsheet, as well as an old-fashioned paper list where I joyfully strike through the deadlines met.

The Internal Revenue Service is a list lover, too.

IRS creates an annual priorities list of what tax issues it should handle through regulations, revenue rulings, and other administrative options. The National Taxpayer Advocate, an independent office within the IRS, also keeps track of a variety of tax matters, including a yearly recounting of the biggest problems we filers face.

TIGTA's tax agency needs list: Then there's the Treasury General Inspector for Tax Administration, or TIGTA.

This IRS watchdog office is required by law to summarize each year what it sees as the most serious management and performance challenges that the IRS faces. The info goes into the Treasury Department's annual financial report. 

To arrive at this list, TIGTA evaluates IRS programs, operations and management functions to determine the areas with the highest vulnerabilities to our tax system. Sounds pretty ominous.

For Fiscal Year 2016, which started on Oct. 1, TIGTA sees -- drum roll, please -- cybersecurity as the tax agency's major concern.

IRS' increased cybersecurity concerns: The Inspector's office found lots of material to justify putting online security at the top of the current IRS challenges list.

"Cybersecurity threats against the Federal Government continue to grow," says TIGTA, pointing to a Department of Homeland Security U.S. Computer Emergency Readiness Team report that found 69,851 cyberattacks against federal agencies in fiscal year 2014. That was an increase of about 15 percent from FY 2013.

The IRS became a cyberattack victim this May, when criminals used taxpayer-specific data acquired from non-IRS sources to gain unauthorized access to tax account information through the IRS' Get Transcript online search tool.  As of mid-August, the IRS indicated that unauthorized users were successful in obtaining access to information for more than 350,000 taxpayer accounts.

"However, the actual number of individuals whose personal information was available to criminals accessing these tax accounts is significantly larger, in that these tax accounts include information on all of the individuals claimed on a tax return (e.g., spouses and dependents)," writes TIGTA.

TIGTA's Office of Investigations, in conjunction with the IRS and other federal law enforcement agencies, are still investigating the hacking incident.

More security worries ahead: But it is a scary and perfect example of the security challenges facing the IRS. And it's one that will get bigger.

"The risk for unauthorized access to tax accounts will continue to grow as the IRS focuses its efforts on delivering self-assisted online tools to taxpayers," writes TIGTA. The IRS is working toward providing, within three to five years, taxpayers and tax professionals with electronic products and services that will allow them to access government services anywhere, any time, on any device.

That also will give cyber criminals more avenues of illegal access unless the IRS steps up its security as it expands its online offerings.

Show the IRS the money: The IRS agrees, but the problem, as always, is money. 

TIGTA notes that it and other independent IRS oversight offices have highlighted the "serious challenges that declining budgets pose to the IRS as it tries to meet its statutory obligations and effectively administer the Nation's tax system."

The financial woes will continue in FY 2016.

"Both the House and Senate Committees on Appropriations recommended budgets below the FY 2015 enacted level of $10.9 billion," writes TIGTA. "As the IRS faces new or growing challenges with a reduced budget and smaller staff, it must attempt to identify and implement innovative and cost-saving strategies."

Good luck with that. TIGTA notes that with staffing costs making up approximately 75 percent of its budget, "the IRS will undoubtedly be challenged to find areas of savings that will allow it to balance quality customer service, strong tax enforcement, and protection of taxpayer information."

Top 10 IRS challenges: Meanwhile the IRS faces other equally critical management and performance challenges this fiscal year. In order of TIGTA priority, they are:

  1. Security for Taxpayer Data and IRS Employees
  2. Implementing the Affordable Care Act and Other Tax Law Changes
  3. Tax Compliance Initiatives
  4. Fraudulent Claims and Improper Payments
  5. Achieving Program Efficiencies and Cost Savings
  6. Improving Tax Systems and Online Services
  7. Providing Quality Taxpayer Service Operations
  8. Globalization
  9. Taxpayer Protection and Rights
  10. Human Capital

You can read TIGTA's thoughts on all these issues in Inspector General J. Russell George's 18-page memo to Treasury Secretary Jacob Lew. 

IRS efforts to stop tax ID theft: The IRS already is making some headway in one area of taxpayer security. The agency created a Security Summit in March to look at ways to slow tax identity theft and related refund fraud.

It recently announced one of that group's new filing-season security efforts, the expanded sharing of taxpayer information and filing data.

Bankrate Taxes Blog logoAs I noted last week at my other tax blog, the belief is that when the IRS, state tax departments and the tax industry exchange the data and insights they collect with each other, they will be able to more quickly spot crooks who are using stolen taxpayer information to file for fraudulent refunds.

Taxpayers or not: Also over at Bankrate Taxes Blog last week, I looked at who isn't paying taxes. A new analysis shows that 45 percent of American households won't pay federal income tax this year. But that doesn't mean they aren't paying any taxes.

You usually can find my additional tax thoughts at Bankrate on Tuesdays and Thursdays. If you miss them there and then, check here at the ol' blog the following weekend for those posts' highlights and links.

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