The Big Problem With the IRS
Conservatives are still fuming about the IRS’ harassment of politically conservative groups applying for non-profit status. Lois Lerner’s name and function as the arbiter of those applications still looms large in the Twittersphere and on conservative blogs. And, to be sure, the flagrancy with which the nation’s tax collection agency abused its powers to delay or deny non-profit status applications by groups with “tea party “ or “patriot” in their names is stunning.
But, to my mind, there is a bigger, wider ranging problem that the tax agency is doing far too little to solve. This year, millions of Americans will be denied their tax refund because it was stolen by a fraud artist able to penetrate the IRS’ flimsy security systems.
Truth is, the tax agency is a sitting duck for scammers and crooks. The latest fashion in cheating taxpayers is stealing a Social Security number and filing for a tax refund in that person’s name. Today’s tax filer won’t even know they’ve been scammed until their highly-anticipated refund check doesn’t turn up.
The number of suspicious refunds is growing – and fast. In 2012, the number was 2.5 million up from 900,000 in 2010. Whistleblowers say software providers may be inadvertently giving criminals cover, but it’s clear the IRS isn’t doing enough to flag fraudulent returns. When the GAO examined IRS operations in its annual security report, it found 69 weaknesses, some easily fixable.
For example, IRS employees use weak passwords, and when they leave the service they can still access the tax agency’s systems. What’s more, some software used by the service is so old it’s not even supported by vendors anymore, which means it doesn’t get security patches.
The GAO report authors concluded that the IRS’ failure to secure its massive database is making taxpayers’ private information vulnerable to hackers and fraudsters. It took the CEO of H&R Block William Cobb coming out publicly and talking about the desperation of these security issues for the problems to rise to national attention. Even then, the IRS commissioner held a secret meeting with industry players to talk about how to fix the problem. Has the issue been resolved? Not yet, says one source that attended the meeting. Maybe next tax year.
There is absolutely no doubt that part of the problem at the IRS is that the attention of its employees has been diverted by the tax exempt scandal, and others like overspending on lavish conferences or the fact that IRS managers kept employees on the payroll who had failed to pay their taxes.
But there is more behind what the IRS Taxpayer Advocate Nina Olson calls one of the worst years on record for the IRS and its taxpayers . Obamacare dumped 47 tax law changes into the tax service’s lap, the most sweeping changes to tax law in 20 years. What’s more, it settled the burden of enforcing the law on the narrow shoulders of the tax agency. So, in addition to collecting the nation’s taxes, now the IRS has responsibility for enforcing a sprawling social program.
The IRS’ performance this year has been stunningly disappointing. Just 40 percent of taxpayer phone calls have been answered. Even more concerning, though, is the service’s inability to protect taxpayer’s private information. It is intolerable that the act of filing your taxes exposes you to identity theft. The tax service runs the risk of alienating the 98 percent of taxpayers that willingly file and abide by the law.