IRS Alleges Worker Fraud and Snooping
Almost 370 employees of the Internal Revenue Service have been investigated or disciplined for using government computers to create fraudulent tax refunds or browse through tax records of friends, relatives, neighbors and celebrities, according to an IRS report.
The internal report, which was released Monday by Sen. John Glenn (D-Ohio), focused on the IRS’s Southeast Region, headquartered in Atlanta. But it said “integrity reviews” conducted by the IRS in its North Atlantic and Western regions also found that “employees are browsing taxpayer accounts for no clear business purpose.”
Glenn, chairman of the Senate Governmental Affairs Committee, said at least one employee had “altered some 200 accounts and got kickbacks” from bogus refund checks that were issued.
The incidents, an IRS spokeswoman said, are “a serious concern to this agency.” She said the IRS had determined that a “nationwide fix” was needed to improve computer security and that efforts were under way to quickly address the problem.
IRS workers are regularly reminded to protect the confidentiality of tax returns, and safeguards to ensure taxpayer privacy are written into law and Treasury Department directives. Specialists in tax law said Monday they were surprised that so many workers had been accused of abusing their positions.
The disclosure of a computer security breakdown comes at a sensitive time for the agency. The IRS has undertaken a decade-long project to redesign and upgrade its automated systems. The project, called Tax Systems Modernization, is expected to cost about $23 billion through the year 2008 and has been described as the largest civilian computer modernization in history.
One goal of the modernization is to give every IRS employee who needs it the capability for on-line computer access to taxpayer information as a way of improving customer service and agency efficiency.
The IRS probe into the Southeast Region investigated 369 employees suspected of misusing the agency’s Integrated Data Retrieval System. The employees were described as rank-and-file workers who handle IRS mail and answer the telephone when taxpayers call.
About 56,000 of the IRS’s 115,000 employees have access to the IDRS, which is used to locate and adjust taxpayer accounts. The IDRS provides agency workers with taxpayer data, such as name, address, Social Security number, dependents claimed, adjusted gross income, taxable income and tax liability.
The IDRS contains only 10% to 15% of the data available in the IRS’s “master file” maintained at the Martinsburg, W.Va., Computing Center but it can instruct the master file computer to send out bills, stop notices or issue refunds.
The IRS inquiry referred 80 employees for criminal investigation, with six of the employees facing potential prosecution by U.S. attorneys for allegedly preparing fraudulent returns and taking kickbacks from bogus refund checks.
Of the 369 cases, 345 were referred to management for review, and 154 were disciplined. Of the 154, three were forced to resign, three were fired and the rest were either reprimanded, suspended or underwent counseling.
IRS officials, citing privacy laws, declined to identify the celebrities whose accounts may have been called up by workers for “non-work” purposes.
Glenn learned of the IRS investigation last month, after the General Accounting Office had reviewed the IRS’s most recent financial statements. The GAO reported that the “IRS did not adequately control access authority given to computer support personnel or adequately monitor employee accesses to taxpayer data.”
Glenn has scheduled a hearing for Wednesday to hear how the new IRS commissioner, Margaret Richardson, plans to address the agency’s computer problems. Richardson was unavailable for comment Monday.
The IRS probe has been under way for three years, and the investigators issued their “Review of Controls Over IDRS Security” last October.
