IRS Data Breach Demonstrates the Risk of Trying to Help Taxpayers

NEWS ANALYSIS: The Internal Revenue Service learns the dangers of using the Internet to try to make things a bit easier for taxpayers.

IRS Data Breach 2

The Internal Revenue Service is one of the federal government's least-liked agencies. No surprise there since the job of the IRS is to pry plenty of your hard earned dollars from your hands. Still, the IRS is in fact sensitive to the fact that it needs to try to make reporting income and paying taxes slightly less painful.

That was the reasoning behind the IRS' effort to make it relatively easy for folks to get a look at the tax records being held for them by using what the IRS called the "Get Transcript" application.

Those records included detailed information about their income tax returns, reported income and other tax-related information. The idea was that you could go to the Website and, after providing some information to establish your identity, be shown what they have.

The system worked pretty well. I used it and I found it helpful, but in the process of making things easier for taxpayers, the IRS also found the truth of a long-honored Washington saying: "No good deed goes unpunished."

On Aug. 8, the IRS announced that its previously announced breach affecting about 100,000 taxpayers had turned out to be worse than expected. In fact, the breach appears to have been about three times as bad as originally thought.

The IRS announcement says that the agency will be contacting the affected taxpayers over the course of the next few days to offer credit monitoring and a secure form of taxpayer identification that will prevent the people who may have stolen your information from filing for a false refund before you can file your real tax return.

Identity theft is a constant problem for the IRS because crooks will try to file tax returns using the information belonging to legitimate taxpayers in order to claim their tax refunds. For many people, this can amount to thousands of dollars each.

It also creates problems and additional expense for the government. Some of those problems arise when annoyed taxpayers, and there are always plenty of them, complain to their representatives in Congress, who then hold hearings and ask tough questions.

Once the IRS determined the extent of the problem with the "Get Transcript" application, it was immediately shut down, which solved the immediate problem, but hasn't done anything for the ability of taxpayers to see their tax information. However, the real trouble appears to be lurking in wait for the 2016 tax filing season. Then, the details gleaned from the harvested tax information can be used to file more false returns requesting refunds.

One way or the other, taxpayers and the government will be out a ton of money. The immediate solution is worth using. For those who are informed they were affected by this break, take the government up on its offer of free credit monitoring, by all means.

In addition, accept the offer of a new secure PIN that will validate the authenticity of tax returns relating to your account.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...