IG: Poor controls over access to IRS portal put taxpayer data at risk

Tax filing professionals can transfer entry privileges to people who haven't been through background checks and other precautionary measures, auditors find.

The Internal Revenue Service failed to implement adequate security measures to protect sensitive data that tax professionals entered into a Web portal, according to an inspector general report released on Monday.

A fiscal 2009 audit by the Treasury IG for Tax Administration showed tax professionals were able to transfer authorization to access the Registered User Portal to individuals who did not go through the standard checks for tax compliance, past violations of e-file requirements and criminal records. The IRS performs suitability checks when principals or officials of a tax firm apply for entry, but then allows them to delegate their access rights to others by filing for power of attorney, auditors found.

"Taxpayers expect the IRS to protect their personal data, and we believe the power of attorney document does not provide the same assurance as the suitability check," the IG stated. "Any individual can become a delegated user. Many of the delegated users may have questionable backgrounds."

The audit found there were 9,988 delegated users permitted to file income tax returns electronically through the portal. About 6,500 of them also had access to electronic services that enabled them to retrieve and manipulate taxpayer data.

In addition, the IRS allows authorized users to assign a special principal consent privilege to a delegated user, which lets that user to extend his or her privileges to others.

"A delegated user could steal taxpayer data for identity theft purposes and grant access to other unscrupulous individuals," the IG said.

Auditors also expressed concern about the IRS' failure to establish strong password controls, analyze audit logs to detect unauthorized access, and configure the system to disable and remove inactive accounts in accordance with standard security policies and procedures.

Agency officials agreed with the IG's recommendation that IRS require suitability checks on delegated users who e-file tax returns or use the portal's other online services.