IRS wrongly allowed contractors access to sensitive data

IRS contractors without background checks had access to sensitive information, potentially putting confidential taxpayer data at risk, according to a federal audit.

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The Treasury inspector general for tax administration found more than a dozen cases in which the IRS awarded contracts that required access to taxpayer information without background investigations or before those checks were completed.

Under IRS policy, background checks are mandatory for contractors who work with that kind of data.

"Allowing contractor employees access to taxpayer data without appropriate background investigations exposes taxpayers to increased risk of fraud and identity theft,” said J. Russell George, the inspector general.

George’s audit comes as the IRS escalates its efforts to combat identity theft and as lawmakers investigating the agency’s improper scrutiny of Tea Party groups have questioned the IRS’s handling of confidential information.

In its report, the inspector general’s office even made a glancing reference to Edward Snowden, the former National Security Agency contractor who leaked classified information about U.S. surveillance efforts.

Contractors who have access to sensitive information, which also includes employee and law enforcement data, must undergo a background check if they’re with the IRS for more than six months.

But the inspector general's audit found five contracts where contractors had not had any background checks out of the 28 total contracts reviewed. In one of those cases, a contractor working on printing and mailing tax forms was given a disk containing 1.4 million taxpayer names, Social Security numbers and other personal information.

A separate contract, for couriers, had given a daily route to an ex-convict who served more than 20 years for arson, the report added.

In another 12 cases, IRS staffers had started background checks for contractors, but contractors were allowed to start working before those investigations had concluded.

John Koskinen, the IRS commissioner, has said that battling tax fraud is a top priority of the agency, but he acknowledged it’s a growing problem.

Separately, House Ways and Means Committee Chairman Dave Camp (R-Mich.) referred former IRS official Lois Lerner, the figure at the center of the Tea Party controversy, to the Justice Department for reckless handling of taxpayer information.

In its response to the report, the IRS said it was “committed to ensuring that background checks are conducted,” but declined to sign on to one of the inspector general’s recommendation.

That recommendation suggested the IRS should consider changes to a waiver that expert witnesses get from background checks. The other recommendations call for increased training for staffers and stronger policies for contract workers.