The Government Accountability Project (GAO) released a report on January 8, 2008 documenting the mediocre progress made by the Internal Revenue Service (IRS) toward tightening its information security systems.  The GAO said: “The IRS is at increased risk of unauthorized access to and disclosure, modification, and destruction of financial and taxpayer information, as well as inadvertent or deliberate disruption of system operations and services.” 

Among other management failures, the GAO noted that the IRS fails to use complex passwords, grants electronic access to individuals who should not have it, moves sensitive internal information around without appropriate encryption, and allows changes to be made to its mainframe computer systems without proper monitoring or documentation. 

This information will be useful the next time Congress broaches the idea of allowing the IRS to hang out its own tax preparation shingle.  This idea has cropped up on several occasions, most recently in April 2007, when Sen. Daniel Akaka (D-Hawaii) introduced S. 1074, the “Free Internet Filing Act,” which would have allowed the IRS to launch a web portal designed to permit the IRS to prepare tax returns.

Taxpayers, especially those earning less than $52,000 a year, already have access to a wide variety of low or no-cost, private sector options for preparing tax returns through the Free File program, which successfully partners private-sector companies with the IRS. 

Aside from the glaring security deficiencies in the IRS’s security systems, there is also a conflict of interest in having the nation’s tax collector serve as a tax preparer as well.  Any attempt by Congress to force the IRS to build an in-house tax preparation infrastructure would be a massive waste of taxpayer money and a danger to the confidentiality and security of taxpayers’ information.