IRS Wants Cash--And Security

By March, the Internal Revenue Service expects three private debt collectors to be helping it collect from tax deadbeats. Given the IRS's record working with contractors, and the business world's problems protecting sensitive information, the strategy raises concern.

It sounds like smart economics, with the IRS reckoning private collectors can bring in $1.4 billion dollars in back taxes in 10 years. The companies keep up to 25%.

And the IRS is setting tough security rules. The work must be done in the United States. Contractors must purge taxpayer information from their IT systems as soon as work on an account is completed, or guarantee its protection if they can't immediately purge it. They must adhere to federal security standards, including knowing where tax returns and information are at all times.

But the Government Accountability Office has criticized the IRS's management of contractors. In an April 27 letter, GAO financial management and assurance director Steven Sebastian identified internal control problems at the IRS that "adversely affected safeguarding of tax receipts and information." It found some contractors got stafflike access to restricted areas without undergoing background investigations.

The business world's track record will do little to improve public confidence. Poor security at a third-party processor caused one of the biggest scandals last year, exposing millions of customer records of the major credit-card companies. And last week, People's Bank joined the growing list of companies that mishandled customer data, when a tape with account and Social Security numbers on 90,000 customers was lost while being transported by UPS.

Membership in the "dang, I lost your data" club keeps growing. Hopefully, it's a club the IRS can stay out of.

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