IRS Failed to Run Background Checks on Contractors

By Michael Klazema on 8/20/2014

Not even the government is immune to background check snafus.

According to a recent report from the Associated Press, a federal investigator found some pretty major background check oversights in recent Internal Revenue Service practices. Based on the investigator's report, the IRS has been neglecting to run any sort of background checks on numerous private contractors. However, even without background checks, these contract workers were given access to confidential taxpayer data, including names, addresses, and Social Security numbers. In other words, the IRS may have put more than a million American taxpayers at risk.

How could this have possibly happened? It appears that poor planning, shoddy organization, and simple lapses of common sense were all to blame for the oversights. In one situation, the IRS handed over a computer hard drive to a company that it had contracted for printing services. The disk contained sensitive information for more than 1.4 million taxpayers, but the IRS didn't see fit to require background checks for any of the people working on the project.

That wasn't the only potential leak of private taxpayer information, either. On the contrary, perhaps the more alarming incident uncovered involved a courier who was contracted "to transport sensitive information." The courier in question was a known felon who has 21 years of prison time on his record. His charges were primarily for arson, not identity theft, but that fact likely won't provide much peace of mind for taxpayers who might have been put in harms way by the failure of the IRS to do its due diligence in assessing contract workers.

The IRS even has a policy in place that requires background checks for any and all contractors that have been given access to sensitive taxpayer information. And while the IRS didn't fail to run background checks on all of its contractors, that fact hardly minimizes the number of potential data leaks.

The IRS reportedly uses about 10,000 different contract firms to help process tax forms and payments. Even a failure to vet one percent of contractors could represent countless opportunities for less-than-trustworthy people to steal taxpayer information and use it for fraudulent purposes. And even when the IRS did run the necessary background checks on contractors, it sometimes failed to require non-disclosure agreements.

The report was completed by J. Russell George, a Treasury Inspector General who reports on tax administration topics. George lambasted the IRS for not running appropriate background checks on contractors, and for "exposing taxpayers to increased risk of fraud and identity theft."


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