Forty-three percent of taxpayer requests for copies of tax returns or transcripts were processed incorrectly or not in accordance with IRS guidelines, according to a new report.

J. Russell George

The report, by the Treasury Inspector General for Tax Administration, found that the IRS needs to strengthen its controls over taxpayer requests for copies of tax returns and transcripts in order to prevent unauthorized disclosure of taxpayer information. TIGTA identified instances in which IRS employees made errors that increased the risk of unauthorized disclosure.

The errors occurred because IRS employees did not always follow guidelines, or because the guidelines were unclear, inconsistent or insufficient in protecting taxpayer information. Existing guidelines allow IRS employees to process taxpayer requests for tax returns or transcripts without an accurate or complete Social Security number and to send copies of returns and transcripts to an address other than that provided to the IRS on tax returns.

“Taxpayers have a right to expect that the IRS will take every measure to protect their tax return information from inappropriate disclosure,” said TIGTA Inspector General J. Russell George in a statement. “The protection of personally identifiable information is a responsibility that the IRS must take more seriously.”

Tax transcripts provide most of the information contained in a tax return. Taxpayers request copies of their tax returns or transcripts for many reasons — to obtain a loan to start a business, to buy a home, to attend college or to verify income for child support. In addition, third parties such as financial institutions, insurance companies or universities could also submit requests for tax returns or transcripts to the IRS on behalf of taxpayers. The IRS currently charges $57 for copies of tax returns, whether they were originally submitted on paper or electronically filed.

TIGTA recommended that the IRS verify taxpayer names and Social Security numbers before processing requests for copies of tax returns or transcripts; ensure that copies are sent only to the address of record; develop guidelines on how to process requests for taxpayers who are victims of identity theft; and reduce or eliminate the user fee for copies of e-filed tax returns to clearly reflect the significantly lower cost of providing such copies.

The IRS agreed with four of TIGTA’s five recommendations but disagreed with a recommendation to reduce or eliminate the user fee for copies of e-filed tax returns. The IRS claimed that the cost of providing copies of e-filed returns is only slightly less than that of paper-filed returns.