The Internal Revenue Service has made only limited progress to date in eliminating the unnecessary use of Social Security Numbers in tax forms, letters and notices, according to a new report, leaving taxpayers exposed to potential identity theft.

The report, from the Treasury Inspector General for Tax Administration, found that in fiscal year 2014, the IRS mailed more than 141 million notices and 37 million letters to taxpayers for various reasons, to help them understand and meet their tax obligations. In a prior review, TIGTA reported that the IRS had not made significant progress in redacting or masking taxpayers’ SSNs from systems, notices, and forms. TIGTA initiated a new audit to re-assess the IRS’s progress, and publicly released the results Wednesday.

TIGTA found that as of January 2015, the IRS estimates that it has removed SSNs from 58 (2 percent) of the 2,749 types of letters and 93 (48 percent) of the 195 types of notices it issues.

An Office of Management and Budget mandate required the IRS to eliminate the unnecessary use of SSNs by March 2009. However, the IRS suspended work on the forms, letters and systems components of its SSN Elimination and Reduction Program in September 2011, so it could focus on other components of the program with its limited funding. Funding needed to upgrade computer systems to process barcoded notices will not be available in fiscal year 2016 because the IRS has deemed other projects to be more critical, TIGTA noted.

TIGTA also found that processes are needed to identify the universe of taxpayer correspondence with unnecessary SSNs and to ensure that SSNs are excluded when creating new correspondence. For example, TIGTA’s review of a sample of 65 forms created since calendar year 2009 found that 14 of them (that is, 22 percent) require taxpayers to provide their SSNs.

“A person’s Social Security Number is the most valuable piece of personal data identity thieves can obtain,” said TIGTA Inspector General J. Russell George in a statement. “The fact that the IRS does not have processes and procedures to accurately identify all correspondence that contain Social Security Numbers remains a concern.”

The report also found that processes are needed to monitor the use of barcode scanners to track correspondence. TIGTA identified scanners that were not being used in one function while another function did not have enough scanners.

TIGTA recommended that the IRS update the SSN Elimination and Reduction Program strategy to include specific time frames and describe how implementation of the proposed digital communication project would affect the IRS’s SSN elimination and reduction plans. The IRS should also develop an agency-wide strategy to identify and compile a list of all correspondence issued to taxpayers, TIGTA suggested, and it should develop processes to ensure that newly created correspondence is designed to omit the unnecessary use of an SSN. In addition, TIGTA recommended the IRS develop processes and procedures to monitor and track barcode scanners to ensure that their use is maximized.

The IRS agreed with three of TIGTA’s four recommendations and plans to take corrective actions. The IRS disagreed, however, with the recommendation to compile a list of all correspondence issued to taxpayers and stated that implementing the recommendation is a more costly endeavor than it appears.

“It is not feasible and would be very expensive for IRS to identify and compile a listing of the universe of correspondence issued to taxpayers,” wrote Mary J. Howard, director of privacy, government liaison and disclosure at the IRS, in response to the report. “The IRS already identified the most widely used letters, notices and forms for the most common programs in the IRS. Given our limited resources in these tough budget times, we believe addressing correspondence known to have the highest volume is a better use of taxpayer money and achieves our shared goal of protecting PII [personally identifiable information].”

For its part, TIGTA said it continues to believe that without identifying the universe of correspondence, the IRS cannot measure its progress in reducing the unnecessary use of SSNs.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access