The IRS should be doing a better job of ensuring that the sensitive personal and financial information on taxpayers’ paper documents doesn’t fall into the wrong hands, according to a new report.

The report, from the Treasury Department’s Inspector General for Tax Administration, found that the IRS needed to improve its oversight of contractors who collect, dispose and destroy paper documents containing sensitive but unclassified information.

Regional IRS officials did not regularly visit with contractors to verify that the trash was properly destroyed, TIGTA found. Nor did they consistently verify that IRS contract employees who have access to the documents have passed background checks.

While the IRS has educated its workforce on the need to protect electronic information from disclosure, the report found that IRS employees are improperly disposing of taxpayer information and other sensitive documents. At every IRS facility visited by TIGTA inspectors, such documents were found in regular waste containers and dumpsters.

Disclosure of taxpayer information or other personally identifiable information could result in identity theft, TIGTA noted in the report. “Taxpayers need to be assured that the IRS is taking every precaution to protect their private information from inadvertent disclosure,” said Inspector General J. Russell George.

TIGTA made five recommendations to the IRS to improve oversight of the destruction of sensitive unclassified documents, including oversight of waste disposal contracts and additional education for IRS employees about the need to properly protect documents containing personally identifiable information.

In response, the IRS said it had improved oversight over its waste disposal contracts by developing standard operating procedures for its managers to follow in monitoring contracts, including better verification that disposal company employees have passed background checks. The IRS is also educating its employees about the importance of protecting electronic and paper documents containing sensitive information.

“While this report’s findings are troubling, I am encouraged that the IRS management is increasing its oversight over the disposal of sensitive documents and educating its employees about the need to protect taxpayer information from loss and potential misuse,” said George.

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