The Internal Revenue Service still has problems with protecting the privacy of taxpayers' personally identifiable information on the printed documents it mails, according to a new report.

The report, from the Treasury Department's inspector general, calls the protection effort a "work in progress." The IRS ships packages primarily via the U.S. Postal Service and the United Parcel Service. In fiscal year 2007, the IRS sent over 150 million pieces of mail to taxpayers through the postal service and more than 3 million packages via UPS. 

"While some UPS packages are damaged, misdirected or lost, disclosures from these types of incidents are minimal," said the report. "However, to the taxpayers whose [personally identifiable information] is compromised, the potential for identity theft is a valid concern."

The Treasury Inspector General for Tax Administration reviewed 63 potential disclosure incidents reported between January and March 2008 and found that 21 of the cases involved the shipment of "hardcopy" personally identifiable information. However, TIGTA found that hardcopy cases and electronic or mixed-media cases were not easy to distinguish in the database of reported incidents.

Not all the packages contained a list of items shipped, and the senders of the packages did not always monitor the delivery and take appropriate action if packages were lost. The IRS has not issued formal procedures to improve how packages are assembled and shipped.

The report recommends that the IRS modify some of its processes and expand a study of shipping procedures that it has planned. The IRS indeed has several initiatives underway to improve its handling of hardcopy taxpayer information and IRS management generally agreed with TIGTA's recommendations.

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