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TIGTA Report Finds Weakness In IRS E-File Security

by Mike Godfrey, Tax-News.com, Washington

10 November 2003


A recent report by the Treasury Inspector General for Tax Administration has identified security lapses in the Internal Revenue Service’s e-file system that can allow individuals to participate in the program without meeting the necessary screening checks.

Consequently, the report found that the e-filing system is open to abuse by those who wish to place fraudulent tax returns, and in one instance the Inspector General’s Office uncovered a case were an electronic return originator (ERO) had filed around 9,000 fake returns over a three-year period, netting the culprit some $7 million in refunds in the process.

TIGTA has attributed much of the responsibility for this on the Revenue’s aggressive promotion of its e-file campaign as it strives to meet its target of 80% of all returns filed electronically by 2007 and its investigation found the security lapse has arisen in large part from a conflict of interest within the organization.

According to TIGTA, “the IRS function responsible for oversight of the screening and acceptance process for new EROs is also responsible for marketing the e-file program to potential EROs. This could result in a separation-of-duties conflict, as the function is both responsible for creating standards and controls to ensure integrity of the system, and involved in trying to encourage practitioners to become EROs," explained the report.

TIGTA recommended that the IRS carry out periodical criminal background checks all those authorized to use the e-file program.


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