IRS Leaks And 'Critical Safeguard Weaknesses' Leave Millions Of Americans' Sensitive Data At Risk As Agency Fights for More Funding

Benjamin Franklin said, "Nothing is certain except death and taxes."

The IRS processed 162 million federal individual tax returns in 2023, and Americans spend a significant amount of time and money on their taxes each year.

According to the Taxpayer Advocate Service, an individual filing one annual tax return spends 13 hours and $240 in out-of-pocket costs.

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While tax season is no one's idea of fun, most Americans presumably assume their sensitive submitted data is safe with the government. Recent high-profile cases may show otherwise.

On Jan. 29, 2024, an IRS consultant was sentenced to five years in prison for leaking the taxes of Donald Trump and other wealthy Americans to the media.

Citadel CEO and hedge fund manager, Ken Griffin, was one of those caught up in the leak and sued the IRS for claiming the IRS failed to protect his filings. 

Regular Americans have reason to be concerned as well.

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The U.S. Government Accountability Office (GAO) recently released a report titled "IRS Needs to Address Critical Safeguard Weaknesses" and found that 77 recommendations the agency made since 2010 have not been implemented by the IRS.

Some of the GAO's recommendations include limiting access to tax records when required by an IRS employee, increasing training for contractors and addressing critical weaknesses in the IRS's IT systems. 

Even private tax prep firms have taken heat for sharing taxpayer information. An investigation led by Senator Elizabeth Warren found that firms like H&R Block HRB gave personal taxpayer data to big tech companies such as Meta META and Alphabet GOOG. 

IRS Commissioner Danny Werfel said that "any disclosure of taxpayer information is unacceptable" and mentioned that "the IRS has put in place new protocols and protections that tightened security, and our aggressive work in this critical area continues in order to protect the tax and financial information of taxpayers."

Werfel believes that the increase in funding to the IRS from the Inflation Reduction Act will prove critical to modernizing its systems. He said, "It is so important that the IRS be funded adequately for its operations — we need to invest in our infrastructure and invest in our data security."

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However, even once the act passed, it’s been a fight for the agency to keep the funding.

The $80 billion to the IRS from the Inflation Reduction Act that got no Republican votes was subject of contention when the House of Representatives's first vote to start 2023 was to rescind all of the funding.

That bill did not make it to the Senate, and Republicans blocked $20 billion from the Inflation Reduction Act to address the debt ceiling last June.