We all periodically provide federal and state tax authorities with written summaries of our most personal financial information seldom thinking that our data will be used to inflict more pain than the applicable tax laws require. We still generally assume that the employees of federal and state taxing agencies adhere to general standards of integrity. That’s particularly true when the revenue agents handling our information are supposedly responsible for helping us.
The IRS has just acknowledged how naive that trust in the security of our information and the integrity of our tax collecting bureaucracies may be. As Paul Caron in his Tax Prof Blog notes here, three IRS employees were recently indicted and arrested on charges of fraudulently misusing the confidential information which the Service had obtained from individuals. They are accused of submitting false refund claims to the IRS resulting in payouts of a million dollars or more to the three between 2008 and 2011.
Ironically, the apparent leader of this scam worked in the IRS’ “Taxpayer Advocate” Office (“Your Voice at the IRS”) where he was responsible for helping taxpayers deal with problems resulting from identity theft.
What’s most remarkable though is that the fraudulent scheme just coming to light was implemented with information that the indicted employees weren’t authorized to access though it has taken almost five years for the Service to complete its investigation and initiate criminal proceedings.