[118690] in Cypherpunks
IP: [FP] Know Your Taxpayer - Privacy Times
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Tue Oct 5 20:59:21 1999
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Date: Tue, 5 Oct 1999 19:00:21 -0400
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Subject: IP: [FP] Know Your Taxpayer - Privacy Times
Date: Tue, 5 Oct 1999 11:23:45 -0500
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SCAN THIS NEWS
9/5/99
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KNOW YOUR TAXPAYER: IRS EYES E-DISCLOSURE OF TAXPAYER DATA
http://www.privacytimes.com/NewWebstories/IRS_priv_10_4.htm
In a move that likely will raise privacy concerns, the Internal Revenue
Service has announced it wants to test a new system that allows taxpayers to
electronically authorize the release of their tax records to third parties,
like mortgage companies and credit bureaus.
The IRS said it expects to launch a pilot project in California designed to
transmit a consenting taxpayer's records -- possibly over the Internet -- to
a third party within 24 hours, rather than the seven- to ten-days it takes
under the current, paper-based system.
In a Sept. 13 Federal Register notice seeking public comment, the IRS said
it envisions inviting around 100 financial services companies to become
contractors that would be authorized to process and transmit a taxpayer's
electronic release form to the IRS, and then receive the taxpayer's IRS
records.
Confidentiality will be a priority, the IRS vowed. "Although this
information is supplied by the Contractor at the taxpayer's consent, the IRS
will require that all information received through this program meet ...
stringent security requirements." These include prohibiting any secondary
use, and maintaining tax data in "locked containers." However, few, if any,
national laws restrict private companies' use of tax records once obtained.
The widening reliance on tax records by mortgage companies, schools and
other non-tax agencies has been a source of unease for privacy advocates.
Section 6103 of the Tax Code strictly safeguards taxpayer data, but allows
for disclosure with taxpayer consent. Many mortgage companies, however,
effectively require self-employed loan applicants to "consent" to the
release of their tax data as a condition of obtaining a loan. The release
form, Form 4506, is usually among the myriad of papers that individuals sign
when applying for mortgages or other forms of credit. Of the six million
people authorizing such disclosures, roughly two million of them do so at
the behest of financial institutions, the IRS said. Some privacy advocates
expressed fear that an electronic system would remove disincentives for
demanding taxpayer records, and turn a trickle into a flood.
"I'm afraid this could be a case of, 'Build it, and they will come,'" said
one privacy expert, referring to the famous line in the baseball movie,
"Field of Dreams."
Pete Sepp, Vice President of the National Taxpayers Union, said the proposal
sounds good in theory. He particularly lauded the IRS's stated goal of
reducing the amount of taxpayer data it would divulge any given third party.
But he expressed concern that by creating an electronic system, where
information moves at the speed of light, the IRS could be erecting a threat
to privacy of potentially "uncontrollable" dimensions. Sepp said NTU may
file comments.
Indeed, the IRS has had problems in the past with IRS employees "browsing"
through taxpayer records. In most cases, the IRS declined to inform
taxpayers that their privacy had been invaded. Moreover, the General
Accounting Office recently found that among the
37 federal and 215 State and local agencies receiving IRS records, there
were cases of inappropriate access to tax files by contractor staff. Experts
questioned how the IRS could enforce restrictions on secondary uses of tax
records held by private sector companies, particularly if the pilot project
blossomed into a full-fledge operation.
"We all know that the IRS and the Social Security Administration each have
large databases," said Phyllis Schlafley, president of the Eagle Forum. "But
we are constantly alert to the integration of these and other systems into
one, big database. Anything that advances us toward this is a realistic
concern."
The IRS proposal is at:
http://www.procurement.irs.treas.gov/etds/index.htm
====
ZDNet:
Privacy Experts Call IRS E-Sharing a Bad Idea
Some say agency's plan to distribute tax records electronically is an
invitation for abuse. October 1, 1999
http://www.zdnet.com/zdtv/cybercrime/news/story/0,3700,2346326,00.html
Privacy experts say they are concerned about an Internal Revenue Service
proposal to electronically release taxpayer records to third parties such as
credit bureaus, mortgage brokers, and student loan agencies.
The IRS receives the majority of tax records via mail. However, the IRS also
uses the US Postal Service to provide tax records to third parties. The
agency said it wants to distribute these records electronically to cut down
on expenses and enable easier access to records.
That has some privacy advocates worried. Easy access means easy abuse-- even
by the IRS itself, says John Berthoud of the National Taxpayers Union.
Berthoud says his organization is concerned that electronic filing and
dissemination of data via the Internet could lead to privacy abuses by
overzealous agents in pursuit of taxpayers' information.
By law, the IRS has been directed to conduct 80 percent of its business
electronically by the year 2007. The electronic "e-sharing" system will
increase annual requests for tax records to be sent to third parties from
the current 6 million to more than 50 million, according to IRS estimates.
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Robert A. Hettinga <mailto: rah@ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
