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Is government security for tax information adequate?

When you are involved in a tax dispute with the IRS or your state revenue agency, it hardly seems like these tax authorities are on your side. Indeed, sometimes aggressive tax litigation is required to resolve the dispute.

When it comes to the privacy of your personal information, however, you and the IRS or the California Department of Revenue do have a common interest. Both of you want to keep that information out of the hands of hackers and others who might gain unauthorized access.

A recent case in South Carolina, though, provides a cautionary tale of how vulnerable government databases are to cyber attacks. South Carolina officials announced recently that a hacker based abroad had stolen key types of personal data from a state computer system that housed tax information.

The stolen data included 3.6 million Social Security numbers. Some 387,000 credit and debit card numbers were also compromised. The IRS, as well as California Department of Revenue and other state tax agencies, have to be reviewing their security procedures in the wake of the South Carolina attack.

There have been at 11 significant security breaches at state tax agencies since 2005, according to a watchdog group called the Privacy Rights Clearinghouse. Those incidents, however, have typically involved incidents such as employees having too much taxpayer data on personal laptops.

A cyber attack from abroad raises the ante immeasurably on security concerns. California obviously must be better prepared than South Carolina was in order to properly protect the personal information of taxpayers. Keeping this information secure is vital to preventing taxpayers from the risk of tax fraud, identity theft or credit card fraud.

Source: "Hacking of Tax Records Has Put States on Guard," New York Times, Robbie Brown, 11-5-12

Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our California tax litigation page.

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