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IRS budget cuts and outdated technology

Last week, the IRS admitted that hackers gained access to the tax documents of 104,000 Americans. Five years of budget cuts may explain the failure in part. Staff reductions, delayed technology projects and the difficulty of creating programs that stop fraud are others.

CNN reported that the agency currently receives 10 percent less funding and has 13,300 fewer employees than it did five years ago. In a July 2014 post, we discussed how funding cuts were resulting in longer call wait times and additional time to resolve tax audits.

Even as it has been forced to make staff cuts, last year the IRS processed an additional seven million tax returns. Add to that the coordination of information-sharing required from Obamacare and the agency has been stretched thin.

Windows XP + antiquated fraud-detecting software 

A review of government documents by CNNMoney found that the IRS cut year-over-year spending on cybersecurity by $10 million in 2014 and cut 47 positions on its cybersecurity team. IRS Commissioner John Koskinen admits that some tech is from the era of the Kennedy administration and computer run on Windows XP, which is no longer supported by Microsoft.

In a speech last summer, Koskinen remarked that the current information systems left the agency “open to more system failures and potential security breaches.” An oversight board also recommended increasing the budget to address the tech problems.

Some point to wasteful spending. For instance, a fraud-catching software project that was supposed to be in place by 2012 is still not working yet in 2015 and it millions overbudget.

While the budget is a factor, it is also difficult to create programs that stop fraud and adapt to Changing hacker tactics. A pilot project offering six-digit PINs that make it harder for others to file in your name is available for fraud victims in three states. However, if this was to roll out nationwide it could create even longer waits to reach customer service, because many lose their PINs.

There is no easy answer. This week, the Senate Finance Committee will hold a hearing to figure out how hackers accessed the tax documents.

In our next post, we will share tips for protecting your digital information in the meantime.

Source: CNN Money, “Is the IRS too broke to protect your info?” Jose Pagliery, May 29, 2015

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