Cyber Thieves Hit the IRS—and 100,000 Taxpayers

Cyber Thieves Hit the IRS—and 100,000 Taxpayers

REUTERS/Kacper Pempel/Files
By Brianna Ehley, The Fiscal Times

Identity thieves hacked into an Internal Revenue Service data system earlier this year, potentially gaining access to personal financial information for at least 100,000 taxpayers.

The IRS issued a statement today saying that its online system, “Get Transcript,” was breached between February and May, the Associated Press first reported. The portal possesses information including tax returns and other taxpayer data stored by the IRS.

Related: Tax Thieves Could Boost Their Income by 262 Percent

The IRS’s statement said the tax thieves were able to penetrate the system because they had knowledge of 100,000 taxpayers, including dates of birth, Social Security numbers and tax filing details.

The massive hack comes as identity theft is at a record high. Earlier this year, the Treasury Inspector General for Tax Administration (TIGTA) reported that 1.6 million taxpayers were affected by identity theft in 2014 – compared to just 271,000 in 2010.

The IRS’s ability to catch fraudsters was even added to the GAO’s “High Risk List” or the list of federal programs that are most-vulnerable to waste, fraud and abuse.

Auditors attribute the increase to the uptick in electronic filing, which is more convenient for tax filers, but also easier for fraudsters to file fake returns.

TIGTA says the IRS doled out more than $5.8 billion in fraudulent refunds related to identity theft during the 2013 filing season.

The shift to electronic filing is also apparently making taxpayer information even more vulnerable according to the latest breach.

Related: IRS Struggles to Help Victims of Identity Fraud

The hack is obviously bad news for the agency, which is already struggling to address cases of identity theft as they stack up. TIGTA reported the IRS took about 278 days on average to resolve identity theft cases in 2013, despite the agency claiming that it takes about 180 days or six months to resolve issues of identity theft.

When it does complete cases, the IG found that about 10 percent of the “resolved” were riddled with errors.

The latest report comes at a tough time for the IRS, which is struggling with a recent round of budget cuts and is operating with an even greater workload while enforcing at least 40 new tax provisions under the president’s health care law.

The agency said it has temporarily suspended the online service that was the subject of the breach until the vulnerabilities are resolved.

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"The burden of compliance with the rule is enormous, and way out of line with any projected benefits associated with the rule," the suit says. In response, a spokesperson for the Department of Health and Human Services said that hospitals “should be ashamed that they aren’t willing to provide American patients the cost of a service before they purchase it.”

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The Wall Street Journal’s Richard Rubin says Elizabeth Warren’s proposed taxes could claim more than 100% of income for some wealthy investors. Here’s an example Rubin discussed Friday:

“Consider a billionaire with a $1,000 investment who earns a 6% return, or $60, received as a capital gain, dividend or interest. If all of Ms. Warren’s taxes are implemented, he could owe 58.2% of that, or $35 in federal tax. Plus, his entire investment would incur a 6% wealth tax, i.e., at least $60. The result: taxes as high as $95 on income of $60 for a combined tax rate of 158%.”

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