Fingerprinting Delays of IRS Personnel May Increase Taxpayer Data Exposure, TIGTA Warns

(Parker Tax Publishing July 2022)

The Treasury Inspector General for Tax Administration (TIGTA) issued an audit report which warns that temporary personnel hiring practices at the IRS during the Coronavirus Disease 2019 pandemic may have increased potential security risks to taxpayer information as a result of delayed employee fingerprinting, as well as delayed inspections of employment eligibility documents. Among other recommendations, TIGTA urged the Treasury Department's Chief Human Capital Officer to conduct periodic reviews of the Form I-9 SharePoint site and provide periodic reminders to hiring officials regarding the inspection of employment documents. TIGTA Report Number 2022-16-039 (7/7/22).

Background

From March 23, 2020, through July 17, 2021, the IRS hired approximately 12,000 individuals under temporary COVID-19 pandemic (the pandemic) hiring policies. Temporary federal guidance allowed the IRS to defer physical inspection of employment eligibility documents for new employees and to also defer fingerprints for some employees. Subsequently, the Treasury Inspector General for Tax Administration (TIGTA) initiated an audit because it determined that while new IRS employees hired during the pandemic may have had their fingerprinting or employment eligibility verification delayed in accordance with newly established hiring policies, prolonged delays could increase the exposure of taxpayer data to potential bad actors. The objective of the audit was to determine whether temporary personnel hiring practices during the pandemic presented potential security risks. In order to make this determination, the TIGTA audit assessed the effectiveness of fingerprinting and hiring activities, including inspection of employment eligibility documents.

The audit was performed with information obtained from the Office of the Chief Human Capital Officer located in Washington, D.C., during the period August 2021 through February 2022, and was conducted in accordance with generally accepted government auditing standards.

Audit Results

The TIGTA Audit Report, which was released on July 7, 2022, found that although the IRS has made progress in reducing the number of new employees hired during the pandemic without identity documents inspected or getting fingerprinted, the delays put the IRS at risk of potential exposure of taxpayer data. IRS records as of January 2022 showed that approximately 1,900 individuals hired from March 23, 2020, through July 17, 2021, are listed as not yet having employment eligibility documents physically inspected. Of the 1,900 individuals, over 1,200 started working in calendar year 2020.

In addition, the report found that the collection of Forms I-9, Employment Eligibility Verification, on the IRS's Form I-9 SharePoint site as of August 2021 did not accurately reflect whether hiring officials completed the physical inspection of new employees' Form I-9 identity documents. TIGTA judgmentally selected and reviewed 38 records from the Form I-9 SharePoint site for which there was no indication that the hiring officials had physically inspected the new employees' verifying documents. That review found that five of the forms had hiring official notations indicating that a physical inspection of the documents had taken place, even though the IRS's Form I-9 SharePoint site was not updated timely to reflect that physical inspection occurred.

According to the report, approximately one quarter of the individuals who were hired from March 23, 2020, through July 17, 2021, filled positions that qualified for the fingerprint deferral. As of January 2022, IRS records show 113 individuals still had not been fingerprinted, 29 of whom started working in 2020. TIGTA also identified 11 individuals who were hired, worked for the IRS between eight and 371 calendar days, and then separated from the IRS without ever having their identity documents physically inspected. Therefore, the IRS hired individuals to fill positions the majority of which would have had access to taxpayer data yet never verified whether those individuals were eligible for federal employment in the United States.

TIGTA Recommendation

TIGTA recommended that the Chief Human Capital Officer of the Treasury Department conduct periodic reviews of the Form I-9 SharePoint site and provide periodic reminders to hiring officials responsible for completion of the Forms I-9 to determine whether or not those individuals are still pending physical inspection and update the records based upon the results of that review to ensure that the Form I-9 SharePoint site is a complete and accurate representation of the status of deferred physical inspections. The IRS said that it agreed with TIGTA's recommendation and plans to take corrective action.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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