In the last few years, tax return fraud has become a serious problem at the state and federal levels, thanks to the growth of e-filing and security holes in IRS and third-party tax software systems. Is the IRS to blame for this trend? There are really only two options: the IRS is either broke or incompetent.

CNN puts it in slightly different terms, asking whether the agency is broke or unable to allocate the budget that it has to protect all of the data that it collects about us. The agency has 10% fewer employees than it did five years ago, but processes more tax returns and also has even more work since the Affordable Care Act was implemented, processing health insurance information and assessing penalties when needed.

While maybe better technology could help the IRS finish more work quickly, there’s a catch: they still have computers running 13-year-old Windows XP, and even their fraud-catching software is two decades old. The agency employs fewer cybersecurity staff than it used to, even as one would think the demand would go up as e-filing has become more popular.

At the same time, the “incompetent” thing might also apply: a new anti-fraud program was supposed to be finished three years ago, and is late and over-budget. Congress is still punishing the agency for what some members of Congress consider “lavish” spending in recent years on things like conferences and training videos. However, when it’s innocent taxpayers who end up with their identities stolen and their tax refund sent to the other side of the world, that punishment is affecting the wrong people.

Is the IRS too broke to protect your info? [CNN Money]

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