IRS Direct File Program Must Ensure Taxpayer Data Stays Secure

This is a regular column from tax and technology attorney Andrew Leahey, principal at Hunter Creek Consulting and sales suppression expert. Here, he shares why the IRS needs to take caution against potential data leaks with its direct e-file tax return system.

Tens of millions of taxpayers are cast out to engage with the for-profit tax preparation industry just to pay the government the money they already know they owe, so it’s no surprise that the IRS’s report to Congress on an IRS-run direct e-file return system was met with massive approval. A direct e-file return system brings the promise of a public option for filing returns.

One huge requirement of making a shift to a space likely dominated by a public option from a space dominated by for-profit private tax preparers is accountability. When private preparers leaked or mishandled data, taxpayer redress was arduous or nonexistent; the same can’t be true under the new system.

There’s nothing inherently more secure about data being maintained by a public entity as opposed to a private one. Much of the rest of the world has had a public tax preparation option for a long time, but some of them have also suffered massive data breaches. The IRS isn’t a stranger to data leaks itself.

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