As the Internal Revenue Service is inundated with millions of tax return files, it may be hard for the agency to keep track of potential cases of identity theft. This problem is continuing to affect consumer perceptions of the agency so much that National Taxpayer Advocate Nina Olson called the IRS "an institution in crisis," . A report by the Treasury Inspector General for Tax Administration (TIGTA) urged the IRS to correct its security problems, .

Tax Preparers Lack Regulation
One of these issues is a lack of regulation regarding tax preparers, which could result in these seemingly trusted employees taking customer data to file fraudulent tax returns.

"Right now anybody can say they are a preparer," IRS Commissioner John Koskinen said in an interview, according to The Boston Globe. "There are reputable companies who provide training to their people but there are a lot of people hanging out a shingle and you can do it without any qualifications at all."

Those who wish to become a tax preparer need to receive an identification number from the IRS as well as pay an application fee of $64.25. However, this simple process may put taxpayers at risk for fraud as these preparers could file inappropriate refunds. Out of the $20 billion of fraudulent refunds issued in 2013, about $12 billion were associated with identity theft.

Closing Security Loopholes
Treasury Inspector General J. Russell George said in a press release that loopholes occur from the inside and out, which can allow criminals to potentially gain unauthorized access to sensitive information if systems do not have the right security measures.

Thieves that perpetuate tax fraud by stealing others' sensitive information are a major problem for the agency, but the IRS may not have the resources necessary to stop identity theft after its budget was cut by more than $1 billion over the last four years, according to The Boston Globe. At the same time, however, collections by the IRS have scaled down by $8 billion. The IRS will have to continue to focus its efforts on curbing identity theft. For fiscal 2014, the IRS has a budget that is half a billion less than the previous year with only $11.3 billion, .

"We understand it is a disaster for an individual taxpayer to get caught up with this,'' Koskinen said, according to Forbes. "If we can't stop the improper refund before it goes out the door, then your tax file is polluted with all this."

Walter Boyd is senior privacy advisor at IDT911 Consulting.

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