Home > 2015 > Identity Theft

The IRS Request That Could Help Identity Thieves

Advertiser Disclosure Comments 0 Comments

More than a year ago, Federal Trade Commission Chair Edith Ramirez asked Congress to strengthen her agency’s data security powers. “Never has the need for such legislation been greater,” she said during a hearing in early 2014.

Nearly two years later, never has a statement like “never has the need been greater” remained an accurate description of a systemic failure when it comes to real advances — at both the government and enterprise level — to protect consumers from bad data security practices. This goes for both the for-profit and nonprofit sectors, and it is why a recent “suggestion” made by the Internal Revenue Service is particularly illogical and alarming.

In September, the IRS proposed giving nonprofits the option of providing more information about people who contribute $250 or more. What kind of information you ask? Just the kind that can make your life a living Hell should it fall into the wrong hands: Name, address, Social Security number. And as an op-ed in the Wall Street Journal pointed out, while the IRS has made the option voluntary for the time being, “that’s often a prelude to compulsory.”

Predictably, most of the criticism leveled at the proposal so far is focused on the cooling effect it will have on donations to politically oriented nonprofits. There is, however, a much more serious and impactful issue here. Not enough has changed in our approach as a society to data security for practices such as more granular data collection to be recommended by a government agency.

If the Office of Personnel Management (along with just about every other federal agency and countless multibillion-dollar financial services, retailers and even cyber security organizations) can get hammered by hackers, can’t just about anyone else? The answer should be obvious. As breaches have become the third certainty in life, the IRS proposal, seen through the prism of current data security practices “out there,” is both misguided and terrifying.

There Is No Functional Standard

The government’s response to identity-related issues and the state of data security legislation continues to fall far short of what is needed to stop the flow of our digital lives into an increasingly inhospitable unknown where, according to the latest yearly roundup, there is a new victim of an identity-related crime every two seconds, and an alarming $16 billion was stolen from 12.7 million consumers in 2013.

To take just one example, the breach at the Office of Personnel Management exposed incredibly sensitive data. The files of more than 22 million people were put at risk, everyone from present and former government employees, contractors and airline workers to CIA agents and their families, roommates and friends. Information from background checks for security clearances was compromised and millions of Social Security numbers and 5.6 million fingerprints were exposed, so you can well imagine that more than enough data points were leaked to enable a fraudster to execute a contract on a house purchase, commit a crime in another person’s name, engage in tax fraud and refund diversion or engineer medical identity theft — the list only limited by the imagination of the hackers or their customers. Of course the reason this happened is an all too familiar story. The agency was woefully under-protected against data foragers.

There was the typical aftermath: promises, posturing and bluster. There was the Federal Information Security Modernization Act of 2014 (FISMA), which, among other things, allowed the Department of Homeland Security to make sure the OPM handled their data better. But after a much-vaunted “30-day Cybersecurity Sprint,” requested by the White House and conducted by the Office of Management and Budget, it seems reasonable to ask how much has actually changed? We know the answer. “Strong authentication for privileged and unprivileged users” increased from 42% to 72% of users. (That’s a C- in grade-school terms.)

More Change Is Needed

All indication would suggest nowhere near enough has changed. According to an OPM report last month filed by the inspector general, the agency “continues to struggle to meet many FISMA requirements.”

As with the government, so goes the country. If the Office of Personnel Management was and continues to be the poster child for data insecurity when so much is at stake, what do you suppose the security measures are at your place of worship where you regularly donate money that gets claimed in your tax return? Or how about the local or even national charities you take care of at the end of every year? And yes, what about your favorite political action committee?

Consider this: Your information might actually be safer at the Office of Personnel Management after their catastrophic breach than it is at your nonprofits of choice. The IRS is most likely a safer bet as well, though it was also hit this year to the tune of more than 300,000 people possibly compromised in the Get Transcript hack.

The IRS Is Endangering Itself

The bigger problem here is diverted tax refunds, which costs the government big time.

We’ve seen $5.8 billion get stolen already, and estimates are as high as $21 billion for 2016. So why increase the United States Treasury’s attackable surface by providing fresh meat for thieves to get the information they need to commit tax fraud? With many in Congress looking to limit the deductions that people can take, one would think an even greater outflow (by way of stolen tax refunds) might be something the IRS would want to sidestep, but instead they seem to be willfully stepping into harm’s way by encouraging organizations that are under-resourced and ill-equipped to defend themselves against hackers to store information that will cost the government serious dollars.

All this leaves us with is a rhetorical question: Should the IRS ask nonprofit organizations to collect and store your Social Security number? I think not. What say you?

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

More on Identity Theft:

Image: Wavebreak Media

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team