Recommendation: Congress should consider providing IRS with explicit authority to establish security requirements for the information systems of paid preparers and Authorized e-file Providers. (Matter for Consideration 1)
Agency: Congress
Status: Open
Comments: No action has been taken on this matter as of December 2019.
Recommendation: The Commissioner of Internal Revenue should develop a governance structure or other form of centralized leadership, such as a steering committee, to coordinate all aspects of IRS's efforts to protect taxpayer information while at third-party providers. (Recommendation 1)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation
Comments: In its initial response to our draft report, IRS disagreed with this recommendation. In November 2019, IRS said that it agreed with the intent of the recommendation, but did not agree to implement it, citing the need for additional explicit authority to establish security requirements for the information systems of paid preparers and others who electronically file. IRS reported that to effectively establish data safeguarding policies and implement strategies enforcing compliance with those policies, a centralized leadership structure requires the statutory authority that clearly communicates the authority of the IRS to do so. Without such authority, implementing the recommendation would be an inefficient, ineffective, and costly use of resources, according to IRS. We disagree that convening a governance structure or other centralized form of leadership would require additional statutory authority or be inefficient, ineffective, and costly. As discussed in the report, IRS has seven different offices across the agency working on information security-related activities that could benefit from centralized oversight and coordination, such as updating existing standards, monitoring Authorized e-file Provider program compliance, and tracking security incident reports.
Recommendation: The Commissioner of Internal Revenue should modify the Authorized e-file Provider program's requirements to explicitly state the required elements of an information security program as provided by the FTC Safeguards Rule. (Recommendation 2)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: In its initial response to our draft report, IRS disagreed with this recommendation. In November 2019, IRS said it agreed with this recommendation and would update IRS Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns, to include security elements that are consistent with the FTC Safeguards Rule. IRS plans to update the publication by November 2020.
Recommendation: The Commissioner of Internal Revenue should require that all tax software providers that participate in the Authorized e-file Provider program follow the subset of NIST Special Publication 800-53 controls that were agreed upon by the Security Summit participants. (Recommendation 3)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: In its initial response to our draft report, IRS disagreed with this recommendation. In November 2019, IRS stated it was in agreement with the intent of this recommendation; however, IRS does not plan to implement it without additional statutory authority to require Authorized e-file Provider Program participants to comply with the NIST Special Publication 800-53. We continue to believe that under IRS's existing authority, IRS has already established some information security requirements for a portion of tax software providers, those that are online providers. IRS has the opportunity to further establish standards for all tax software providers by incorporating the subset of NIST controls into its Authorized e-file Provider program, which would capitalize on the work it has completed with the Security Summit members.
Recommendation: The Commissioner of Internal Revenue should regularly review and update the security requirements that apply to tax software providers and other Authorized e-file Providers. (Recommendation 4)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: IRS agreed with this recommendation and in November 2019 said that it will update IRS Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns, with a formal memorandum to all internal stakeholders during the annual review process. IRS plans to take this action by November 2020.
Recommendation: The Commissioner of Internal Revenue should update IRS's monitoring programs for electronic return originators to include techniques to monitor basic information security and cybersecurity issues. Further, IRS should make the appropriate revisions to internal guidance, job aids, and staff training, as necessary. (Recommendation 5)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: In its initial response to our draft report, IRS disagreed with this recommendation. In November 2019, IRS stated it was in agreement with the intent of this recommendation; however, it does not plan to implement it. IRS reported it does not have the statutory authority to establish policy on information security and cybersecurity issues, nor to enforce compliance if noncompliance is observed. Additionally, IRS said that the specialized technical skills required to monitor compliance with information and cybersecurity standards, should statutory authority be granted, would require additional funding to meet those monitoring needs. However, as we reported, IRS already monitors physical aspects of information security, which goes beyond existing Authorized e-file Provider program requirements. Since most individuals now file tax returns electronically, having checks for physical security without comparable checks for cybersecurity does not address current risks, as cyber criminals and fraudsters are increasingly attacking third-party providers, as IRS has noted. We believe that incorporating some basic cybersecurity monitoring into the visits would provide IRS the opportunity to help inform the most vulnerable third-party providers of additional guidance and resources.
Recommendation: The Commissioner of Internal Revenue should conduct a risk assessment to determine whether different monitoring approaches are appropriate for all of the provider types in the IRS's Authorized e-file Provider program. If changes are needed, IRS should make appropriate revisions to the monitoring program, internal guidance, job aids, and staff training, as necessary. (Recommendation 6)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: In its initial response to our draft report, IRS disagreed with this recommendation. In November 2019, IRS said it agreed with the intent of this recommendation; however it does not plan to implement it. IRS stated that absent statutory authority and funding, an assessment of the different monitoring approaches is moot. We disagree with this conclusion. As discussed in the report, IRS does not systematically monitor the existing security requirements for online providers, nor does it conduct information security or cybersecurity monitoring for all types of Authorized e-file Providers. We believe that IRS could conduct a risk assessment of its current monitoring program within existing statutory authority and make necessary changes that would provide better assurance that all types of providers are receiving some level of oversight and that IRS is addressing the greatest risk areas appropriately.
Recommendation: The Commissioner of Internal Revenue should standardize the incident reporting requirements for all types Authorized e-file Providers. (Recommendation 7)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: IRS agreed with this recommendation and in November 2019 said that it would develop a standardized process for all Authorized e-file Providers to report security incidents to IRS. IRS said it plans to update IRS Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns, to include this standardized process by November 2020.
Recommendation: The Commissioner of Internal Revenue should document intake, storage, and sharing of the security incident data across IRS offices. (Recommendation 8)
Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Comments: In its initial response to our draft report, IRS agreed with this recommendation. In November 2019, IRS said it agreed with this recommendation with respect to the formal process for tax professionals to report data breaches to the IRS through the Stakeholder Liaison function within the Communications and Liaison organization. According to IRS, procedures are documented in the Data Breach Incident Reporting Instructions that are followed during the intake process. IRS said that upon completion, the breach information is disseminated to other offices within the IRS, depending on the nature of the breach incident reported. According to IRS, all 2018 and 2019 Tax Pro Data Breach incidents remain stored in the Data Breach module of the Return Preparer Database. We will follow up to confirm the information IRS described and determine if these procedures cover all of the IRS offices included in our report.
