July 16, 2013

If reports that the IRS has allegedly targeted politically conservative organizations and allegedly read tax payer’s e-mails without a warrant didn’t give this federal organization enough headaches, its latest scandal of leaking social security numbers just might. The IRS was shown to have leaked social security numbers of more than 100,000 American citizens associated with 527 political organizations.

What Happened?

On July 8, 2013, audits performed by the independent Public.Resource.org non-profit corporation discovered that the IRS accidentally published social security numbers of individuals connected to tax-exempt 527 political organizations.

A 527 is a non-profit organization formed under Section 527 of the Internal Revenue Code, which grants tax-exempt status to political committees at the national, state and local level. The most common types of 527s are those affiliated with interest groups, unions or associations of elected officials, such as the Republican Governors Association.- The Center for Public Integrity

The IRS reportedly published the social security numbers on their website’s 527 political organization database. The published information was discovered when an unrelated, but improperly checked shipment, containing IRS data was audited by the non-profit. After Public.Resource.org notified the IRS of the breach, the entire database containing all affected information was taken offline.

Who was Affected?

According to FoxNews.com, donors were primarily affected by this leak. Individuals who prepared tax returns for the 527 political organizations were also impacted to a lesser degree. But with so many individuals’ information leaked, virtually anyone could be affected because 527 political organizations are quite prolific. These organizations can and do lobby and influence the political process on a local, county, state and national level including, but not limited to policy, voting, legislation and elections.

What Does it Mean?

There are multiple implications from this data breach. The IRS might lose even more credibility with the American public after suffering setbacks with other recent scandals. Congress members are already calling for an investigation to understand why it happened, what measures will be taken to ensure it doesn’t happen again and what parties will be held accountable.

Potential donors, tax preparers and anyone else affected by the information breach will need to find out if they have been affected. Individuals will have to take precautionary measures to minimize chances of identity theft. Donors may also limit contributions to these organizations to $200 or less, as a way to prevent future information leaks, because IRS regulations require reporting donors’ names for contributions of $200 or more.

Many believe the IRS will continue to face scrutiny because this new scandal compounds and further erodes the IRS’ competence and credibility. Donors and tax preparers are definitely less likely to donate to 527 political organizations because they don’t want to risk future publications of their sensitive information.

Photo: FDR Presidential Library & Museum