Tax Nightmares

If the mere act of filing your annual tax return isn't unsettling enough, here's something else to keep you tossing at night: The Internal Revenue Service is doing a lousy job of protecting your annual filings, including your payments and your personal information.

That's the conclusion of a recent General Accounting Office study that documents how the IRS screws up in some astounding ways. During peak filing months, for instance, the agency hires thousands of temps to handle millions of dollars worth of receipts but doesn't get background check results until well after the workers are gone. Between 1995 and 1997, says the GAO, 12 thefts at IRS service centers were committed by temps with arrest records. The GAO also notes that one district office used a bike messenger to deliver daily deposits of up to $100 million. Another courier reportedly left a deposit of more than $200 million unattended in an open vehicle.

So what does this mean to the taxpayer? The GAO warns you can get hurt by this lax tax system in two basic ways. First, your payments can be stolen by check cloning operations (that's what happened when a bad employee sent checks to members of a New York crime ring). Second, criminals can use your sensitive personal information--bank account numbers, addresses, signatures, and Social Security numbers--to perpetrate identity fraud. Pleasant dreams.