GAO says IRS was vulnerable to hackers

The U.S Internal Revenue Service failed to implement adequate security to protect online tax filers' data during the 2000 filing season, concludes a new report from the government's watchdog agency.

Neither the IRS' electronic filing system nor its electronically transmitted tax return data were secure from being viewed or tampered with, according to the new report released Thursday by the U.S. General Accounting Office (GAO). GAO officials were able to show that unauthorized users internally and externally to the IRS could gain access to the IRS' electronic filing systems, the report states.

IRS officials plugged the holes in the IRS tax filing system security prior to this year's tax filing season.

"As noted by the GAO, there were some e-filing areas that needed strengthening during last year's filing season," IRS Commissioner Charles O. Rossotti, said in a statement. "When the findings came to our attention, the IRS moved swiftly to implement these changes."

The IRS has completed action on all critical security areas recommended by the GAO, Rossotti said. In January of this year, the IRS system reached full-security certification under federal government guidelines, he said.

During 2000, the IRS reported that more than 35 million individual taxpayers, about 20% more than the year before, filed their returns electronically with the IRS' e-file program. The number represents about 28% of all individual returns for the 2000 filing season, the GAO said.

The IRS has a goal of receiving 80% of all tax returns electronically by 2007. The IRS only takes online returns through authorized tax preparers working with the IRS, like H&R Block.

The GAO report makes five critical points about the IRS' security during 2000.