Twenty-six IRS computer tapes containing taxpayer information are missing after they were delivered to City Hall months ago.
Kansas City is one of hundreds of governmental entities that share taxpayer information back and forth with the Internal Revenue Service. City officials use the federal tax return information to enforce their collection of the 1 percent city earnings tax, which is paid by people who live or work in Kansas City.
City and IRS officials on Thursday either would not or could not say exactly what information is on the tapes or the number of taxpayers whose information is on the tapes.
But the information potentially could include taxpayers’ names, Social Security numbers and bank account numbers, or they could contain employer information.
The tapes require special equipment to read and software that is not commonly used, so the average person could not access the information, said Assistant City Manager Rich Noll.
“We have no reason to believe there was any foul play,” Noll said, although he added he could not rule it out.
Special agents with the Inspector General’s office of the Treasury Department, along with city officials, are investigating the missing tapes, Noll said.
Several Kansas City Council members said Thursday that they had been briefed on the missing tapes but that the matter was too sensitive for them to comment further.
A tax lawyer with Shook Hardy & Bacon said the matter was potentially serious.
“Anytime taxpayer information is lost, taxpayers need to be concerned,” said attorney Stan Weiner. “They don’t want this (taxpayer) information to be readily available.”
Weiner said the IRS by law cannot make unauthorized disclosures of taxpayer information. It has strict agreements with other taxing authorities such as Kansas City designed to safeguard that information.
The city receives shipments of tapes periodically throughout the year, Noll said. The 26 missing tapes were an entire shipment the city received last August.
Noll said he became aware of the disappearance in late December. He said the city was supposed to have the tapes for a specific period of time, but they apparently were not returned to the Treasury Department in a timely manner, triggering the investigation.
“We are cooperating in every way we can,” Noll said. “We are continuing to search every avenue.”
Employees in the city’s Office of Management and Budget and the Finance Department were sent home early on Jan. 3 and their offices were searched, but the tapes were not found.
Noll said he did not think the tapes contained images of tax forms. He said he did not think there was significant risk that sensitive taxpayer information had been inappropriately released, but he could not say there was no risk.
When asked why the city couldn’t provide more information about what type of information was missing, city spokeswoman Mary Charles said the city had never received this type of tape before.
“The tapes were never reviewed, so we don’t know what’s on there,” she said.
The trail of where the tapes went in City Hall is what is under investigation, Charles said. There is no documentation to show that the tapes ever reached the Finance Department, where they would have been reviewed.
Charles said the IRS knows what information is on the missing tapes, but Michael Devine, IRS spokesman in St. Louis, did not provide any details. Devine provided general information stating that the IRS and other taxing agencies share information to enhance voluntary compliance with tax laws. The IRS has strict rules about the agencies keeping that taxpayer data confidential.
The federal tax return information that is shared includes everything pertaining to a person’s potential tax liability, such as the taxpayer’s name, names of dependents, mailing address, identification number and bank account information. But it was not clear whether any of that information was on the missing tapes.
The city has taken steps to ensure the security of the rest of its taxpayer information, Noll said.
The city has received certification in the past attesting to its adequate security measures, Charles said.
Kansas City has had an earnings tax for decades and has exchanged taxpayer information with the IRS during that time, but Noll said he knew of no other instance of missing information.
Noll would not say whether any employees had been disciplined over the missing tapes.
Lost data
Concerns about government handling of sensitive information has heightened in recent years.
A U.S. House committee reported in October that federal workers at 19 agencies had lost personal information affecting thousands of people. In most of the 788 incidents since January 2003, the information was lost or stolen.
That was in addition to “hundreds of security and privacy incidents” at the Department of Veterans Affairs, the committee said.