(2) Information contained on returns and/or the instructions accompanying the returns advising taxpayers of the ADP processing of the return. One of the principal forms of this advice is the request that the taxpayer use the preaddressed mailing label in filing his return, or use the pre-addressed return because it will facilitate the master file processing of the return. (3) Receipt of bills, math error notices, refund notices, notices of offsets of overpayments to underpayments, assessments, abatement notices, etc., emitted from the files whenever contact with the taxpayer is required to settle his tax account. (4) Publicity continuously emitted by the Service. (B) On all notices, etc., sent to taxpayers, provision is made for the taxpayer to use the notice as a turn-around document to correct or reply to any inaccurate master file data contained therein. The only limitations to this are the reviews of these replies as to correctness and accuracy. If the reply data is accurate, the necessary file changes are made. Question 11.-What aspects of the recorded data are available to other persons? Who, specifically? For what purpose? By what authority? Answer. Please see the attached fact sheets (Attachment 4) and Treasury Regulations regarding disclosure of official information (Attachment 5). Question 12.-Is a record maintained of each inspection or use of the individual's record? Answer.-No record is maintained on the master files of each "inspection" or use of a taxpayer record. However, no other Federal agency or local government has access to this data except through approved formal requests as described for Question #9. Files of the request are kept in the National Office and/or the IR Service Centers and Regional offices of IRS. Question 13.-For each data bank, please indicate how the information is collected, whether it is solicited from the individual, from third persons, or from existing records. Answer.-Most of the data on the Master Files are derived directly from the taxpayers themselves from the data they place on their tax returns. Other sources are: (1) Assessments, collections and adjustments made by Revenue Officers. (2) Assessments, abatements, and collections made by Audit Examining Officers or Intelligence Special Agents. Limited data on the reasons for such actions are also noted on the master files. (3) Adjustments made by Internal Revenue Service Centers as a result of a taxpayer communication or quality review made by Service Centers. Examples of these are payments posted to the wrong tax account, changes of name, address, T.P. Account Number, etc. Question 14.-What officials in your agency are responsible for determining the accuracy of information in the data bank? What provisions are made, procedurally, for deleting information found to be inaccurate or inappropriate, either on the initiative of the agency or on motion of the individual? Answer. Officials responsible for determining accuracy of information on Master Files are: (1) Service Center Directors, who administer programs for checking returns and perfecting data. The Service Center Director is responsible for the review of refunds, bills, taxpayer communications, etc., and the correction of Master File data found to be incorrect. (2) Internal Audit personnel, who make constant checks of the master files to insure their operations conform to the IR Code, IR Regulations and IR Policy Statements. (3) Revenue Officers. Revenue Agents, Intelligence Special Agents. Data on the Master Files found inaccurate can be reversed and corrected. Since money transaction records are accounting records, they are not deleted but reversed and corrected so as to have an audit trail in accordance with sound accounting practice. Other data (name, address, etc.) are corrected with the old data deleted. Question 15.-What other agencies have access to information or use of information in each data bank? Answer. A transcript of the status of a taxpayer's account, as reflected on the Individual Master File (IMF), is furnished to the Department of Justice, upon request of a proper officer thereof, when that information is pertinent to tax litigation between the taxpayer and the Government. Federal agencies other than IRS are never permitted direct access to the IMF. With respect to Federal agencies and Congressional Committees which have authority to inspect individual income tax returns-pursuant to Executive Orders issued under the authority of 26 U.S.C. 6103 (a)—the Commissioner of Internal Revenue may, at his discretion, furnish information contained on the IMF concerning such taxpayers to the requesting agency, i.e., he may furnish information on the IMF to the requesting agency in instances where the agency has the right to obtain that same information by inspecting the particular individual income tax return. For example, in responding to a request for the current address of a taxpayer, IRS extracts that information from the IMF rather than by "looking up" the latest filed return itself. Please see Attachment 4 for a discussion of limitations to access and use of the information by other agencies. Question 16.-What states and federal agencies may utilize the data in your computerized files by coding, interfacing and other devices relating to their own computers? Answer. In accordance with statute and regulation, states and federal agencies may so utilize this data subject to limitations. Please see Attachments 4 and 5. Question 17.-What security devices and procedures are utilized to prevent: (a) unauthorized access to the data file: and (b) improper use of the information? Answer. (a) The data files are now contained in masonry, non-combustible type buildings, protected in general by such measures as: chain link fencing, armed guards, electronic intrusion detection systems monitored by facility guards and by remotely located protection contractors for back-up and continuity, and a fulltime Protective Programs Officer who has direct responsibilities for overall protection of the facility. In addition, all persons entering the buildings are controlled by a colored-coded identification badge system. This system is monitored by employees, supervisors and the guards to ensure admittance is limited to authorized persons, and to assist in control over internal movement within the building. The data files themselves are located in restricted areas to which access is limited. (b) The restrictions contained in the Treasury disclosure regulations (Attachment 5) limit inspection of this data to those whose use of this information would be "proper". Additionally, Internal Revenue Service procedure requires that a statement concerning the penalty provisions relating to unauthorized disclosure of official information be affixed to each reel of tape, and grouping of microfilm copies, abstracts, transcripts, etc., that is furnished to persons outside of the Service. See Notice 129 (Attachment 6). Letters of transmittal call attention to the affixed legend. The penalty provisions of 26 U.S.C. 7213 and 18 U.S.C. 1905 serve as deterrent to improper use of data. [Omitted.] It is a procedure of the Service to include in transmittal letters a request that copies or data furnished (along with any copies made therefrom by the requestor) be returned to the IRS office furnishing the copies or data, when such has served their purpose. Delivery of the information is to be accomplished by arrangements to deliver the documents in person, or if mails are to be used, the mailing envelope is to be marked "To Be Opened by Addressee Only." IRS procedures provide that: (1) The requesting agency be asked to advise the IRS office furnishing the copies, if the copies are to be retained as a record in an official hearing or in a trial. (2) If the data is to be destroyed (or erased) after it has served its purpose, the requesting agency is to be asked to notify the IRS office furnishing the data when the destruction has been accomplished. (3) The requesting agency should notify the IRS office furnishing the data, if the data is to be furnished for statistical purposes and retained indefinitely. Question 18.-What formal or informal arrangement does the Treasury Department have with congressional committees for the authorizing and reviewing of new data banks and the clearance of new electronic or mechanized record-management techniques? Answer. All new plans of this nature are discussed with the House and Senate Subcommittees on Appropriations. Question 19.-(A) Have any data programs or the development of other comprehensive records systems been discussed before other congressional committees by Treasury Department representatives? (B) Have any been specifically approved by Congress or congressional committees? (C) If so, would you please supply any available testimony, or citations to such hearings? Answer. The Internal Revenue Service has participated in discussions of this nature with the House and Senate subcommittees on Appropriations. Additionally, representatives of the Service have appeared before the Ways and Means Committee of the House of Representatives when Numbering Legislation on the use of social security numbers in the ADP System was discussed. 20-550 O 74 pt. 59 At various other times, the Commissioner and his representatives appear before the Ways and Means Committee of the House and the Senate Finance Committee on tax matters. During such appearances, data banks could be discussed. INTERNAL REVENUE SERVICE STATISTICS OF INCOME MICROFILM FILE (INDIVIDUALS) Date Response Prepared.-February 2, 1973 Class of File.-All other files File Control No.-IR-02 File Medium.-Microfilm National Security Classification.-None. (1) Describe briefly the major categories of data on individuals presently maintained and stored under auspices of the Treasury Department and its agencies and the approximate number of subject individuals covered in each category. The Statistics of Income Microfilm File, Individuals is a file of tax returns, associated schedules and attachments filed by individual taxpayers and statistical abstract sheets prepared by Internal Revenue Service personnel on the basis of the tax return information supplied. There is a total of approximately 32,000 returns, or about 4,000 for each tax year 1963 through 1970. For tax years 1963 through 1966 the file is comprised of all the tax returns with adjusted gross income of $500,000 or over (these number about 2,000 returns each year) and the remainder a random subsample of the total Statistics of Income Sample. For tax year 1967 the proportion of returns with adjusted gross income of $500,000 or over was reduced to a random 50%, totaling about 1,000 returns and the remainder of the file was a random subsample of the Statistics of Income file. For tax years 1968 through 1970 the microfilm subsample is comprised of a random 1.5% of the total Statistics of Income file. This file is used by Statistics Division and other Treasury Department personnel for specific purposes such as pilot studies, small scale studies of taxpayer reporting habits and in depth studies of statistical error conditions occurring during statistical processing. (2) Under what statutory and administrative authority was each data bank established and for what purposes? Please supply copies of pertinent federal statutes, regulations and memoranda on which this authority is based and by which it is implemented. Authority for keeping records.—44 U.S. Code, Sec. 3101 et seq. [Omitted.] Authority for automation.-Treasury Department Administrative Circular No. 73-Management of Automatic Data Processing, dated June 27, 1962 [Omitted.] Authority for publishing statistics.-26 U.S. Code Sec. 6108, which reads as follows: "SEC. 6108 PUBLICATION OF STATISTICS OF INCOME "The Secretary or his delegate shall prepare and publish annually statistics reasonably available with respect to the operation of the income tax laws, including classifications of taxpayers and of income, the amounts allowed as deduction, exemptions and credits, and any other facts deemed pertinent and valuable." (3) Are Treasury Department controls, guidelines, or advice required by or offered to state officials and private individuals who either administer or who utilize this data-gathering program? Please supply copies of pertinent rules or advisory documents as issued by federal and state agencies. The Statistics of Income microfilm file, since it contains copies of tax returns is subject to the Internal Revenue Code provisions concerning the confidentiality of information contained in tax returns. These provisions prevent private individuals from either administering or utilizing such a file. In the case of State officials, who are not so prevented, the controls, guidelines or advice would be the same as those presently required and offered for all Internal Revenue Service data systems based on tax returns. (4) For each category and each conglomerate of data, indicate its present state of computerization or other mechanization for access and retrieval as well as for evaluation and analysis. Access to the microfilm file is not mechanized, but is through the use of a card file for each tax year, maintained in Social Security Number sequence and indexed by the number of the reel of film on which the return appears. (5) Describe plans for further computerization or mechanization in each program. There are no such plans. (6) In what instances would each system be utilized? By what officials and by what agencies? Not applicable (see answer to Question 5). (7) For each new data storage and processing program, please describe: (a) the advantages; and (b) the extent to which it permits correlating, common storage and multi-faceted analysis of data on a scale not hitherto available. Not applicable (see answer to Question 5). (8) What specific subject areas concerning an individual's background, personal life, personality and habits are noted in each data program? The Statistics of Income Microfilm File consists of information submitted by individuals on their tax returns, in general: name and address, Social Security Number, income by source, number and type of exemptions, deductions, tax. (9) Has the Treasury Department and its component agencies developed comprehensive guidelines governing maintenance of any or all the various data systems, access to them, review and disclosure of material in them, and distribution of data to other agencies? If so, please supply copies. The Statistics of Income data system is governed by the same guidelines which have been developed for other Internal Revenue data systems containing information from tax returns. (10-A) Is the subject individual or his representative notified of the fact that he is in the data bank? (B) Is he allowed to review the data on record about him; to supplement his file; or to explain or rebut inaccurate material? Please describe the precise limitations on such rights for each restriction. The following response, also furnished in our report on the Master File, is applicable to this file as a derivative of the Master File: (A) Taxpayers are notified of their inclusion in the Master Files by: (1) Receipt of a blank return form mailed out from processing the files. (2) Information contained on returns and/or the instructions accompanying the returns advising taxpayers of the ADP processing of the return. One of the principal forms of this advise is the request that the taxpayer use the preaddressed mailing lable in filing his return, or use the pre-addressed return becaue it will facilitate the master file processing of the return. (3) Receipt of bills, math error notices, refund notices, notices of offsets of overpayments to underpayments, assessments, abatement notices, etc., emitted from the files whenever contact with the taxpayer is required to settle his tax account. (4) Publicity continuously emitted by the Service. (B) On all notices, etc., sent to taxpayers, provision is made for the taxpayer to use the notice as a turn-around document to correct or reply to any inaccurate master file data contained therein. The only limitations to this are the reviews of these replies as to correctness and accuracy. If the reply data is accurate, the necessary file changes are made. (11) What aspects of the recorded data are available to other persons? Who, specifically? For what purpose? By what authority? The microfilm file is available for statistical purposes but only to those who by law and Executive Order of the President are permitted to inspect tax returns. (12) Is a record maintained of each inspection or use of the individual's record? A record is maintained of each inspection or use of the microfilm file by authorized persons other than Treasury Department personnel. (13) For each data bank, please indicate how the information is collected, whether it is solicited from the individual, from third persons, or from existing records. The microfilm file consists solely of information furnished by individual taxpayers on their tax returns. (14) What officials in your agency are responsible for determining the accuracy of information in the data bank? What provisions are made, procedurally, for deleting information found to be inaccurate or inappropriate, either on the initiative of the agency or on motion of the individual? The Director of the Statistics Division and his staff are directly responsible for the statistical accuracy of the information in the Statistics of Income file. To insure statistical accuracy there is in effect a quality control system applicable to the various statistical processing stages. The system provides in varying degrees, depending on the processing stage, for the correction of statistically inaccurate data as well as for the elimination of systemic irregularities that may give rise to such inaccuracies. (15) What other agencies have access to information or use of the information in each data bank? The Federal and State agencies which by law and Executive Order are permitted to inspect tax returns have access to the Statistics of Income file. Please see attachment to our report on the Master File (IRO1) (Attachment #5) for a discussion of limitations to access and use of the information. (16) What states and federal agencies may utilize the data in your computerized files by coding, interfacing and other devices relating to their own computers? See answer to Question 15. (17) What security devices and procedures are utilized to prevent: (a) unauthorized access to the data file; and (b) improper use of the information? The microfilm files are kept in a restricted area in the Statistics Division and safeguarded by the same procedures applicable to original returns. The same penalties regarding unauthorized disclosure apply. Treasury personnel authorized to have access to tax returns may use the microfilm files by requesting access to them through the head of the Statistics Division organizational unit (Operations and Records Section) having custody of the file. (18) What formal or informal arrangement does the Treasury Department have with congressional committees for the authorizing and reviewing of new data banks and the clearance of new electronic or mechanized record-management techniques? All new plans of this nature are discussed with the House and Senate Subcommittees on Appropriations. (19-A) Have any data programs or the development of other comprehensive records systems been discussed before other congressional committees by Treasury Department representatives? (B) Have any been specifically approved by Congress or congressional committees? (C) If so, would you please supply any available testimony, or citations to such hearings? The Internal Revenue Service has participated in discussions of this nature with the House and Senate subcommittees on Appropriations. Additionally, representatives of the Service have appeared before the Ways and Means Committee of the House of Representatives when Numbering Legislation on the use of social security numbers in the ADP System was discussed. At various other times, the Commissioner and his representatives appear before the Ways and Means Committee of the House and the Senate Finance Committee on tax matters. During such appearances, data banks could be discussed. INTERNAL REVENUE SERVICE STATISTICS OF INCOME TAPE FILE (INDIVIDUALS) Date Response Prepared.-December 23, 1971 (Updated April 16, 1973) File Control No.-IR-03 File Medium.-Magnetic Tape National Security Classification.-None (1) Describe briefly the major categories of data on individuals presently maintained and stored under auspices of the Treasury Department and its agencies and the approximate number of subject individuals covered in each category. The individual Statistics of Income file consists of records on magnetic tape of from 254,000 to 473,000 individual income tax returns for the years 1974 through 1971. Each record represents either one individual or a husband-wife combination on a joint return. Each contains a Social Security Number identifying the taxpayer(s); coded personal information from the return, such as marital status, number of exemptions for self and wife, number of exemptions for children, etc.; and economic and tax administration data such as taxable income and income tax, sources of income in detail, including complete profit-and-loss statements for business and farms, and itemized deduc tions. |