Privacy Impact Assessment – Electronic Data Exchange Pilot Project (EDS)
EDS System Overview
The IRS provides extracts of data from its master files to state tax agencies under the authority of 26 USC 6103(d). These extracts are currently provided on media such as magnetic tape reels or magnetic tape cartridges.
The purpose of the electronic data exchange pilot is to identify and test a means to transmit the extract data to states electronically. The pilot will involve several states and a few extracts to be determined by a planning committee. If successful, it is envisioned that electronic delivery of the data will be offered to all eligible states and used to transmit all appropriate data extracts.
This project does not anticipate that direct access to or retrieval of data from IRS systems will be afforded to state tax agencies. Stated simply, the current process of delivering data via shipments of magnetic media will be replaced with an electronic transfer of the same data.
System of Record Numbers (SORN)
Treasury/IRS 24.030 – CADE Individual Master File (IMF)
Treasury/IRS 22.061 – Information Return Master File (IRMF)
Treasury/IRS 42.008 – Audit Information Management System File
Treasury/IRS 44.003 – Appeals Centralized Data System File
Treasury/IRS 24.046 – CADE Business Master File (BMF)
DATA IN THE SYSTEM
1. Describe the information (data elements and fields) available in the system in the following categories:
A. Taxpayer – The data elements and fields provided to states through the Governmental Liaison Data Exchange program are described in detail in data specifications books that are created each year for each data extract. The most current information for each extract is as follows:
a) Extract Year 2002 Individual Master File (IMF)/Individual Return Transaction File (IRTF) Extract Specifications Book – Document 6501-I (Rev. 7/2002)
b) Extract Year 2002 Business Master File (BMF)/Business Return Transaction File (BRTF) Extract Specifications Book – Document 6501-B (Rev. 7/2002)
c) Tax Year 2000 Information Returns Master File (IRMF) Extract Specification Book – Document 9239 (Rev. 5/2002)
d) Tax Year 2000, CP 2000 Extract Specification Book – Document 9120 (Rev. 4/2002)
e) Tax Year 2001 Levy Extract Specification Book – Document 9244 (Rev. 5/2002)
f) 2001 Fiscal Year EXAM/APPEALS Extract Specification Book – Document 9199 (Rev. 3/2002)
g) Extract Year 2003 Taxpayer Address Request (TAR) Extract Specification Book – Document 9173 (Rev. 12/2002)
h) Extract Year 2003 Preparer Tax Identification Number (PTIN) Extract Specification Book (Rev. 11/2002)
i) Extract Year 2002 Non-Itemizer Extract Specification Book – Document 9137 (Rev. 8/2002)
j) Tax Year 2000 1099 – MISC Extract Specification Book (Rev. 4/2002)
B. Employee – There is no employee data in the system.
C. Audit Trail Information – There is no audit trail data in the system.
D. Other - None
2. Describe/Identify which data elements are obtained from files, databases individuals, or any other sources.
A. IRS
a) Individual Master File - IMF/IRTF Extract, TAR Extract, Non-Itemizer Extract
b) Business Master File - BMF/BRTF Extract
c) Information Return Master File - IRMF Extract, CP2000 Extract, Levy Extract, 1099-MISC
d) Audit Information Management System - Exam/Appeals Extract
e) Appeals Information Management System - Exam/Appeals Extract
f) PTIN Cross Reference Database - PTIN Extract
B. Taxpayer – IMF, BMF, IRMF and PTIN files are created primarily from tax returns and other documents filed by individual and business taxpayers.
C. Employee – There is no data obtained from employees.
D. Other Federal Agencies – One data element on the IMF/IRTF extract, dates of birth & death of the primary and secondary taxpayers, is obtained from the records of the Social Security Administration.
E. State and local agencies – None.
F. Other third party sources – None
3. Is each data item required for the business purpose of the system?
Each data element in the extract program is necessary for and used by state tax agencies for tax administration purposes. Agencies enroll in the exchange program annually and describe their need for specific data elements as part of the enrollment process. In addition, field disclosure officers conduct annual “need and use” reviews to verify that the data elements are actually used for the purpose of state tax administration.
4. How will each data item be verified for accuracy, timeliness, and completeness?
All of the data elements to be shared with states are subject to accuracy checks and verification methods inherent in tax return and information return processing. Additionally, data elements are verified and updated through IRS contacts with taxpayers during tax compliance activities or based on contacts initiated by taxpayers. As most extracts are created and delivered annually, with some delivered as frequently as weekly, the data elements are provided and used in a timely manner and data elements in the hands of state tax agencies are replaced with current information on a regular basis.
5. Is there another source for the data? Explain how that source is or is not used.
There is no other source for the data IRS shares with state tax agencies.
6. Generally, how will data be retrieved by the user?
There is no direct retrieval of data from IRS systems afforded to state tax agencies through the IRS Governmental Liaison Data Exchange Program. The current process of delivering data via shipments of magnetic media will merely be replaced with an electronic transfer of the same data.
7. Is the data retrievable by a personal identifier such as name, SSN, or other unique identifier?
As stated above, there is no direct retrieval of data from IRS systems. Data provided to state tax agencies are created by extracting information from IRS files in three ways:
a) by state code for a particular state,
b) by specific zip codes provided by the state tax agency,
c) by Social Security Numbers and/or Employer Identification Numbers provided by the state tax agency. Name controls are also submitted.
Note: One extract, the PTIN Extract, consists of the nationwide file of Preparer Tax Identification Numbers. An updated file is provided to participating states on a monthly basis.
ACCESS TO THE DATA
8. Who will have access to the data in the system?
Access to Federal tax data in the hands of state tax agencies is limited to those employees who have a need to know the information in connection with the administration of state tax laws. The data is protected from unauthorized disclosure in accordance with the safeguard provisions of IRC 6103(p)(4). IRS Disclosure personnel conduct periodic safeguard reviews of the state tax agencies to assess their adherence to the safeguard provisions.
9. How is access to the data by a user determined and by whom?
Once the data has been provided to state tax agencies, access is determined by state tax agency management subject to the “need to know” and safeguard limitations discussed above.
10. Do other IRS systems provide, receive, or share data in the system? If yes, list the systems and describe which data is shared.
Item # 2 lists the IRS files from which state data extracts are created. The Specification Books listed in Item #1 contain detailed descriptions of the data.
11. Have the IRS systems described in Item #10 received an approved Security Certification and Privacy Impact Assessment?
The systems from which data is extracted constitute IRS’s primary master files. Security and Privacy issues concerning these files can be obtained from the file owner.
12. Will other agencies provide, receive, or share data in any form with this system?
The IRS Governmental Liaison Data Exchange Program is designed to share Federal tax information with state tax agencies. Redisclosure of Federal tax information provided to state tax agencies is subject to the limitations of IRC 6103.
ADMINISTRATIVE CONTROLS OF DATA
13. What are the procedures for eliminating the data at the end of the retention period?
Detailed instructions concerning the disposal of federal tax information after its use are contained in IRS Publication 1075.
14. Will this system use technology in a new way?
Yes, the pilot program will be the first time that IRS data extracts have been provided to states via an electronic method of delivery.
15. Will this system be used to identify or locate individuals or groups? If so, describe the business purpose for this capability.
The IRS extract data, in the hands of the state tax agencies, can be used to identify or locate individuals or groups. This capability currently exists when states obtain IRS extracts via magnetic media shipments. It is necessary for the states to administer their tax laws. The new delivery method will create no new capabilities for state participants.
16. Will this system provide the capability to monitor individuals or groups?
If yes, describe the business purpose for this capability and the controls established to prevent unauthorized monitoring. As mentioned above, state tax agencies can use the IRS extract data for any legitimate state tax administration purpose, including the monitoring of individuals or groups. State controls to prevent all unauthorized access to the data and unauthorized uses of the data have been established, reviewed and approved by IRS field disclosure personnel.
17. Can use of the system allow IRS to treat taxpayers, employees or others, differently?
No. Use of an electronic delivery method will have no effect on IRS’s treatment of taxpayers, employees, or others.
18. Does the system ensure “due process” by allowing affected parties to respond to any negative determination, prior to final action?
Electronic delivery of the IRS extract data will have no effect on any affected party’s current ability to respond to negative determinations prior to final action. Taxpayers who face state tax compliance or enforcement activity as a result of a state tax agency’s use of electronically delivered IRS extract data, will have the same rights and remedies available under state law as they had in the past.
19. If the system is web-based, does it use persistent cookies or other tracking devices to identify web visitors?
The system is not web-based.
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