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Information Returns Processing

Privacy Impact Assessment-Information Returns Processing (IRP)

System Overview:

The Information Returns Processing (IRP) System receives data submitted by employers and other third parties (payers) reporting taxpayer income such as wages, pensions, interest and dividends paid during the tax year. This information is validated and stored in the Information Return Master File (IRMF).  IRP also has two Correlation projects which attempts to match income reported on information returns against income reported by taxpayers on their individual income tax returns.  If no match is discovered, the potential NON FILER cases are referred to Collection for possible action.  If the match discovers sufficient under reported income an UNDERREPORTER case is created and routed to Examination function for follow-up.

System of Record Notice:
Treasury/IRS 22.061 Information Return Master File (IRMF)

Data in the System

1. Describe the information (data elements and fields) available in the system in the following categories:
A. Taxpayer-Taxpayer Income paid to an individual or organization for a given tax year.Each reporting includes two entities, the taxpayer (payee) whose income is being reported and the entity (payer) reporting the information. This information is reported using a variety of forms (see below) and include information such as wages, dividends, interest, cash payments, shareholder income, etc., and information to identify both the payee and payer (name, TIN and address).
The payee data is stored in the Information Returns Master File (IRMF). The information pertaining to the transmittal of these reports, including payer identity, number and type of reports and amounts of income.
B. Employee-N/A
C.  Audit Trail Information-Master files by definition do not have an audit trail.  They are defined as having interfaces to systems that maintain their own audit trails.  There is no direct access to IRP data. All access is through batch files. The data viewed by authorized IRS employees is a copy of the IMF data loaded into any of a number of other systems that have a user interface. These systems maintain the authentication and authorization required, including the use of audit trail information.
D. Other-Each reporting includes two entities, the taxpayer (payee) whose income is being reported and the entity (payer) reporting the information. This information is reported using a variety of forms (see below) and include information such as wages, dividends, interest, cash payments, shareholder income, etc., and information to identify both the payee and payer (name, TIN and address).
The payee data is stored in the Information Returns Master File (IRMF). The information pertaining to the transmittal of these reports, including payer identity, number and type of reports and amounts of income.

2. Describe/identify which data elements are obtained from files, databases, individuals, or any other sources.
IRS-The data is reported by the payer on various forms and schedules (F1096, F1042, F1098, F1099, Sch K-1, F5498, F8300 and F8362).  Social Security Administration provides the data reported on W-2s.  Customs Service reports International Transportation of Currency or Monetary Instruments (CMIR).
IRP connects to the following systems:
Automated Underreporter (AUR),
Automated Collection System (ACS),
Automated Substitute for Return (ASFR),
Audit Trail Lead Analysis System (ATLAS),
Federal Employee/Retiree Delinquency Initiative (FERDI),
Audit Information Management System (AIMS),
Taxpayer Information File (TIF),
Individual Master File (IMF),
Business Master File (BMF),
Generalized Mainline Framework (GMF),
Generalized Unpostable Framework (GUF)

Taxpayer- The data is reported by the payer on various forms and schedules (F1096, F1042, F1098, F1099, Sch K-1, F5498, F8300 and F8362).

Employee-N/A

Federal Agencies-Social Security Administration provides the data reported on W-2s.

Other-Environment Protection Agency,Customs Service.Department of Justice,Department of Housing and Urban Development.Financial Management Service,U.S. Secret Service,Federal Emergency Management Agency,U.S. Department of Agriculture,Department of Defense: Defense Manpower Data Center,Department of Health and Human Services: Centers for Medicare & Medicaid Services,Health Care Financial Administration,Department of Labor,Department of Energy,Department of Interior,State of Arkansas

3. Is each data item required for the business purpose of the system?  Explain.
Yes. The name, TIN and address are required to identify the recipient of the income. The amount of income is required for various document matching compliance programs (non-filing and under reporting).

4. How will each data item be verified for accuracy, timeliness, and completeness? Validate of SSA data is a joint effort between SSA and IRS.
IRS monitors the compliance of payers required to report income for accuracy, timeliness and completeness. This payer compliance program works to bring payers into compliance, but has the authority to assess penalties for each information return reported with errors.

5. Is there another source for the data?  Explain how that source is or is not used. No

6. Generally, how will data be retrieved by the user?
The IRP system performs analysis and case building processing. This inventory of cases can be accessed via IDRS, which maintains an audit trail using ATLAS.
External case management systems (primarily Automated Underreporter, Automated Collection System and Automated Substitute for Return) extract information to establish a working inventory for specific compliance activities. These systems are responsible for maintaining their own security and audit trails.
Ad hoc queries for specific TINs, names or addresses can be entered thru IDRS command codes. These command codes are available only to authorized users and each query is recorded by ATLAS.

7. Is the data retrievable by a personal identifier such as name, SSN, or other unique identifier?
Yes,Each reporting includes two entities, the taxpayer (payee) whose income is being reported and the entity (payer) reporting the information. This information is reported using a variety of forms (see below) and include information such as wages, dividends, interest, cash payments, shareholder income, etc., and information to identify both the payee and payer (name, TIN and address).
The payee data is stored in the Information Returns Master File (IRMF). The information pertaining to the transmittal of these reports, including payer identity, number and type of reports and amounts of income.

Access to the Data

8. Who will have access to the data in the system (Users, Managers, System Administrators, Developers, Others)? Authorized IRS program developers, as well as IRS organizations developing managerial and statistical reports. IRS personnel use only IRS-owned laptops and equipment to perform their duties.  All IRS personnel have proper security clearance and are subject to all organizational policies and procedures regarding access to the application and data. 

9. How is access to the data by a user determined and by whom? Data access is granted on a need-to-know basis.  A potential user must submit a request for access form (Form 5081) to their local management for approval consideration. Users are not permitted access without a signed 5081 form from an authorized management official.

10. Do other IRS systems provide, receive, or share data in the system?  If YES, list the system(s) and describe which data is shared.  If NO, continue to Question 12. Yes, Automated Underreporter (AUR),Automated Collection System (ACS),Criminal Investigation (CI),Examination (EXM),Automated Substitute for Return (ASFR),Audit Trail Lead Analysis System (ATLAS),Federal Employee/Retiree Delinquency Initiative (FERDI),Audit Information Management System (AIMS),Taxpayer Information File (TIF),Individual Master File (IMF),Business Master File (BMF),Generalized Mainline Framework (GMF),Generalized Unpostable Framework (GUF)

11. Have the IRS systems described in Item 10 received an approved Security Certification and Privacy Impact Assessment?
The mainframe system that provides the processing and storage capabilities for the tax processing system, including the Information Returns Processing System (IRMF), as well as Business Master File (BMF), Individual Master File (IMF),  is preparing to under go security testing and is expected to receive certification later this year.

12. Will other agencies provide, receive, or share data in any form with this system? The Social Security Administration (SSA) exchanges W-2 data with the IRS. As we validate and update data, we share those changes with SSA.
The Census Bureau receives an annual extract of data to use as test data for their system.Other Governmental agencies have been invited to participate in the bulk validation of entity information. Currently fifteen Memoranda of Understanding are in effect. These are:Environment Protection Agency,Customs Service,Department of Justice,Department of Housing and Urban Development,Financial Management Service,U.S. Secret Service.Federal Emergency Management Agency,U.S. Department of Agriculture, Department of Defense: Defense Manpower Data Center.
Department of Health and Human Services: Centers for Medicare & Medicaid Services,Health Care Financial Administration,Department of Labor,Department of Energy,Department of Interior. In addition, IRP is mandated by law [IRC § 6103(d)] to share Federal Tax Information (FTI) with States for the purposes of tax administration.  These data extracts are sent first to IRS’s Office of Government Liaison, who insures that all external trading partners are authorized and that they adhere to all appropriate guidelines related to safeguarding Taxpayer Information. 

Administrative Controls of Data

13. What are the procedures for eliminating the data at the end of the retention period? Annual processing updates the active file, removing records beyond the retention period. The Information Returns Master File (IRMF) maintains a current year file and a prior year file, which consists of the five tax years immediately proceeding the current tax year. Each year a new prior year file is created. This is accomplished by dropping the oldest of the five prior years and adding in what had been the current year. This processing is document in PRP 404-019.
IRP follows the policy detailed within IRM 1.15.29, exhibit 1.15.29-1 Item No. 75 & 223 for data elimination.

14. Will this system use technology in a new way?  If "YES" describe.  If "NO" go to Question. No

15. Will this system be used to identify or locate individuals or groups?  If so, describe the business purpose for this capability. Yes, The business purpose is to identify and locate taxpayers who are not in compliance with federal income tax filing and payment requirements.

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. Yes, This capability is the result of maintaining the repository this data, combined with the ability to perform queries and extracts. Queries are included in the audit trail (ATLAS), and extracts are performed only based on an approved request for information services.

17. Can use of the system allow IRS to treat taxpayers, employees, or others, differently?  Explain. No, If a taxpayer is identified as being noncompliant, they are subject to the same compliance activities as every other noncompliant taxpayer.

18. Does the system ensure "due process" by allowing affected parties to respond to any negative determination, prior to final action?
The IRP System performs analysis on the data to identify potential compliance issues. The IRP System does not make any adjustments or assessments.
The information is reviewed by IRS employees in the Wage & Investment and Small Business/ Self Employed Business Units to correspond with the taxpayer, advising them of the proposed action (either a tax adjustment to an existing assessment or establishing an initial assessment for a tax period). The taxpayers are requested to concur or provide additional information. When applicable, the taxpayer is advised of their statutory appeal rights.

19. If the system is web-based, does it use persistent cookies or other tracking devices to identify web visitors? N/A

 


 

Page Last Reviewed or Updated: 08-Apr-2014