Information Returns Master File Processing


Privacy Impact Assessment – Information Returns Master File Processing (IRMF)

IRMF System Overview:
IRMF processing creates a master file of current tax year information returns and maintains access to five prior years.  Beginning in May of each year, extracts are made from the entire IRMF weekly.  The primary customers for this information are Examination, Collection, Federal/State Relations, Criminal Investigation and Research.  Data is also provided to Federal and State Agencies.  A VSAM version of the file is maintained.

System of Records Number(s):
Treasury/IRS 24.030 CADE Individual Master File
Treasury/IRS 34.037 IRS Audit Trail and Security Records System.

Data in the System

1. Describe the information (data elements and fields) available in the system in the following categories:
A. Taxpayer
B. Employee
C. Audit Trail Information (including employee log-in info)
D. Other (Describe)

Taxpayer/Other: Income paid to an individual or organization for a given tax year.  The taxpayer (payee) 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).

B.  Employee: None.

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 IRMF 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:  None.

2. Describe/identify which data elements are obtained from files, databases, individuals, or any other sources.
B.  Taxpayer
C.  Employee
D.  Other Federal Agencies (List agency)
E.  State and Local Agencies (List agency)
F.  Other third party sources (Describe)

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, W-3s, W-4s.  Customs Service reports International Transportation of Currency or Monetary Instruments (CMIR).

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 taxpayer’s account. The income, deductions, credits, etc. reported on the tax return, as well as any payments received, are required to settle the taxpayer’s account, and maintain a record of taxes assessed, abated and collected.

4. How will each data item be verified for accuracy, timeliness, and completeness?

Validation 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? 

IRMF data is not directly accessible by users. Data is extracted on a weekly basis for reports and for loading into other IRS systems, which provide read-only access to the data (on a need to know basis).   The data are extracted by criteria or status.  Every case which meets the criteria or status is extracted.

7. Is the data retrievable by a personal identifier such as name, SSN, or other unique identifier? 

Yes, by name and SSN (or other TIN).

Access to the Data

8. Who will have access to the data in the system (Users, Managers, System Administrators, Developers, Others)?

Authorized IRS personnel and contract program developers, as well as IRS organizations developing managerial and statistical reports.

9. How is access to the data by a user determined and by whom? 

Data access is granted on a need to know basis. Potential users must submit requests for access 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. 

Audit Trail Lead Analysis System (ATLAS)
Child Support Enforcement Extract (CSE)
Compliance Data Warehouse (CDW)
Disclosure of Information to Federal State and Local Agencies (DIFSLA)
Electronic Fraud Detection System (EFDS)
Enterprise Data Warehouse Individual Filers Model (EDW IFM)
Federal-State 1099-MISC Extract (1099-MISC EXT)
Federal-State IRMF Extract (Fed-St IRMF EXT)
IRS Internal (IRS INT) (External Trading Partner)
Individual Master File Pre-Posting (IMF PRE-POSTING, IMF INPUTS)
Information Returns Processing Nonfiler (IRP NF)
Information Returns Processing Underreporter (IRP UR)
Information Returns Processing Underreporter Backup Withholding (IRP UBWH)
Information Returns Statistics of Income (IR SOI)
Information Returns Transcript File On Line (IRPTR)
National Research Program (NRP)
RRB-SSA Trust Fund Tabulations Report (RRB-SSA-TFTR)
Security Audit and Analysis System (SAAS)
State-Levy Processing (STATE-LEVY)
Taxpayer Inquiry Lookup File Processing (TILT)
Child Support Enforcement Extract (CSE)
Enterprise Data Warehouse Individual Filers Model (EDW IFM)
Executive Control Program for BMF Extract (BMF 701 EXEC)
Executive Control Program for IMF Extract (IMF 701 EXEC)
Individual Master File Discriminant Index Function Inventory (IMF DIF INV)
Information Returns Processing Nonfiler (IRP NF)
Information Returns Processing Underreporter Backup Withholding (IRP UBWH)
Information Returns Processing Validation & Perfection (IRP VAL)
Payer Master File Processing (PMF)
Taxpayer Delinquent Account (TDA)
Taxpayer Inquiry Lookup File Processing (TILT)
Wage Document Input (W2 INPUT)

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), received certification and accreditation or after 8-13-2004.

12.  Will other agencies provide, receive, or share data in any form with this system?

Social Security Administration (SSA) exchanges W-2, W-3 and W-4 data with the IRS. As we validate and update data, we share those changes with SSA.
Census Bureau receives an annual extract of data to use as test data for their system.

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

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. See IRM

14.  Will this system use technology in a new way?  If "YES" describe.  If "NO" go to Question 15.  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?  Yes.
The IRMF System performs analysis on the data to identify potential compliance issues. The IRMF 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 to 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.