IRS Exposes Taxpayer Data With Missing ComputersIRS Exposes Taxpayer Data With Missing Computers

After experiencing for itself the thrill of an audit, the Internal Revenue Service was found to have lost 477 laptops (as well as 13 desktop computers) between 2003 and 2006 and to be inadequate in protecting sensitive taxpayer information.

The Treasury's inspector general said in a report that because of the missing computers, personal information on at least 2,359 U.S. taxpayers was compromised, though records don't list what data was stored on many of the machines. "It is likely that sensitive data for a significant number of taxpayers has been unnecessarily exposed to potential identity theft and/or other fraudulent schemes," said Michael Phillips, deputy inspector general, in the report. He added that it's likely that a large number of the missing computers contain unencrypted data. The IRS also was cited for using weak passwords.

The IRS handles about 220 million tax returns a year, containing personal financial and identifying data such as incomes and Social Security numbers. The agency has issued 47,000 laptops to employees.