Your Favorite Bureaucracy Goes Digital

Moving With Caution

Slated to begin in July 2001, the secure transcript program will be launched with the tax practitioner industry, state tax agencies (legislatively authorized to receive the information), and two small (about 100 users) pilots, one with the mortgage industry and the other with colleges, universities, and the Department of Education. Also planned for 2001 is the online electronic Form 4506, which taxpayers can complete and have encrypted. The mortgage industry pilot will be open to all private businesses involved in doing verification for loans, grants or subsidies. Making the program available on a national basis will come later, probably sometime around middle to late 2002, says Barr.

Under the program, the IRS will be able to test the concept with a relatively large audience in California and receive feedback on customer satisfaction and ease of use. To keep the data private, organizations that become involved must agree to keep the information on the tax return confidential; use it only for the purpose directed by the taxpayer; store it in locked containers when it is not in use; and not trade, barter or sell the information without the taxpayer's authorization. The third party would be required to obtain separate authorization from the taxpayer for any additional disclosures to other third parties involved.

Despite these requirements, privacy experts warn that the electronic system may not be appropriate when sensitive tax information is involved. The concept presents a privacy problem, says Marc Rotenberg, executive director of the Electronic Privacy Information Center in Washington, DC. "If you have information you're trying to keep confidential, you don't digitize it and throw it up on the Internet,' he asserts.

In addition, privacy advocates are alarmed that the proposal would make it so easy to transmit data allowing more businesses to demand to see the tax information. It follows, they maintain, that companies that have access to this sensitive data might resell it to other businesses for marketing or other commercial purposes.

But an electronic system, says Jacksack, may not be any worse as far as privacy is concerned than what is already happening with the existing paper system.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the April 2000 print edition of Entrepreneur with the headline: Your Favorite Bureaucracy Goes Digital.

Loading the player ...

Shark Tank's Daymond John on Lessons From His Worst Mistakes

Ads by Google

Share Your Thoughts

Connect with Entrepreneur

Most Shared Stories