IRS Beefs Up Security After Mellon Bank Fiasco

Internal Revenue Service Commissioner Charles Rossotti outlined plans last week to improve security measures at sites such as Mellon Bank where tax returns are received and initially processed.

Plans call for improved background checks for all employees who handle tax returns, including FBI fingerprint checks, as well as a requirement that the banks pass a security certification check.

Last week information surfaced surrounding the intentional action on the part of Pittsburgh's Mellon Bank employees to hide and in some cases destroy approximately 40,000 tax returns that were delivered to the bank for initial processing. Some of the Mellon Bank tax returns have been recovered.

Banks that receive tax returns on behalf of the IRS each spring, referred to as lockbox banks, hire temporary employees who, working with the banks' full time staff, open tax returns, remove checks from the envelopes, deposit the checks in an IRS account at the bank, and forward the paperwork to the IRS.

There are 10 such lockbox banks in use in the United States, and there are no plans to discontinue the system of using bank employees to open tax returns and process the deposit of checks. Bank One in Valley Forge, PA, will replace Mellon Bank as the lockbox bank for the Pittsburgh region.

"The current breach of security has caused us all a great deal of distress," said Commissioner Rossotti. "However, we do not view this isolated incident as a reason to discontinue our entire lockbox network relationship."