Treasury faults KC for loss of IRS tapes

? Federal investigators are blaming city officials for the loss in 2006 of 26 IRS computer tapes containing taxpayer information.

In a heavily redacted report obtained through a Freedom of Information Act request, the Treasury Department’s inspector general for tax administration said the city failed to follow “proper safeguards for protecting federal tax return information.”

The tapes were delivered to City Hall in August 2006 to help revenue officials make sure people living or working in Kansas City are paying the 1 percent city earnings tax.

City officials said they realized the tapes were missing in late 2006, touching off the investigation that began Dec. 19, 2006, and lasted until Nov. 1, 2007. The tapes have never been found.

“The investigation revealed the city did not follow and was not following the proper safeguards for protecting federal tax return information,” the inspectors wrote. “During the investigation, it was observed that security measures … were not being followed.”

Most of the information in the 42 pages was blacked out. The agency said it wasn’t handing over 105 additional pages because that “could impede its law enforcement activities.”

Amy Jones, a disclosure officer for the agency, said that the inspector general’s office typically withholds information, such as witness interviews and investigation techniques.

“The information was compiled for law enforcement purposes and the privacy interests of the third parties outweighs the public’s interest in having the information released,” the agency said.

According to the report, a copy was provided to the IRS but not to the U.S. attorney’s office.

IRS spokesman Michael Devine declined to comment, citing federal disclosure laws covering taxpayer information. He did not immediately return phone and e-mail messages left by The Associated Press on Saturday.

The IRS has never said what was on the tapes, how many taxpayers may have been affected and whether taxpayers would be told of the lost information.

City officials said they didn’t know how many taxpayers were affected but added that the tapes are unreadable without special equipment. They said they know the tapes arrived at City Hall but don’t know what happened to them after that.

City Manager Wayne Cauthen said the agency hasn’t provided the city with a copy of the report or told officials what they found.

“This is an important document for us to have,” Cauthen said. “We cooperated with the investigation … but they haven’t shared anything with us, either.”

City spokeswoman Mary Charles said the city has tightened its policies for securing taxpayer information but is still waiting for the IRS to share its concerns.

Charles said the city is no longer receiving IRS information but is sharing information with the state and Jackson County to make sure workers and residents are paying the earnings tax.