Can IRS be sued for Losing Your Tax Return Data? Maybe.

IRS Building

(Maybe. Such a lawyerly answer!)

By now, you have probably heard that possible Russian hackers stole sensitive personal information from the IRS website in at least 104,000 successful attempts over a period of three months or more. It has been reported that the stolen information may have led to at least $50 Million in fraudulent tax refunds. Further, the stolen information exposes the affected taxpayers to the real danger of identity theft. The true loss to affected taxpayers may be much higher.

Some of you may ask: can I sue the IRS if I was affected? That’s a fair question. We tremble at the idea that the IRS will come after our wallets when we make an honest mistake with penalties and interests, wouldn’t it be nice to go after the IRS for its blunder? As is intuitive to most of you, if a private company suffered such a breach, there surely would be lawsuits and settlements ahead. But is the IRS, as a part of the federal government, vulnerable to civil legal actions? The question is a complicated one, and I will attempt to provide some color below.

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