The IRS has fixed just 49 of 115 computer security problems found by the GAO in the November audit, the GAO said. The agency, which collects about US$2.7 trillion in taxes each year, still does not always enforce strong password management, does not encrypt some sensitive data and does not always limit the number of workers with access to sensitive information, the GAO said.

"IRS continues to, among other things, allow sensitive information, including IDs and passwords for mission-critical applications, to be readily available to any user on its internal network, and grant excessive access to individuals who do not need it," the GAO report said. "Despite IRS’s progress, information security control weaknesses continue to jeopardize the confidentiality, integrity, and availability of financial and sensitive taxpayer information."

The GAO report did note that the IRS has taken several steps to improve information security since the November report.

The IRS has implemented controls for unauthorized network access on its mainframe, it has encrypted sensitive data going across its network, and it has improved the patching of critical vulnerabilities, the GAO said.

However, the IRS has not yet implemented an agencywide information security program, the GAO said. A program should include periodic risk assessments, testing of security procedures and security training for IRS workers, the GAO said.

"These deficiencies represent a material weakness in IRS's internal controls over its financial and tax processing systems," the GAO report said. "Until IRS takes these steps, financial and taxpayer information are at increased risk of unauthorized disclosure, modification, or destruction, and the agency's management decisions may be based on unreliable or inaccurate financial information."

IRS Commissioner Douglas Shulman said the agency will work with GAO to fix any problems.

"The security and privacy of taxpayer information is of utmost importance to us and the integrity of our financial systems continues to be sound," he wrote in a letter included with the GAO report. "We are committed to securing our computer environment as we continually evaluate processes, promote user awareness and apply innovative ideas to increase compliance."