WASHINGTON -- Imagine being holed up in an IRS office, poring over computerized income tax data. Then imagine seeing the name Arnold Schwarzenegger on a return, or Donald Trump, or Barbra Streisand. If you could tinker with a computer program and find out the celebrities' personal financial information, would you?
Over the past five years, government statistics show, more than 1,300 Internal Revenue Service employees allegedly did that.
About 420 of those workers have been penalized, and hundreds more are under investigation for illegally browsing through the records of celebrities, family, friends and neighbors, according to the Senate Governmental Affairs Committee, which yesterday urged the IRS to crack down on the suspected abuses.
The committee also unveiled new figures indicating that the number of cases of fraudulent filing of income tax returns is expected to double this year. More than 77,000 cases were detected in 1993.
The IRS says it is cracking down on the problems. The agency contends that higher numbers of abuse and fraud cases reflect increased vigilance by investigators -- and not necessarily a huge increase in wrongdoing.
The Baltimore office of the IRS employs nearly 900 people to handle income tax returns.
To eliminate snooping, the agency has hired an international expert on privacy to patrol the IRS work force, and is programming its systems with artificial intelligence software to keep snooping to a minimum.
IRS Commissioner Margaret Milner Richardson said agency busybodies are getting scared straight.
"I will tell you that I've had many visits with employees to tell them to not even think about abusing taxpayers' rights to privacy," Ms. Richardson told the committee. "If we've erred on one side, we've erred on the side of being too tough."
But Sen. John Glenn, D-Ohio, said the Peeping Tom syndrome may have only gotten worse since the issue was last visited nearly a year ago.
"The IRS must do a better job of safeguarding the privacy of Americans' financial and tax information," Mr. Glenn said. "What disturbs me is that more than 500 of these investigations have occurred since . . . the commissioner issued strong guidance that browsing or other unauthorized access would not be tolerated at the IRS."
Currently, the IRS uses computer security systems that intervene if employees try to gain access to their own accounts or those of their spouses. In these cases, the employee's computer freezes and only a supervisor can get it working again.
Depending on severity of the violation, the employee is subject to a range of sanctions, including psychiatric counseling, dismissal or a charge of criminal wrongdoing.
But several senators questioned whether violators were being given the toughest penalties.
They pointed to an internal IRS review that found that penalties varied widely, and in 16 percent of the cases punishment was "too lenient."
Sen. Byron L. Dorgan, D-N.D., said he prefers that the IRS gain a reputation for imposing penalties that are "certain, severe and harsh." Browsing in its most dangerous form can result in illegal disclosure or alteration of personal financial records, he said.
Mr. Dorgan asked his well-heeled Senate colleagues if they would want their IRS accounts to double as pleasure reading for unauthorized IRS employees. Several senators visibly cringed.
High-tech solutions to snooping include alarm systems which will alert supervisors to potential violations and security profiles designating the access each IRS employee has to private accounts. The agency also hired its first "Privacy Advocate" to develop a privacy training program for all IRS officials.
The union that represents IRS workers said the alleged violators threaten to "tarnish" the agency's work. "The revelation . . . that increasing numbers of IRS employees are breaching their sworn pledge to keep private tax matters private is disturbing, to say the least," Robert Tobias, president of the National Treasury Employees Union, said in a statement. "Our members are told that yielding to the temptation to snoop can cost them their jobs and more."
Several senators and agency officials said the IRS privacy controls won't work without more federal dollars. Mr. Glenn railed against a proposed $400 million cut in the IRS appropriations bill, which comes before a House-Senate negotiating team this week. That money would go to complete work on Tax Systems Modernization, the multibillion-dollar project meant to upgrade IRS computers.
If the money is not restored, Ms. Richardson said, the IRS may be forced to abandon major hardware purchases for the modernization program and rethink the effort.
Meanwhile, several senators also sounded an alarm over the increased number of reported fraudulent filing cases.
"As hard as they are trying, I am not convinced that the IRS has the capacity, or the technology, to keep up with the ingenuity and volume of fraudulent tax filing schemes," Mr. Glenn said.
The IRS detected 53,100 fraudulent taxpayer returns in the first five months of this year, about half of which were electronically filed.