Federal law makes IRS files private records. The law has many exceptions, however. IRS files can be legally shared with other federal and state agencies. (Most leakage comes from result of sloppy state agencies that are granted access to IRS files.) Furthermore, IRS employees have been caught snooping, and computer hackers have broken into government databases. While violation of the Privacy Act is a crime, rarely is anyone prosecuted for it, though IRS personnel can be fired if caught.