WASHINGTON - Although the Internal Revenue Service (IRS) is detecting more cases of identity theft through its Taxpayer Protection Program, case processing controls need to be strengthened to reduce the burden on taxpayers who are the victims of this crime.
This is a finding of a new audit report released today by the Treasury Inspector General for Tax Administration (TIGTA).
The IRS implemented the Taxpayer Protection Program to review tax returns that the IRS proactively identifies as involving potential identity theft to prevent the issuance of fraudulent refunds.
TIGTA initiated its audit to evaluate whether the Taxpayer Protection Program helped the IRS effectively assist taxpayers and resolve identity theft cases. TIGTA found that the Taxpayer Protection Program improves identity theft detection. For example, in Calendar Year 2012, the program identified 324,670 tax returns that involved identity theft. The IRS prevented the issuance of fraudulent tax returns totaling $2.2 billion. These tax returns were identified before processing was completed to protect tax refunds from being issued.
However, TIGTA found that controls over identity theft tax returns worked in the Taxpayer Protection Program need to be strengthened. Tests of identity theft cases showed that the controls relating to the Taxpayer Protection Program data, cases worked, and training were insufficient.
"The Taxpayer Protection Program is important to the IRS's efforts to combat tax refund fraud and help victims of identity theft receive their refunds," said the Treasury Inspector General for Tax Administration, J. Russell George. "While the program has yielded some favorable outcomes, more needs to be done to strengthen program controls," he added.
TIGTA recommended that the IRS develop processes to ensure that required identity theft indicators are placed on taxpayer accounts and employees properly update the Account Management Services system with actions they take when working identity theft cases. In addition, timeliness measures need to be developed to accurately track the length of time required to resolve Taxpayer Protection Program cases.
TIGTA also recommended that employees complete required training.
The IRS agreed with all of TIGTA's recommendations and plans to take corrective actions.