Improvements Are Needed to Better Ensure Refunds Claimed on Potentially Fraudulent Tax Returns Are Not Erroneously Released

The Commissioner, Wage and Investment Division, should correct the programming that is erroneously overriding the Integrity and Verification Operations (IVO) function resequencing tax account marker to ensure that refunds are not issued prior to tax examiners screening and verifying the tax return.

The Commissioner, Wage and Investment Division, should develop a process that periodically reconciles Integrity and Verification Operations (IVO) function inventories between the Electronic Fraud Detection System (EFDS) and the Integrated Data Retrieval System (IDRS) to ensure that refunds associated with identified potentially fraudulent tax returns are not erroneously released.

The Commissioner, Wage and Investment Division, should develop a process to ensure that tax examiners verify a potentially erroneous refund claimed by a taxpayer within the 11 week hold period or place an unexpiring refund hold marker on the taxpayer's account to hold the refund longer until verification can be completed as required.

The Commissioner, Wage and Investment Division, should ensure that actions are taken to identify and address the causes for the instances in which resequencing markers placed on accounts were not delaying the IRS's processing of the tax returns and thus preventing the erroneous issuance of refunds.