TD P 15-71
Controls Need to Be Improved to Ensure
Accurate Direct Deposit of Tax Refunds
May 2003
Reference
Number: 2003-40-108
This report has cleared
the Treasury Inspector General for Tax Administration disclosure review process
and information determined to be restricted from public release has been
redacted from this document.
Phone Number | 202-622-6500
Email Address | TIGTACommunications@tigta.treas.gov
Web Site
| http://www.tigta.gov
May 9, 2003
MEMORANDUM FOR
COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM: Gordon
C. Milbourn III /s/ Gordon C. Milbourn
III
Acting
Deputy Inspector General for Audit
SUBJECT: Final Audit Report - Controls Need to Be Improved to Ensure Accurate Direct Deposit of Tax
Refunds (Audit # 200240058)
This report presents the results of our review to determine
the effectiveness of controls to prevent the diversion of refunds claimed on
paper filed tax returns to direct deposit[1] accounts not authorized by the
taxpayers.
In Tax Year (TY)
1995, the Internal Revenue Service (IRS) began to offer taxpayers who file
paper tax returns the option of having their tax refunds directly
deposited. To obtain a tax refund via
direct deposit, the taxpayer is required to provide the Routing
Transit Number, Deposit Account Number, and type of account (checking or
savings) on his or her tax return. This information is necessary for the IRS to
identify the specific account to which the tax refund should be deposited. The tax return
instructions caution taxpayers that the IRS is not
responsible for a lost tax refund if a taxpayer enters the wrong account
information on the tax return.
During TY 2001,[2] the IRS processed over 79 million
paper filed individual income tax returns, of which over 56 million had claims
for tax refunds totaling approximately $100 billion. However, control weaknesses present opportunities
for tax refunds claimed on paper tax returns to be directly deposited to
unauthorized bank accounts. For example,
between Calendar Years *******************************************************************************
b)(3):26 U.S.C. 6103(b)(7)(C)********************************
**************************************(b)(3):26 U.S.C.
6103(b)(7)(C)***************************************************************************
**********************************************************************************************
Control weaknesses in both the instructions for completing
the United States Individual Income Tax Return (Form 1040) and the processing
procedures for when the direct deposit fields are left blank expose each of
these tax refunds to the risk that an IRS employee can divert the tax refund
via direct deposit to an unauthorized bank account. Furthermore, diversions of tax refunds result
in taxpayers
being significantly burdened, as they do not timely receive the tax refunds to
which they are entitled.
Implementation of our recommendations will reduce the risk
of diversion and enable detection of employees who may be involved in future
improprieties. These recommendations are
considered to impose the least burden on the taxpayer and are cost beneficial
to the IRS. Since the initiation of the
audit, IRS management has taken actions as a result of our recommendations to
implement guidance to detect, deter, and refer to the TIGTA Office of Investigations
potential cases of diversion of taxpayer refunds by IRS employees via direct
deposit.
For the TY 2003 Filing Season,[3] Form 1040 instructions should be
revised to require taxpayers to line through the direct deposit fields on paper
filed tax returns when they are left blank.
The IRS should develop procedures to address those tax returns on which
the taxpayers failed to line through blank direct deposit fields. Additionally, the IRS should work with tax
software preparation companies to initiate modifications to the manner in which
the direct deposit fields print out for those tax returns prepared via computer
and sent to IRS as paper tax returns.
These modifications should eliminate the printing of the direct deposit
fields when the taxpayer elects to receive a paper tax refund check.
Management’s
Response: IRS
management agreed with the recommendations presented in the report and will
take corrective action. Specifically,
the 2003 instructions for completing Form 1040 will be changed to tell
taxpayers to line through the direct deposit fields on the tax return if they
are not requesting a direct deposit of a refund check. In addition, Submission Processing procedures
will be changed to instruct Code and Edit function employees to line through
this section if a taxpayer fails to follow the instructions. Also, the IRS will contact the software
developers and request that they modify their programs so that the fields do
not appear or cannot be altered if a taxpayer wishes to receive a paper refund
check. These changes will be effective
for TY 2003.
The IRS did not
agree with the potential benefits presented in the report. Specifically, the IRS believed that our
calculation did not consider the fact that over 8.6 million taxpayers filing
paper tax returns used direct deposit to have over $18.3 billion deposited into
their accounts. Our benefit should not
include these taxpayers in the calculation.
Management’s complete response to the draft report is included as
Appendix V.
Office of Audit Comment: We appreciate management’s recognition that
the current procedures for direct deposit present opportunities for tax refunds
claimed to be directly deposited to unauthorized bank accounts, along with
their agreement to implement corrective actions, as the recommendations made in
the report will substantially reduce the possibility of diversion. However, management disagreed with the
potential benefits that our recommendations may have on the protection of revenue. This disagreement relates to the fact that
our calculation includes tax refunds paid via direct deposit. We disagree with management’s position that
the benefits should be reduced by the amount of tax refunds paid via direct
deposit. Our disagreement is based in
the fact that control weaknesses reported present the opportunity for these tax
refunds to also be potentially diverted to unauthorized bank accounts.
The TIGTA has designated this report as Limited Official Use
(LOU) pursuant to Treasury Directive TD P-71-10, Chapter III, Section 2,
“Limited Official Use Information and Other Legends” of the Department of
Treasury Security Manual. Because this
document has been designated LOU, it may only be made available to those
officials who have a need to know the information contained within this report
in the performance of their official duties.
This report must be safeguarded and protected from unauthorized
disclosure; therefore, all requests for disclosure of this report must be
referred to the Disclosure Unit within the TIGTA’s Office of Chief Counsel.
Copies of this report are also being sent to the IRS managers who are affected by the report recommendations. Please contact me at (202) 622-6510 if you have questions or Michael R. Phillips, Assistant Inspector General for Audit (Wage and Investment Income Programs), at (202) 927-0597.
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Outcome Measures
Appendix V – Management’s Response to the Draft Report
In Tax Year (TY) 1995, the Internal Revenue Service
(IRS) began to offer taxpayers who file paper tax returns the option of having
their tax refunds directly deposited.[4] Tax refunds paid via direct deposit provide
benefits to both the taxpayer and the IRS, including:
·
Faster and more convenient receipt of the tax refund.
·
Security of tax refund payment – no paper check to lose.
·
Reduced refund issuance cost for the IRS when compared with issuing a
paper tax refund check.
To obtain a tax refund via direct deposit, the
taxpayer is required to enter the Routing Transit Number, Deposit Account Number, and
type of account (checking or savings) on his or her tax return. This information is necessary for the IRS to
identify the specific account to which the tax refund should be deposited. The tax return instructions caution taxpayers that the IRS is not responsible for a
lost tax refund if the taxpayer enters the wrong account information on the tax
return.
During TY 2001, the IRS processed over 79 million
paper filed individual tax returns, of which over 56 million had claims for
tax refunds totaling approximately $100 billion, as shown in the following
table.
Tax Refunds Issued by Type
of Refund
TY 2001 Paper Filed Tax Returns
Type of Refund
|
Refunds Issued |
Dollars Refunded |
|
Paper Check |
47.7 million |
$81.3 billion |
|
Direct Deposit |
8.6 million |
$18.3 billion |
|
Total |
56.3 million |
$99.6 billion |
Source: Treasury Inspector
General for Tax Administration (TIGTA) Extract of TY 2001 Direct Deposit
Database through June 2002 and Submission Processing Individual Master File[5]
Refund Report through October 2002.
The IRS generally processes a paper filed tax return
within 6 weeks from the date the tax return is received. Subsequent to the 6-week period, taxpayers who do
not receive their tax refunds can contact any of the various IRS Customer Service functions
to inquire about their missing tax refunds.
The IRS’ Customer Service options include calling the toll-free telephone service,
using the automated refund inquiry system, visiting a Taxpayer Assistance
Center, sending in correspondence, and contacting the Taxpayer Advocate
Service.[6] The identification of missing tax refunds is
based solely on a taxpayer contacting the IRS, as the IRS has no process to
proactively identify missing tax refunds.
Contacting the IRS through any of
the above Customer Service options initiates the IRS’ tax refund inquiry
process. The IRS’ Refund Inquiry Unit
will work with the taxpayer to obtain pertinent information and perform
research to determine what may have occurred with the missing tax refund. Based on the results of the Refund Inquiry
Unit’s research, the taxpayer could be reissued his or her tax refund or be
provided with information as to why the IRS is not responsible for the missing
refund. For a taxpayer who does not
receive a tax refund within 45 days after the date the IRS receives the tax
return, the IRS will pay the taxpayer interest on the tax refund.
Audit testing was performed at the National
Headquarters for Submission Processing (Cincinnati, Ohio, and Washington, D.C.)
and the eight Submission Processing sites[7] that accept and process
paper filed individual income tax returns.
Audit work was performed between June and December 2002. The audit was conducted in accordance with Government Auditing Standards. Detailed
information on our audit objective, scope, and methodology is presented in
Appendix I. Major contributors to the
report are listed in Appendix II.
Control Weaknesses Present
Opportunities for Tax Refunds Claimed on Paper Tax Returns to Be Directly
Deposited to Unauthorized Bank Accounts
Controls need to be improved to ensure that tax refunds are accurately directly deposited. Specifically, between Calendar Years 2000 and 2001, ********************************************(b)(3):26 U.S.C. 6103(b)(7)(C) *********************************************** ********************(b)(3):26 U.S.C. 6103(b)(7)(C)*************************************************************** *************************************************************************************************************************.
We alerted IRS executives on June 25, 2002, to the
control weaknesses in the processing of paper filed tax returns that provide
opportunities for tax refunds claimed on paper filed tax returns to be directly
deposited to bank accounts that were not authorized by the taxpayers. As a result of this alert, IRS management
added this risk as a reportable condition to the tax processing Annual
Assurance Process memorandum.[8] Further, the Submission Processing site
functions developed an action plan to determine what controls were currently in
place to prevent unauthorized direct deposits.
Contributing factors
Several
factors contributed to the control weaknesses we identified.
Instructions
for completing the United States Individual Income Tax Return (Form 1040) do
not require the taxpayer to void the direct deposit fields if the taxpayer does
not use them.
When the direct deposit fields are
left blank, the opportunity exists for IRS employees who work in the areas that
receive and open tax returns,[9] review the
tax returns for completeness,[10] and input
the information from tax returns into IRS computers[11] to alter
the fields. Specifically, the
instructions do not require the taxpayer to take any preventive steps (e.g.,
lining through the direct deposit fields on the tax return to void them rather
than leaving them blank) to ensure the fields cannot be manipulated subsequent
to the filing of the tax return.
Furthermore,
IRS reports indicate that approximately 48 percent of paper filed tax returns
are prepared on a computer using tax preparation software packages. When these tax returns are printed, the
direct deposit fields are left blank for those taxpayers who elect to receive a
paper check tax refund. As with the
hand-written paper Forms 1040, the direct deposit fields on these tax returns
can be altered.
Tax return processing controls do not
minimize the risk of, or identify potential instances of, employee diversion of
tax refunds via direct deposit to unauthorized bank accounts. There are no controls in place to minimize the risk of, or identify
potential instances of, employee impropriety via direct deposit in the areas
that receive and open tax returns, review the tax returns for completeness, and
input the information from tax returns into IRS computers. Specifically, IRS procedures do not require actions
to be taken upon the IRS’ receipt of a paper tax return to minimize the
possibility of an employee inputting unauthorized direct deposit information in
fields left blank by the taxpayer.
Procedures do not provide IRS employees with
guidance on identifying and referring for investigation tax returns with
suspicious direct deposits. Procedures were not
developed and distributed to those employees who work in the areas that receive and
open tax returns, review the tax returns for completeness, and input the
information from tax returns into IRS computers informing them of the need to refer cases
with potentially unauthorized direct deposits to the TIGTA Office of
Investigations.
When
working refund inquiries, IRS employees did not consider the possibility of
employee impropriety for those cases involving direct deposit.
Employees
in those functions that assist taxpayers who do not receive their refunds were
not required to consider the possibility of employee impropriety when
evaluating tax refund inquiries that involve direct deposits.
Prior to the initiation of this audit, IRS
management presumed that most unauthorized direct deposit refunds were the
result of IRS processing errors.[12] The IRS’ position has been that in the case of direct
deposits, the
taxpayer has the burden to show that the tax refund was deposited to an account
other than the one he or she designated on the tax return. An IRS Chief Counsel advice,[13] dated September 6, 2002,
stated that in
the context of direct deposit, the IRS satisfies its burden of proof by showing
that it refunded to the bank account designated by the taxpayer on the tax
return. If the taxpayer does not satisfy
this proof, then the IRS does not have authority to replace the incorrectly
deposited refund.
In April 2002, procedures to assist the IRS’ Refund
Inquiry Unit in identifying potential cases of employee impropriety via direct
deposit were drafted by the Taxpayer Advocate Office of Systemic Advocacy. However, the procedures were not implemented
until October 2002.
We alerted IRS senior executives
on August 27, 2002, that no procedures were in place to create an awareness of
the possibility of employee impropriety and to refer those cases that may
involve fraudulent direct deposit of tax refunds to the TIGTA Office of
Investigations. As a result, IRS
management implemented revised guidelines to address our concerns.
Impact of control weaknesses
If adequate controls are not implemented, the
opportunity for employee impropriety remains high. At risk is the protection of approximately
$100 billion in tax refunds claimed on over 56 million paper filed individual income tax returns.[14] If controls are not strengthened, IRS
employees will continue to have the ability to divert tax refunds to
unauthorized bank accounts with minimal risk of being detected. Additionally, with increased
controls, fewer taxpayers who do not receive the timely refunds to which they
are entitled may be burdened.
Corrective actions implemented since the initiation of this audit
IRS management has developed and issued guidance in
response to audit recommendations made during the course of our review. This guidance alerts employees to refer to the TIGTA Office of
Investigations tax returns meeting certain criteria that may indicate diversion
of a tax refund via direct deposit.
Additionally, on November 27, 2002, IRS management
issued a memorandum to all Submission Processing site Directors informing them
of the need to be alert to suspected activities, to monitor tax returns that
are waiting to be processed in staging areas, and to pay attention to work
areas where writing instruments are restricted.
Further, managers were advised to immediately notify the TIGTA Office of
Investigations when a suspected diversion of a tax refund occurs.
We recognize the promptness of actions taken by IRS
management to date to address weaknesses reported during the audit; however,
additional improvements are needed to minimize risk and to more easily focus
investigators to the area in which an impropriety may have taken place.
The identification of improprieties to date are minimal when compared with the over 79 million paper
filed individual income tax
returns the IRS processed in TY
2001. The following recommendations are designed to
minimize the IRS’ risk and enable detection of any employees who may be
involved in future diversions of tax refunds via direct deposit. These recommendations have been discussed
with IRS management and are considered to impose the least burden on the taxpayer
and the least cost to the IRS.
For
the TY 2003 Filing Season,[15] the Commissioner, Wage and
Investment Division, should:
1.
Revise Form 1040
instructions to require the taxpayer to line through the direct deposit fields
if he or she is requesting a paper refund check. Internal procedures should be developed to
address those tax returns on which the taxpayers failed to line through the
blank direct deposit fields.
Management’s Response: The 2003
instructions for completing Form 1040 will be changed to tell taxpayers to line
through the direct deposit fields on the tax return if they are not requesting
a direct deposit of a refund check.
Submission Processing procedures will be
changed to instruct Code and Edit function employees to line through this section
if a taxpayer fails to follow the instructions.
The changes will be effective for TY 2003 returns.
2. Work with tax software preparation companies to initiate modifications to the manner in which the direct deposit fields print out for those tax returns prepared via computer and sent to the IRS as paper tax returns. Specifically, modifications should be made to eliminate the printing of the direct deposit fields when the taxpayer elects to receive a paper tax refund check.
Management’s
Response: The IRS will contact the software developers
and request that they modify their programs so that the fields do not appear or
cannot be altered if a taxpayer wishes to receive a paper refund check. The IRS will request that the software
companies make this modification to the TY 2003 versions of their software
packages.
Appendix I
Detailed Objective, Scope, and
Methodology
The overall objective of
this review was to determine the effectiveness of controls to prevent the
diversion of refunds claimed on paper filed tax returns to direct deposit[16]
accounts not authorized by the taxpayers.
To accomplish this objective, we conducted the following tests:
I.
Obtained and reviewed the Internal Revenue
Service’s (IRS) guidance relating to the processing of paper filed tax returns.
II.
Identified the process followed for
processing paper filed tax returns.
A.
Identified the filing requirements for
taxpayers who request a direct deposit of their individual income tax refunds.
B.
Performed a walk-through at the Memphis
Submission Processing site[17]
to determine how paper filed tax refunds are processed.
C.
Held discussions with representatives from
the Submission Processing function to identify controls in place for processing
paper filed tax returns.
III.
Determined if the IRS has controls in place
to ensure that tax refunds requested on paper filed tax returns are not
directly deposited to unauthorized bank accounts.
A.
Obtained a computer extract of all direct
deposit individual income tax refunds for Tax Year 2001 for the period January
through June 2002 from the IRS’ Direct Deposit Database File.
B.
Because testing identified tax refunds
claimed on paper filed individual income tax returns are potentially being
diverted to unauthorized bank accounts, we calculated the number of tax returns
with direct deposits as well as the amount of the refunds issued.
IV.
Interviewed
management to identify factors that contribute to the inadequacy of the IRS’
controls to prevent unauthorized direct deposit tax refunds and what actions
the IRS has taken to improve controls.
V. Identified the process to assist taxpayers who may have had their refunds lost or stolen as a result of employee theft.
A. Identified the Refund Inquiry Unit process to assist taxpayers whose refunds are either inadvertently or intentionally diverted to incorrect bank accounts via direct deposit.
B. Performed a walk-through at the Andover Submission Processing site to determine how taxpayers are assisted to obtain a replacement refund.
C. Held discussions with representatives from the Accounts Management function to identify controls to identify potential cases of refunds diverted via direct deposit to bank accounts not authorized by the taxpayer.
Appendix II
Major Contributors to This Report
Michael R. Phillips, Assistant Inspector
General for Audit (Wage and Investment Income Programs)
Kerry Kilpatrick, Director
Russell Martin, Audit Manager
Edie Lemire, Senior Auditor
Grace Terranova, Senior Auditor
Mary Keyes, Auditor
Appendix III
Commissioner N:C
Deputy
Commissioner N:DC
Deputy
Chief Financial Officer, Department of the Treasury
Deputy
Commissioner, Wage and Investment Division W
Director, Electronic Tax Administration W:E
Director, Strategy and Finance W:S
Director, Accounts Management W:CAS:AM
Director, Submission Processing W:CAS:SP
This appendix presents detailed
information on the measurable impact that our recommended corrective actions
will have on tax administration. These
benefits will be incorporated into our Semiannual Report to the Congress.
Type and Value of Outcome Measure:
·
Revenue Protection – Potential; an estimated 56
million taxpayers who file a paper individual income tax return (see page 3).
· Revenue Protection – Potential; an estimated $100 billion in tax refunds claimed by individual taxpayers who file a paper individual income tax return (see page 3).
Methodology Used to Measure the Reported Benefit:
The Internal Revenue Service (IRS) is required to
process returns claiming a refund within 45 days of the date of receipt. Therefore, all timely received Tax Year (TY)
2001 returns[18] claiming a refund should
have been processed and had refunds issued by June 1, 2002. The Submission Processing function did not
have a report showing the number of paper filed individual income tax returns
claiming a refund and the total refund amount.
Therefore, we determined (1) the potential number of
taxpayers claiming a refund on paper filed individual income tax returns by
identifying the number of TY 2001 individual income tax returns claiming a
refund and (2) the potential amount of tax refunds claimed on paper filed
individual income tax returns by identifying the refund amount on all TY 2001
individual income tax returns claiming a refund, based on an Individual Master
File (IMF)[19] Refund Report provided by
the Submission Processing function. We
then subtracted the number of electronically filed (ELF) individual income tax
returns claiming a refund and the refund amount of ELF individual income tax
returns claiming a refund, based on information provided by the Electronic Tax
Administration function (see the following calculation).
|
|
|
Number of |
|
Dollar Amount |
|
Total
Individual Taxpayer Returns With a Tax Refund Claim (ELF & Paper)[20] |
|
|
|
|
|
Less: Total IMF ELF |
|
|
|
|
|
Total
IMF Paper Refunds |
|
56,340,798 returns |
|
$99,521,575,524 |
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
ATLANTA, GA 30308
COMMISSIONER
WAGE AND INVESTMENT DIVISION
APRIL 28, 2003
MEMORANDUM FOR TREASURY
INSPECTOR GENERAL FOR TAX
ADMINISTRATION
FROM: John Dalrymple /s/ John Dalrymple
Commissioner, Wage and Investment Division
SUBJECT: Draft Audit Report - Controls Need to Be Improved to
Ensure Accurate Direct Deposit of Tax
Refunds (Audit No, 200240058)
We recognize that the current procedures for direct deposit make them vulnerable to diversion by dishonest employees. As acknowledged in your report, the guidance we issued to our employees and managers will serve both as a deterrent to abuse and will increase the probability of detection. I believe that prompt detection, reporting, and vigorous prosecution of these offenses serve as the strongest deterrent to employee improprieties. I agree that implementing the two recommendations contained in the report will substantially reduce the possibility of employee diversion of refunds by direct deposit. The continued growth of direct deposit and expansion of electronic filing should further reduce the potential for diversion of refunds.
I disagree with the potential benefits listed in the report. Your calculation does not consider the fact that over 8.6 million taxpayers filing paper returns used direct deposit to have over 18.3 billion dollars deposited to their accounts. Your benefit calculation should not apply to those taxpayers who utilized the direct deposit feature in Tax Year 2001.
If you have any questions,
please call me or Ronald S. Rhodes, Director, Customer
Account Services, at (404) 338-8910.
Attachment
Attachment
RECOMMENDATION 1(A)
Revise Form 1040 instructions
to require the taxpayer to line through the direct deposit fields if he/she is requesting a paper refund
check.
CORRECTIVE ACTION
We agree with this
recommendation. The 2003 instructions for completing Form 1040 will be changed to tell taxpayers to line through the
direct deposit fields on the tax return if
they are not requesting a direct deposit of a refund check.
IMPLEMENTATION DATE
November 6, 2003
RESPONSIBLE OFFICIALS
Director, Tax Forms and
Publications
RECOMMENDATION 1(B)
Internal procedures should be
developed to line through the blank direct deposit fields if the taxpayer fails to do so.
CORRECTIVE ACTION
We agree with this
recommendation. Submission Processing procedures will
be changed to instruct the Code and Edit
employees to line through this section if a taxpayer
fails to follow the instructions. The changes will be effective for tax year
2003 returns.
IMPLEMENTATION DATE
January 15, 2004
RESPONSIBLE OFFICIALS
Director, Submission
Processing
Director, Customer Account
Services
CORRECTIVE ACTION
MONITORING PLAN
Completion of these
corrective actions will be monitored through our normal internal control processes that cover annual updates to our tax
forms and filing season processing
changes made to the IRM (Internal Revenue Manual). Responsible managers will report any problems with implementation
of these changes to the responsible
executive. Implementation of these actions will reduce risk of refund diversion.
RECOMMENDATION 2
Work with tax software
preparation companies to initiate modifications to the manner in which the direct deposit fields print out for those
tax returns prepared via computer and
sent to the IRS as a paper tax return. Specifically, modifications should be
made to eliminate the printing of the
direct deposit fields or render the fields visually unalterable when the taxpayer elects to receive a
paper tax refund check.
CORRECTIVE ACTION
We agree with this
recommendation. We will contact the software developers and request that they modify their programs so that the
fields do not appear or cannot be altered
if a taxpayer wishes to receive a paper refund check. We will request that the
software companies make this modification to the
tax year 2003 version of their software
packages.
IMPLEMENTATION DATE
January 15, 2004
RESPONSIBLE OFFICIALS
Director, Electronic Tax
Administration
CORRECTIVE ACTION
MONITORING PLAN
Tax returns prepared using
computer tax preparation software but printed and filed as paper returns are susceptible to alteration of the
direct deposit fields. Modifications made
by software companies to deter alteration to the direct deposit fields will
reduce the risk of refund diversion.
[1] Direct deposit is an electronic transfer of a tax refund to a bank account specified by the taxpayer on the tax return, instead of the issuance of a paper refund check.
[2] TY 2001
tax returns were processed in the Submission Processing sites from January 1,
2002, through August 5, 2002. Submission
Processing sites are the data processing arm of the IRS. The sites process paper submissions, correct
errors, and forward data to the computing centers for analysis and posting to
taxpayer accounts.
[3] The filing season is the period from January through April when most individual income tax returns are filed.
[4] Direct deposit is an electronic transfer of a tax refund to a bank account specified by the taxpayer on the tax return, instead of the issuance of a paper refund check.
[5] The Individual Master File is the IRS database that maintains transactions or records of individual tax accounts.
[6] “Lost or stolen tax refunds” was ranked 11th out of 23 broadly defined reasons why taxpayers contacted the Taxpayer Advocate Service in Fiscal Year 2001.
[7] Submission Processing sites are located in Andover, Atlanta, Austin, Holtsville, Fresno, Kansas City, Memphis, and Philadelphia. Submission Processing sites are the data processing arm of the IRS. The sites process paper submissions, correct errors, and forward data to the computing centers for analysis and posting to taxpayer accounts.
[8] The Annual Assurance memorandum reports instances of waste, fraud, and abuse identified in the IRS’ Submission Processing sites.
[9] Receipt and Control function, which is responsible for handling mail.
[10] Code and Edit function, which is responsible for marking returns for entry into IRS computer systems.
[11] Data Transcription function, which is responsible for entering tax return data into IRS computer systems.
[12] Processing errors may include erroneously entering the direct deposit data from another taxpayer’s tax return or transposition of numbers in the direct deposit fields.
[13] A Chief Counsel Advice is written advice or instruction prepared by the Office of Chief Counsel that is issued to IRS employees. It conveys legal interpretation of internal revenue law either in general or as applied to specific taxpayers or groups of specific taxpayers.
[14] For more details on the calculations, see Appendix IV.
[15] The filing season is the period from January through April when most individual income tax returns are filed.
[16] Direct deposit is an electronic transfer of a tax refund to a bank account specified by the taxpayer on the tax return, instead of the issuance of a paper refund check.
[17] Submission Processing sites are the data processing arm of the IRS. The sites process paper submissions, correct errors, and forward data to the computing centers for analysis and posting to taxpayer accounts.
[18] Taxpayers were required to file TY 2001 returns by April 15, 2002.
[19] The IMF is the IRS database that maintains transactions or records of individual tax accounts.
[20] Submission Processing TY 2001 IMF Refund Report dated August 5, 2002.
[21] Electronic Tax Administration TY 2001 statistics, provided by the Individual Electronic Filing Branch, dated October 20, 2002.