Treasury
Inspector General for Tax Administration
Office of Audit
INSUFFICIENT AND INEXPERIENCED STAFF
COULD REDUCE THE ABILITY TO DETECT AND STOP FRAUDULENT REFUNDS
Issued on January 8, 2010
Highlights
Highlights of
Report Number: 2010-40-017 to the Internal
Revenue Service Commissioner for the Wage and Investment Division.
IMPACT ON TAXPAYERS
The Questionable Refund Program
(QRP) is a nationwide, multi-functional program designed to detect and stop
fraudulent claims for refunds on income tax returns. Pre-refund fraud detection activities have
been transferred from the Criminal Investigation Division to the Wage and
Investment Division Accounts Management function. Insufficient staffing could result in a
reduction of fraudulent refunds identified and stopped, and the inability of
the Internal Revenue Service (IRS) to provide timely assistance to taxpayers
who experience delays in receiving their refund or who are victims of identity
theft.
WHY TIGTA DID THE AUDIT
This
audit was initiated to assess IRS efforts to ensure a successful transition of
pre-refund fraud detection activities from the Criminal Investigation Division
to the Wage and Investment Division. Prior to the release of a refund, the IRS
reviews questionable tax returns to determine fraud potential. If a tax return is selected for further
verification, the refund is held until employers or third parties are contacted
to verify wage information. If the
verification concludes that a tax return contains false information (e.g.,
false or inflated wages), the tax return is referred to either the Accounts
Management function or the Examination function for resolution. If fraud was not detected, the IRS releases
the refund.
WHAT
TIGTA FOUND
The IRS took a
number of actions to facilitate the transition of QRP activities to the Wage
and Investment Division, and on October 11, 2009, the Accounts Management
function assumed responsibility for transitioned activities. However, staffing may not be sufficient,
which could result in a reduction of fraudulent refunds identified and stopped,
and the inability of the IRS to timely provide assistance to taxpayers experiencing delays in
Management
used the actual hours charged by employees in Fiscal Year 2007 for the
activities being transitioned and then revalidated the results by using the
actual hours charged in Fiscal Year 2008 rather than performing a comprehensive
analysis to determine the average time to complete one unit of work. The analysis also did not include an
assessment of the anticipated workload volumes by activity for the year.
In addition, the
actual hours charged to the transitioned activities in Fiscal Year 2008 are
based on a highly experienced staff.
However, when the Accounts Management function assumes responsibility
for the transitioned activities, the majority of the individuals performing
these duties will be new employees. For
example, of the 359 employees who will be working on the transitioned
activities, 62 percent (222 employees) will be new to the program.
An additional
concern is that the 222 new employees will either be seasonal or temporary
employees. The hiring of seasonal
employees could result in higher turnover rates, thereby reducing the
possibility of an increased number of experienced employees performing the work
in subsequent years.
WHAT TIGTA RECOMMENDED
TIGTA recommended the Commissioner, Wage and Investment
Division, perform a comprehensive analysis during the 2010 Filing Season to
determine the average time to complete one unit of work for each of the
transitioned activities. The average
time to complete one unit of work should then be applied to the anticipated
workload volumes to identify staffing resources needed to timely complete these
activities in Processing Year 2011.
In their response to the
report, IRS officials agreed with the recommendation. The IRS plans to analyze the volume of work
and staff hours needed to perform the 2010 Filing Season work in order to
determine the resources required to timely complete the projected work in the
2011 Filing Season.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2010reports/201040017fr.html.
Email Address: inquiries@tigta.treas.gov
Phone Number: 202-622-6500
Web Site:
http://www.tigta.gov