Office of Audit


Criminal Investigation SHOULD Increase its Role in
enforcement efForts Against Identity Theft

Final Report issued on August 28, 2019

Highlights of Reference Number:† 2019-30-047 to the Commissioner of Internal Revenue.


Identity theft is a deliberate and purposeful violation of Internal Revenue laws by those who use another personís name and Taxpayer Identification Number either to obtain employment unlawfully or to file a fraudulent tax return.† When identity theft for purposes of refund fraud is not investigated, innocent taxpayers can be harmed and the confidence in tax administration can be undermined.


In CIís annual report for Fiscal Year 2018, CI officials indicated that resources devoted to identity theft cases would be reduced in favor of traditional tax work and bringing the most sophisticated tax cases to the U.S. Department of Justice for prosecution.† The overall objective of this review was to evaluate CIís efforts in identifying and investigating tax-related identity theft cases.


From Fiscal Year 2013 to Fiscal Year 2017, the number of identity theft investigations initiated by CI declined 75 percent, while the number of special agents declined 15 percent.† CI identity theft investigations initiated declined at a larger percentage when compared to overall investigations initiated, which declined by 43 percent.

The IRS tracks both IRS-identified (the IRS proactively identifies taxpayers as victims) and taxpayer‑initiated identity theft incidents.† For taxpayer-initiated incidents, taxpayers contact the IRS to report that, after filing their tax return, they received a notice that the return was rejected because someone (an identity thief) already filed a return using the same Social Security Number and name.† TIGTAís review found that many incidents initiated by taxpayers were not placed in CIís Scheme Tracking Referral System (STARS) for consideration in CIís scheme development process.† Specifically, 98,773 taxpayer-initiated identity theft returns processed in Calendar Year 2016 were not placed in CIís STARS, which is the master list of all schemes developed for the IRS.† By not including these returns, CI may limit its ability to identify fraud characteristics for returns that bypass IRS filters for possible investigation.

Further, CIís coordination and documentation of internal identity theft referrals needs improvement.† It is every Federal employeeís duty to report fraud to the proper authorities.† Given that requirement, the proper authorities should have an effective process to receive referrals.† Other functions inside the IRS that interact with identity theft victims have useful information about identity theft and refund fraud.† If CI took steps to harness an effective partnership with other IRS functions, CI could increase the quality and quantity of its investigations.† While there is a CI referral process for compliance functions, there is no referral process for other employees who work with identity theft cases such as the Taxpayer Advocate Service and the Wage and Investment (W&I) Divisionís Identity Theft Victims Assistance organization (IDTVA).


TIGTA recommended that the Chief, CI:† 1) request that the Commissioner, W&I Division, develop a process to make available taxpayer-initiated cases for scheme development and CI case consideration and 2) develop a process for employees who work identity theft cases such as TAS and the W&I Divisonís IDTVA organization to submit quality identity theft referrals and fraud referrals to CI.† CI partially agreed to request an assessment of the STARS database for taxpayer-initiated returns, but disagreed with developing a process with TAS and the W&I Division to submit referrals to CI.† The IRS agreed with TIGTAís recommendation that the National Taxpayer Advocate finalize pending guidance on identity theft referrals.


To view the report, including the scope, methodology, and full IRS response, go to:


Phone Number ††/† 202-622-6500

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