Treasury Inspector General for Tax Administration
September 21, 2010
TIGTA - 2010-56
Contact: Karen Kraushaar
WASHINGTON- The Internal Revenue Service (IRS) should make better use of the third-party data it receives from employers, government agencies and financial institutions to reduce erroneous refunds, increase revenues and promote voluntary compliance, according to a new audit report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
TIGTA found that the IRS:
The report also found that additional validation of taxpayer information using third-party data is needed to validate claims for the Earned Income Tax Credit (EITC) and other credits.
"These problems allow a substantial number of erroneous refunds and credits to be granted that are not allowable by law," said J. Russell George, the Treasury Inspector General for Tax Administration. "For example, I am troubled that we found a lack of adequate corrective action by the IRS to address improper claims in the EITC Program, which is particularly vulnerable to fraud."
TIGTA recommended that the IRS freeze refunds for those taxpayers with potentially invalid EITC claims, require valid responses before allowing the EITC claims, and adjust the returns if taxpayers do not respond within a specific time period.
The IRS disagreed with TIGTA's recommendations to freeze potentially invalid refunds and to create a centralized control point for all third-party data.
To view the report, including scope, methodology, and full IRS response, go to: https://www.treasury.gov/tigta/auditreports/2010reports/201040062fr.pdf.
A special plugin is required to view PDF documents. To obtain the free PDF reader, please visit the Adobe web site.