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Treasury Inspector General for Tax Administration

Press Release

April 18, 2013
TIGTA - 2013-14
Contact: David Barnes
(202) 622-3062

Taxpayer Referrals of Suspected Tax Fraud are Misrouted and Improperly Screened by the IRS

WASHINGTON – When individuals want to report possible instances of Federal tax fraud by a taxpayer, the Internal Revenue Service (IRS) instructs them to complete and mail Form 3949-A, Information Referral, or to provide this information via a letter. However, many of these reports of suspected tax fraud were improperly routed and screened by the IRS, according to a new audit report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS’s Accounts Management function receives Form 3949-A referrals and determines where to send them to be screened. In September 2012, TIGTA reported that the Accounts Management function misrouted referrals or sent incomplete, or unrelated referrals to the various business units and offices.

During Fiscal Years 2010 through 2012, the IRS’s Small Business/Self-Employed (SB/SE) and the Wage and Investment (W&I) Divisions received and screened 274,976 Forms 3949-A referrals. During that same time period, examinations initiated from Form 3949-A referrals resulted in more than $66.5 million in tax assessments. However, the IRS’s ineffective routing and screening processes caused many of the referrals to not be selected for examination.

Improvements to the process and better communication with the Account Management function will reduce the number of referrals the divisions receive, allowing both the SB/SE and W&I Divisions to process Forms 3949-A more efficiently and effectively. TIGTA determined both SB/SE and W&I Division screeners improperly screened referrals. Neither division has a routine review process to evaluate screened referrals not selected for examination. Furthermore, the SB/SE does not have specific guidelines or instructions for screeners to use when screening referrals. Improving the process may allow the divisions to select more referrals with examination potential.

“The IRS must ensure that it makes effective use of information from those individuals who report suspected tax fraud,” said J. Russell George, Treasury Inspector General for Tax Administration. “This is a critical component of the IRS’s enforcement efforts,” he added.

IRS management officials agreed with all of TIGTA’s recommendations and stated that they plan to take corrective actions.

Read the report.


Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.

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