Treasury Inspector General for Tax Administration
June 13, 2013
TIGTA - 2013-22
Contact: David Barnes
WASHINGTON – The Internal Revenue Service (IRS) has initiated corrective actions to address deficiencies in its program that oversees applications for Individual Taxpayer Identification Numbers, or ITINs, but additional improvements in the program are still needed.
That is a finding of a new report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).
“I am pleased that the IRS has made significant progress addressing seven of the nine deficiencies that TIGTA previously identified in the ITIN application program,” said J. Russell George, Treasury Inspector General for Tax Administration. “Now, IRS officials need to address the remainder of our concerns.”
In Calendar Year 1996, the IRS created the Individual Taxpayer Identification Number (ITIN) so that individuals who are not eligible to obtain Social Security Numbers could obtain an identification number for tax purposes. TIGTA conducted its audit in response to a complaint it received that IRS management was not supporting the implementation of revised processes and procedures designed to improve on the identification of questionable ITIN applications.
A prior TIGTA audit found that the ITIN application review and verification process was so deficient that there was no assurance that ITINs were not being assigned to individuals submitting questionable applications. The overall objective of this review was to assess the IRS’s progress in identifying questionable ITIN applications, including assessing the IRS’s implementation of corrective actions agreed to in response to TIGTA’s previously issued ITIN report.
TIGTA found that the IRS initiated corrective actions to address the majority of recommendations included in the prior audit report, which are significantly improving the identification of questionable ITIN applications. After the new procedures were put into place, the number of applications rejected as questionable increased from 226,011 for the period July through December 2011 to 340,659 for the same period in 2012.
However, TIGTA found that IRS management still has not developed organizational processes and procedures to work potential fraud schemes. Moreover, actions have not been taken to analyze information from previously processed ITIN applications to identify indicators of questionable applications that could be used to proactively identify similar applications during processing.
In addition, tax examiners remain concerned that management will reverse the current focus of ensuring that only qualified individuals receive an ITIN to again emphasize quickly processing ITIN applications. Finally, although the quality review process was expanded, some changes could inadvertently discourage tax examiners from identifying questionable documents.
TIGTA recommended that the IRS develop computer programming to flag ITIN applications that contain characteristics of previously identified questionable ITIN applications. The IRS should also ensure that the quality review process continues to emphasize the importance of the identification of questionable documents and that weekly team meetings are held with tax examiners to discuss ITIN application processing trends, patterns, and concerns.
The IRS agreed with TIGTA’s recommendations and plans to evaluate implementing the programming changes as part of a risk assessment that will not only determine the scope and associated costs but will also consider other controls and actions that can be implemented if the requested programming changes are not funded. The IRS also plans to ensure that the weekly team meetings continue to be held.
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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