Treasury Inspector General for Tax Administration
February 4, 2015
TIGTA - 2015-02
Contact: David Barnes
WASHINGTON – An audit report released today identifies several problems with a new program allowing the Internal Revenue Service (IRS) to share tax information of identity theft victims with State and local law enforcement agencies.
The IRS’s Law Enforcement Assistance Program (LEAP) began as a pilot program in Florida in 2012 and was expanded in 2013 to help law enforcement officers across the country obtain tax return data vital to their efforts in investigating and prosecuting cases of identity theft.
The Treasury Inspector General for Tax Administration (TIGTA) reviewed whether requests for tax return data under the LEAP are processed timely, accurately, and securely.
Law enforcement officers use Form 8821-A, IRS Disclosure Authorization for Victims of Identity Theft, to obtain consent from the identity theft victim to request tax return information from the IRS. TIGTA reviewed a statistically valid sample of 194 of the 2,481 Forms 8821-A processed between January 3, 2013 and September 27, 2013. Of these, 39 requests had been rejected and another four did not have the date that the information was mailed to the law enforcement officer. Of the remaining 151 requests, 88 requests (58 percent) were not processed within the required 10 business days.
In addition, the IRS did not always maintain documentation of tax return information provided to the law enforcement officers. TIGTA also found that requests for tax return information were not always accurately worked. For the 39 requests that the IRS rejected, eight (21 percent) should not have been rejected. Most requests were erroneously rejected because the assistors incorrectly concluded that a tax return associated with the victim of the identity theft was not filed.
The IRS’s quality reviews usually check to ensure that all actions and required research are performed. However, because management had not established requirements for assistors to use a computer research command code, the quality reviews did not check to ensure that this research was completed.
In addition, 11 (7 percent) of the 155 requests for which the IRS provided the law enforcement officer with tax return information were invalid or incomplete and should not have been processed due to the risk of unauthorized disclosure.
Lastly, the IRS has not established an outreach strategy to increase awareness of the LEAP and the benefits the program provides to both the victims of identity theft and law enforcement.
“Tax-related identity theft continues to be one of the most serious challenges facing the Federal system of tax administration,” said J. Russell George, Treasury Inspector General for Tax Administration. "It is incumbent upon the Internal Revenue Service to fully use all available tools in the fight against this fraudulent activity.”
TIGTA recommended that the IRS develop processes and procedures to ensure that requests are timely and accurately processed. Additionally, the IRS should review the LEAP database to ensure that information is accurate and complete, and ensure that prescreening procedures are effective in rejecting requests that have missing, incomplete, or altered information. Further, IRS Criminal Investigation should develop a LEAP outreach strategy that details specific actions to promote and expand participation in the program.
The IRS agreed with all six recommendations and plans to take appropriate action.
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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