Treasury Inspector General for Tax Administration
November 30, 2016
TIGTA - 2016-38
Contact: Karen Kraushaar, Director of Communications
WASHINGTON — Internal Revenue Service (IRS) employees made processing errors when assisting some victims of identity theft who requested copies of the tax returns that had been filed fraudulently using the victims’ identities, according to an audit report published today by the Treasury Inspector General for Tax Administration (TIGTA).
On May 6, 2015, a U.S. Senator wrote to the Commissioner of the IRS to express concern with the IRS’s policy to not provide tax-related identity theft victims with copies of the fraudulent returns filed using their name and Social Security Number. In response to this concern, the IRS changed its policy to allow victims of tax-related identity theft to receive, upon request, redacted copies of those fraudulent tax returns. On November 3, 2015, the IRS established the Fraudulent Return Request Program to help victims of identity theft learn more about the information that identity thieves used to prepare fraudulent tax returns using their name and Social Security Number.
Since the program began, the IRS has received more than 5,000 requests for copies of fraudulent returns. In developing the Fraudulent Return Request Program, the IRS identified information that taxpayers must provide to obtain a copy of a fraudulent tax return, and developed guidelines and procedures to receive and process requests and to account for and track the processing of requests.
TIGTA’s evaluation found that, although the IRS took prompt action to establish this program, it should take additional actions to improve the accuracy and timeliness of processing return requests. TIGTA’s review of a statistically valid sample of 130 taxpayer requests, from a total population of 1,962 taxpayer requests made as of March 11, 2016, identified 33 taxpayer requests (25.4 percent) with one or more processing errors. These errors included not timely processing the request, not providing a copy of the fraudulent tax return, and not properly redacting all required information from the return. For example, for two requests that taxpayers made for fraudulent tax returns, the taxpayers received the required acknowledgement letters 44 and 47 days after the request was received (not within the required 30 days). From the results of this sample, TIGTA projects that 498 taxpayers’ requests could contain processing errors.
When TIGTA brought these concerns to their attention, IRS management indicated that they performed a program review and found similar concerns. For example, they identified inconsistences with some of the redacted information on the tax returns, and said that many of the errors resulted from implementing new and evolving procedures. To help correct these errors, the IRS updated internal guidelines and created new training material to assist employees in processing requests.
“The government should do everything in its power to assist victims of identity theft,” said J. Russell George, Treasury Inspector General for Tax Administration. “This includes the accurate and timely processing of identity theft victims’ requests for copies of fraudulent tax returns.”
TIGTA recommended that the IRS: 1) ensure that assistors timely and accurately process requests and 2) implement an automated process to redact Personally Identifiable Information on copies of fraudulent returns provided to identity theft victims. The IRS agreed with both recommendations and stated that they plan to take corrective action to address them.
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.