The Taxpayer Protection Program that the Internal Revenue Service implemented in an effort to curb the problem of identity theft-related tax fraud is improving the IRS’s efforts at detecting identity theft, but the case-processing controls need to be strengthened to reduce the burden on taxpayers victimized by identity theft, according to a new government report.
The report, from the Treasury Inspector General for Tax Administration, acknowledged the IRS’s Taxpayer Protection Program is crucial to the agency’s efforts to combat tax refund fraud and help victims of identity theft receive their refunds. Last year, the program identified 324,670 tax returns involving identity theft and prevented the issuance of $2.2 billion in fraudulent tax refunds. The tax returns were identified before processing was completed to protect the fraudulent tax refunds from ever being issued.
However, controls over the identity theft tax returns in the Taxpayer Protection Program need to be strengthened, according to the TIGTA report. The Inspector General noted that tests of identity theft cases showed that the controls relating to the Taxpayer Protection Program data, the cases worked and training were insufficient.
For example, identity theft indicators were not always input on taxpayer accounts. In addition, Account Management Services system cases were not clearly documented or closed accurately. Timeliness measures to accurately track the time frame to resolve cases have not been established either. Moreover, documentation of employee training is insufficient.
TIGTA recommended that the IRS develop processes to ensure that the required identity theft indicators are placed on taxpayer accounts and employees properly update the Account Management Services system with actions they take when working identity theft cases. In addition, timeliness measures need to be developed to accurately track the time frame to resolve Taxpayer Protection Program cases, TIGTA suggested. Employees should also complete the required training, and documentation should be maintained in the Enterprise Learning Management System.
The IRS agreed with all of TIGTA’s recommendations. The IRS plans to refine its existing procedures to ensure that appropriate identity theft indicators are placed on taxpayer accounts, develop a process for managers to review employee updates on cases, form a cross functional group to establish tracking methodologies for measuring cases from initial contact through case closure, and ensure that employee training is updated on the Enterprise Learning Management System.
“We appreciate the report’s acknowledgement of our improvements in early detection of potentially fraudulent tax returns with indications of identity theft,” IRS Wage and Investment Division commissioner Peggy Bogadi wrote in response to the report. “The Taxpayer Protection Program (TPP) is one of the first lines of defense in stopping the victimization of innocent taxpayers whose identities may have been compromised and used by unscrupulous individuals to claim fraudulent refunds.”
To ensure enough staff were available for the toll-free telephone line, she pointed out that approximately 600 Accounts Management employees were trained so a minimum of 200 employees were available to assist taxpayers during last filing season. New training was also developed and delivered to ensure the extra employees were prepared for the beginning of the filing season. “Although the training modules were not incorporated into the Enterprise Learning Management System, the employee records are being manually updated to reflect course completion,” she added. “We will ensure future training sessions are cataloged prior to delivery to ensure employee records are updated as training is received.”
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