IRS Relying Heavily on Technology for Fraud Detection and Taxpayer Service

Faced with steep budget cuts, the Internal Revenue Service directed more taxpayers to consult Web sites and its mobile app for answers to their questions this year rather than visiting the IRS’s walk-in Taxpayer Assistance Centers or calling its phone lines, while also using technology to detect tax refund fraud.

An interim report from the Treasury Inspector General for Tax Administration on tax season that was publicly released Thursday, a day after the end of filing season, found that as a result of continued budget cuts, the IRS is depending even more on technology-based services, while fewer customers are receiving live assistance from the IRS this year. In addition, the tax agency is continuing to expand its fraud detection efforts,

During fiscal year 2015, the IRS planned to assist 5.3 million taxpayers through face-to-face contact at the Taxpayer Assistance Centers, a nearly 4 percent decrease from fiscal year 2014. As of March 7, 2015, approximately 45.6 million taxpayers contacted the IRS by calling the various Customer Account Services function’s toll-free telephone assistance lines. IRS assistors have answered 4.2 million calls and have achieved a 38.5 percent Level of Service with a 24.6 minute Average Speed of Answer. 

The level of service for the 2014 filing season was 74.7 percent. However, the IRS continues to expand its self-assistance options that taxpayers can access 24 hours a day, seven days a week, including its IRS2Go mobile app, YouTube channels, interactive self-help tools on IRS.gov, and Twitter, Tumblr and Facebook accounts.

The filing season, defined as the period from January 1 through mid-April, is critical for the IRS because it is during this time that most individuals file their income tax returns and contact the IRS if they have questions about specific laws or filing procedures, TIGTA noted. The objective of this review was to provide selected information related to the IRS’s 2015 filing season. TIGTA plans to issue the final results of its analysis of the 2015 filing season in September 2015.

[IMGCAP(1)]“The IRS’s efforts to monitor and prepare for the legislative extension of certain tax provisions prior to the start of the filing season enabled it to begin the filing season as scheduled,” said TIGTA Inspector General J. Russell George in a statement. "However, this filing season it has become increasingly difficult for taxpayers contacting the IRS by telephone to reach an assistor."

As of March 6, 2015, the IRS received more than 66.7 million tax returns—more than 62.3 million (93.5 percent) were filed electronically and more than 4.3 million (6.5 percent) were filed on paper. The IRS has issued more than 54.2 million refunds totaling more than $162 billion. In addition, as of Feb. 26, 2015, the IRS processed 737,148 tax returns that reported more than $2.1 billion in Premium Tax Credits that were either received in advance or claimed at the time of filing. More than 3.7 million tax returns reported shared responsibility payments totaling more than $655 million for not maintaining required health insurance coverage.

TIGTA also found that the IRS is continuing to expand its efforts to detect tax refund fraud. As of March 7, 2015, the IRS reports that it identified 36,674 tax returns with $172.9 million claimed in fraudulent refunds and prevented the issuance of $132.8 million (76.8 percent) in fraudulent refunds. In addition, the IRS reports that expanded use of controls to identify fraudulent refund claims before they are accepted into the processing system has identified approximately 37,000 fraudulent electronically filed tax returns and approximately 10,000 paper tax returns as of March 5, 2015. The IRS also identified and confirmed 16,523 fraudulent tax returns involving identity theft as of Feb. 28, 2015, and identified 26,797 prisoner tax returns for screening as of March 7, 2015.

This report was prepared to provide interim information only. TIGTA made no recommendations in the report.

Despite the positive news in the report on the IRS’s fraud detection efforts, at least one lawmaker believes the IRS needs to do more to combat identity theft.

Warner Letter

Sen. Mark R. Warner, D-Va., requested more information Thursday from the IRS about procedures in place to help taxpayers who have been victims of identity theft, and what might be done going forward to proactively alert taxpayers identified as possible victims of identity theft. In a letter to IRS commissioner John Koskinen, Warner pointed out that this tax season, taxpayers attempted to file tax returns with the IRS only to discover that a return had already been filed and a fraudulent refund claimed using their identity.

[IMGCAP(2)]“As you know, filing and claiming a false return is shockingly easy, with scammers needing only a Social Security number (SSN) and a name to file and claim a false return,” he wrote. “The number of these cases has continued to soar, with nearly 3 million incidents of tax-related identity theft reported in 2013, the most recent year for which this data is publicly available. While the IRS attempts to identify and prevent as many of these cases as possible, often this fraud is only discovered when the legitimate taxpayer files his or her return and finds that two returns have been filed using the same SSN.”

Data from the Government Accountability Office revealed that the IRS issued approximately $5.8 billion in fraudulent refunds during the 2013 filing season.

Approximately 2.9 million incidents of tax-related identity theft occurred in 2013, up from nearly 1.8 million in 2012, according to an earlier report from TIGTA, Warner pointed out. As a result, hundreds of thousands of taxpayers experienced significant delays in receiving their refunds.

“I want to understand what your agency is doing now to help taxpayers and what might be done going forward to be more proactive about helping taxpayers who have been the victims of tax-related identity theft,” Warner added.

Thursday’s letter follows up on an earlier letter from Warner, who wrote to the IRS commissioner on February 18 pressing for an explanation of the processes for preventing tax-related identity theft and for notifying taxpayers and law enforcement when the IRS identifies a case of potential fraud.