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ASK THE EDD LAWYER – THE GAO REPORTS IMPROVED IRS TELEPHONE SERVICE FOR IDENTITY THEFT VICTIMS

By Robert S. Schriebman

February 3, 2017

INTRODUCTION

The Government Accounting Office (GAO) has issued a report praising IRS improved telephone service for victims of identity theft (IDT). The report is designated GAO-17-186 and was published February 1, 2017. Along with the praise, there was also criticism.

Is The IRS Really Getting Better?

Compared to the 2015 tax filing season, the 2016 filing season showed substantial improvement in aspects of service for victims of IDT refund fraud. While the report praised the IRS, it also stated that inefficiencies contribute to delays and potentially weak internal control with the risk of the IRS still releasing fraudulent refunds.

The IRS reduced its backlog of IDT cases and formed a team to improve the handling of these cases, but the GAO found that the IRS needs to do more. File retrieval and scanning processes still contribute to delays and unnecessary requests for documents. The GAO did a test of 16 cases and found that what could have been resolved quickly took at least one month because the right hand of the IRS was waiting for the left hand to retrieve and scan taxpayer documents into the IRS’s system. Of the 16 cases reviewed there were 2 cases of fraudulent refunds issued in error or 12.5% error. In the business world this would be a disaster of bankruptcy proportion.

There are still weaknesses within the IRS process and the GAO fears that the IRS will continue to issue refunds to crooks. IRS workers and their managers run the risk of releasing refunds even when flags on the taxpayer’s account show that the tax returns were under review for IDT matters, or two returns had been filed by the same taxpayer.

Some crooks file fraudulent refund claims by listing more dependents than what the real taxpayer has. When a dependent’s identify appears on one of these returns, the IRS does not consider a dependent to be a victim if a correct social security number are shown on the return. Failure to notify the real taxpayer results in the issuance of a fraudulent refund.

Conclusion

The GAO recommended that the IRS immediately undertake the following four protective measures:

  1. Display customer service standards and performance online.
  2. Review its retrieval and scanning processes.
  3. Find out why and how IRS personnel are releasing refund claims on accounts that have been flagged as potentially being IDT.
  4. Revise its notices to victims of potential identity theft.

To these GAO recommendations the IRS balked. The IRS feels that its IDT errors are not widespread and that the GAO recommendations amount to using a cannon to kill a mouse. In other words the IRS is saying, "Our minds are made up – don’t confuse us with reality." What do you think?

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, "IRS Tax Collection Procedures – A Manual for Practitioners" published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See "California Tax Collection Practice and Procedures" and "California Taxation Practice and Procedure," both published by Commerce Clearing House.

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