Each tax season has its own unique challenges, and a pair of recently released government reports has highlighted the struggles the IRS needs to overcome in order to help taxpayers and identity theft victims in the current season. We here at Polston Tax strive to keep our clients informed, and to ensure that their personal information is treated with the utmost possible care. Today we’re taking a look at both reports, and see how, or if, their findings will affect the American Taxpayer.
The TIGTA Audit
On January 31st, the Treasury Inspector General for Tax Administration, or TIGTA, audited the IRS (yes, the IRS gets audited too). According to the official results, TIGTA's objective was to "evaluate whether the IRS timely and accurately processed individual paper and electronically filed tax returns during the 2016 Filing Season". In other words, it's an examination of the IRS's performance during last tax season, and here's what TIGTA found:
Late in 2015, Congress passed what the report calls, "legislation that extended a number of expired tax provisions". The effort was part of the Protecting Americans from Tax Hikes Act of 2015, and included provisions on the Earned Income Tax Credit and the Additional Child Tax Credit (which we've covered here), as well as provisions on Individual Taxpayer Identification Numbers (covered here). In addition, this act retroactively extended the Health Coverage Tax Credit (HCTC) through 2019.
TIGTA found that the IRS was able to update all of its publications and forms, and handled the late legislation well, for the most part. However, the IRS did not properly process HCTC claims, resulting in a delay on 6.8 percent of those refunds. TIGTA also found that some computer errors were preventing some direct deposits from converting to paper checks, resulting in a delay of about $9.2 million in taxes.
But TIGTA's most interesting find was declining numbers in taxpayers assisted by IRS Taxpayer centers -- a 20 percent decrease, which equates to over a million people. It's a considerable number, especially when one considers the extra budget of $290 million (http://www.cbpp.org/research/federal-tax/irs-funding-cuts-compromise-taxpayer-service-and-weaken-enforcement) the IRS received for the express purpose of improving their customer services.
The GAO Report
The United States Government Accountability Office (GAO) issued a report evaluating the performance of the IRS during the past tax season. The GAO report emphasized on identify theft and fraudulent refunds, and found that while the IRS had improved aspects of its service, "inefficiencies and potentially weak internal controls reduced the IRS's ability to serve identify theft victims and protect federal dollars."
One of the more concerning findings contained in the report regards the erroneous release of refunds to fraudsters: In one example, (shown on page 29 of the GAO report) the IRS released a refund of "about $9,900, even though the refund was tagged for potential IDT (identity theft)." Such refunds may be released automatically, or even by an IRS customer service assistor. In some instances, refunds are released erroneously because a fraudulent return may contain a dependent's identify. While the IRS does notify primary and secondary taxpayers when they are victims of identity theft, they do not notify taxpayers that their dependents' information may have been used to commit fraud.
"Dependents can also be victims of identity theft fraud," said John M. Dalrymple, IRS Deputy Commissioner for Services and Enforcement. "However, in many instances it is not clearly apparent which taxpayer can claim the dependent until a review has been completed."
Both reports have suggested adjustments that the IRS has taken into consideration for the currently underway 2017 tax season. The IRS is confident that many of the concerns addressed in these reports will be, or have already been, rectified. But if you're still concerned, don't hesitate to give our offices a call over here at Polston Tax.
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