“Refund fraud adversely affects the ability of innocent taxpayers to file their tax returns and timely receive their tax refunds, often imposing significant financial hardship,” J. Russell George, the inspector general for tax administration, said in a statement.
After reviewing 100 cases of identity theft closed in 2013, auditors estimated that 10 percent of the 267,692 total cases resolved by the IRS that year may have been resolved inaccurately, leading to longer waits for refunds or incorrect refund amounts. (The group looked at cases that were resolved between October 2012 and September 2013.)
Auditors recommended that the IRS develop a training course to help make sure that the people investigating identity theft are prepared to handle complicated cases. It also suggested that the agency limit the number of times a case can be reassigned. The cases studied were handled by 10 people on average.
The IRS said in a statement that the review was done while the agency was making changes to its tax fraud investigation process. For instance, the IRS has since gotten better at catching refund fraud while returns are being processed, the agency said. Streamlining has also made it possible for identity theft victims to get their refunds within 120 days, sooner than the 180-day time frame that was often given to taxpayers.
Identity theft has received more attention this tax season after a surge in suspicious state returns seen earlier this year caused TurboTax, the largest provider of tax preparation software, to temporarily stop transmitting state returns and to introduce new security measures. The IRS met with major tax preparation companies and state tax authorities last month to call for new ways to fight fraud that can be rolled out in time for next year’s tax season.
Cuts to the IRS’s budget have also hampered the agency’s ability to roll out certain security measures, audit tax returns and answer taxpayers’ questions. This tax season, only 40 percent of the people who call the IRS are getting through to an agent.