irs chases the wrong returns, delaying refunds, wasting resources.
by 卡塔尔世界杯常规比赛时间
let’s have a pity party! you’re invited.
let’s pity the internal revenue service for having to identify fraudulent tax returns and taxpayer identities.
more: the big free-file flop | the demise of schedule a? | refunds still up, but only by 0.7% | survey: busy season goes sour | tax refunds up 1.7% | lessons learned: how the federal shutdown hit busy season 2019 | tax refund fury roils busy season | taxpayer advocate slams congress over funding
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let’s pity the taxpayer whose tax return gets flagged as fraudulent—or her stolen identity that doesn’t.
and let’s pity the tax preparer stuck between the legitimate taxpayer and the fumbling, under-funded, well-intentioned bureaucracy of the irs.
let’s face it: the irs has the extremely difficult task of determining which of the 250 million tax returns it looks at are fraudulent, that is, either presenting fraudulent information or filed under a fraudulent name. it’s not an easy task. the world of fraud is fast-paced and creative while the irs is short-staffed and working with rickety computers and flawed, old-fashioned software.
and somewhere in the stack of a quarter-billion returns are a number of fraudsters looking to make a quick bunch of bucks off american taxpayers.
$20 billion delayed
last year, the irs’s return integrity office protected about $7.6 billion in revenue between jan. 1, and sept. 30. that’s a pretty penny, but the fraud detection system delayed the processing of a prettier penny—almost $20 billion in legitimate refunds, refunds that should have been circulating in the u.s. economy, not to mention sustaining american families.
the taxpayer advocacy service says those delays are unwarranted and can be considered abusive of taxpayer rights. the vast majority of returns flagged as possible frauds were misidentified. the “false positive rate” (fpr) for suspected identity theft (idt) was 63 percent. the fpr for non-identity theft (non-idt) was a staggering 81 percent.
yes, 81 percent of refunds pulled over for suspected fraud were perfectly legitimate, and the average delay of refunds was 38-40 days.
could an orangutan have done better by simply selecting returns at random? well, no. presumably, the 63 percent and 81 percent included most of the fraudulent returns. after that, it was a matter of weeding out the legitimate ones and sending the legitimate taxpayers the money they’d entrusted to the government, interest-free, for the better part of a year.
too often, alas, the manner was less than expeditious. ideally, the irs is supposed to strain out the real frauds within two weeks, releasing the non-frauds for payment. but according to the irs, even after two weeks, 64 percent of the suspect non-idt returns were legitimate.
that 64 percent—the percent not cleared within two weeks—is called the “operation performance rate” (opr) .
excessive number of misidentified returns
between the fpr and the opr, an excessive number of misidentified returns are clogging the process of getting tax refunds to honest taxpayers.
and that makes america’s national taxpayer advocate, nina e. olson, who heads the tas, “concerned about the fraud detection systems high fpr long processing times, and unwieldy processes that are aggravated by an outdated system.”
olson has identified several aspects of what’s wrong with the irs fraud detection systems.
- the irs does not capture all the information necessary to evaluate the accuracy and efficiency of its refund fraud programs.
- factors contributing to high fprs and delays include:
- the systems’ weekly check for corroborating third-party (e.g. employer) information,
- a failure to consider whether a given “fraudulent” (or simply erroneous) return would actually result in a loss of revenue, and
- the barriers taxpayers face in authenticating their identity.
- the electronic fraud detection system (efds) contributes to long processing times because it lacks systemic verification capabilities.
- the high fpr and delays resulted in a 287 percent increase in pre-refund wage verification cases between january 1 and september 30 last year—about half of which ultimately resulted in taxpayers being refunded exactly what they’d originally claimed.
there isn’t a whole lot tax practitioners can do about any of this besides complain with a certain professional authority. but they might want to be able to explain to their clients why their refunds are delayed, how long the delay will take, and how they can expedite the process.
why the delay
one major cause of delay is that the irs does not capture enough information about the results of its fraud detection programs and therefore can’t fix the problem. something is causing the system filters to misidentify too many returns. the consequently excessive number of returns held for questioning causes delays.
another cause of delay is taxpayers’ delays in authenticating their identities. taxpayers are required to authenticate their identity over the phone, online, or in person at a taxpayer assistance center (tac). the irs does not know why some taxpayers take so long to prove that their return is really theirs, but some of the likely causes are:
- the taxpayer calls the irs and nobody answers the phone.
- the taxpayer is uncomfortable authenticating id online—and not without reason.
- the taxpayer contacts the nearest tac only to find that it is closed or, typically, the next available appointment is three months in the future.
the irs may have solved this problem, but it’s too soon to say. last year, the irs made a weekly check to verify that third-party information, such as w-2s from employers, matched the information on returns. a good match moved a suspect return back into the refund process, but that could take a week or more. this year, the checks are being made daily. but this year we had a government shutdown. the irs was late in providing the forms that have to be checked. w-2s were due from employers by february 1, but tens of thousands weren’t even mailed to employers until the middle of february.
incredibly enough, the effds lacks a systemic verification capability. in february of 2018, 303,000 earned income tax credit and additional child tax credit returns were selected as possibly fraudulent because no third-party information had been received as of february 15. but when the information finally came in, exonerating most of the returns, the irs had no way to release them as a batch. agents had to process and release the returns one at a time. the same antiquated system does not allow a customer service representative to access a case in the effds.
reducing tax fraud is essential. the irs must be as vigilant as fraudsters are relentless. at the same time, legitimate taxpayers should not be harmed with delays, tax practitioners should not be hounded because of delays, and the irs should not be burdened with unnecessary work caused by its own inadequacies. some solutions are inexpensive, and others, such as an it overhaul and hiring thousands of agents, are not. but all are necessary if the united states government is to remain a going concern.