IRS Criminal Investigation needs to do more against ID theft

Even as the Internal Revenue Service grappled with tax-related identity theft in recent years, the number of ID theft cases investigated by its Criminal Investigation division dropped significantly, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, was the result of a review of CI’s efforts against identity theft that was spurred by indications in the Fiscal Year 2018 CI annual report that the unit would reduce the resources it devoted to ID theft cases.

According to TIGTA, the number of ID theft investigations launched by Criminal Investigation declined 75 percent from FY 2013 to FY 2017. While IRS resources overall were being squeezed at the same time, that decline outstrips other areas: The number of overall investigations initiated dropped by 43 percent, while the number of special agents in CI declined by 15 percent.

One critical problem lies in the fact that a significant pool of potential ID theft cases may never come to CI’s attention: Many “taxpayer-initiated incidents” — those where the taxpayer reports a problem, rather than the IRS identifying it — never reach the unit’s Scheme Tracking Referral System. In 2016, for instance, TIGTA found that as many as 98,000 taxpayer-initiated incidents were not placed in STARS.

AT-090319-TIGTA IRS CI ID theft cases - CHART

“By not including these returns, CI may limit its ability to identify fraud characteristics for returns that bypass IRS filters for possible investigation,” TIGTA reported.

The inspector general also suggested that CI needed to better coordinate and document ID theft referrals from other parts of the IRS, particularly the Taxpayer Advocate Service, and the Wage and Investment Division’s Identity Theft Victims Assistance organization.

TIGTA recommended that the head of CI create a better way for other for other IRS personnel to submit “quality” ID theft and fraud referrals, but CI disagreed with the suggestion, saying that current referral channels are adequate to the task.

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