The Internal Revenue Service did not always respond with accurate, timely information to requests from law enforcement to help identity theft victims, according to a new report.
The report, from the Treasury Inspector General for Tax Administration, found a number of problems with a new program that is supposed to allow the IRS to share the tax information of identity theft victims with state and local law enforcement agencies. The IRS’s Law Enforcement Assistance Program, also known as LEAP, began as a pilot program in Florida in 2012 and later expanded the following year to help law enforcement officers across the country get the tax data they needed to investigate and prosecute cases of identity theft.
Law enforcement officers use Form 8821-A, IRS Disclosure Authorization for Victims of Identity Theft, to obtain consent from an identity theft victim to request tax return information from the IRS.
For the new report, TIGTA reviewed whether requests for tax return data under the LEAP are processed on a timely, accurate and secure basis. TIGTA reviewed a statistically valid sample of 194 of 2,481 Forms 8821-A that were processed between Jan. 3, 2013 and Sept. 27, 2013. Of these, 39 requests had been rejected and another four did not have the date that the information was mailed to the law enforcement officer.
Of the remaining 151 requests, 88 requests (58 percent) were not processed within the required 10 business days.
The report found that the IRS did not always maintain documentation of tax return information provided to law enforcement officers, and requests for tax return information were not always accurately worked on by IRS employees. Of the 39 requests that the IRS rejected, eight of them (that is, 21 percent) should not have been rejected, according to TIGTA. Most requests were erroneously rejected because the IRS assistors incorrectly concluded that a tax return associated with the identity theft victim was not filed.
The IRS’s quality reviews usually check to ensure that all actions and required research are performed. However, because IRS management had not established requirements for assistors to use a computer research command code, the quality reviews did not check to ensure that this research was completed.
In addition, 11 of the 155 requests (that is, 7 percent) for which the IRS provided the law enforcement officer with tax return information were invalid or incomplete and should not have been processed due to the risk of unauthorized disclosure, according to the report.
Finally, TIGTA noted, the IRS has not established an outreach strategy to increase awareness of the LEAP and the benefits provided by the program to both identity theft victims and law enforcement.
“Tax-related identity theft continues to be one of the most serious challenges facing the federal system of tax administration,” said TIGTA Inspector General J. Russell George in a statement. "It is incumbent upon the Internal Revenue Service to fully use all available tools in the fight against this fraudulent activity.”
TIGTA recommended that the IRS develop processes and procedures to ensure that requests for assistance are timely and accurately processed. In addition, TIGTA said the IRS should review the LEAP database to ensure the information is accurate and complete, and ensure that prescreening procedures are effective in rejecting requests that have missing, incomplete or altered information. Further, the report suggested that IRS Criminal Investigation should develop a LEAP outreach strategy that details specific actions to promote and expand participation in the program.
The IRS agreed with all six recommendations and said it plans to take the appropriate actions. “As the threat of identity theft and its impact on victims has continued to grow, we recognize the importance of ensuring the LEAP services requests by law enforcement officials are processed in a timely, accurate and secure manner,” wrote Debra Holland, commissioner of the IRS’s Wage and Investment Division, in response to the report. “We are also addressing report findings that some requests were not processed within established timeframes and accuracy guidelines by evaluating our quality review procedures, enhancing procedural guidance, and improving instructions to employees and managers that reinforce the importance of timely and accurate service delivery.”
She added that the IRS has already taken several actions, including consolidating the separate request-tracking report databases into a single system, revising its guidance on the processing of Form 8821-A, and creating a new form to provide more detailed information to law enforcement officials when requests for tax information are rejected.
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