IRS needs to make fraud referrals easier

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The Internal Revenue Service’s processes for handling fraud referrals from the public need serious work, according to a new report.

The new report, from the Treasury Inspector General for Tax Administration, found that the way the IRS handles its Information Referral program and the Forms 3949-A, “Information Referral,” that individuals and businesses use to report potential tax fraud, needs serious improvement.

While almost $247 million in taxes were assessed based on these fraud referrals in Fiscal Years 2016-2018, the number of referrals actually dropped by almost 15 percent over the same period, from over 72,000 a year to just under 62,000.

Among the problems cited in the report was the fact that the IRS still lacks an online referral application – an improvement TIGTA suggested six years ago.

The IRS also needs to make it easier for taxpayers to learn how to report suspected fraud: The inspector general’s audit noted, for example, that a basic keyword search on does not call up the ““How Do You Report Suspected Tax Fraud Activity?” page.

In addition, the IRS does not accurately account for or track information referrals. A TIGTA review of four different weeks’ inventory reports on Forms 3949-A received found “significant discrepancies” in reporting, and a review of a sample of forms that were marked for destruction found that almost three-quarters of them should have been reviewed more carefully.

Among other things, the inspector general recommended that the IRS give staff better guidelines and make sure they’re followed, build strong procedures around handling fraud referrals in languages other than English, and better track misrouted referrals.

The IRS agreed to all of the recommendations, and plans to improve its procedures.

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Tax fraud Fraud prevention Fraud detection IRS TIGTA