The Internal Revenue Service has been developing a new system to detect fraudulent tax returns to replace an outdated system, but has not been able to phase out the old system, which could cost taxpayers an estimated $18 million per year to run both systems, according to a new report.
The report, from the Treasury Inspector General for Tax Administration, said the IRS originally developed the Electronic Fraud Detection System back in 1994, and it remains the IRS’s main system for detecting fraudulent returns. The EFDS is designed to maximize revenue protection and fraud detection when tax returns are filed to reduce the issuance of questionable refunds. The IRS has been developing its Return Review Program to replace the EFDS due to fundamental limitations in technology and design. However, the IRS has not set a termination date nor established a retirement plan for the EFDS.
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