Watchdog: IRS should improve handling of ID-theft cases

The IRS should take steps to improve its handling of identity-theft cases, the Government Accountability Office [GAO] said in a report made public Tuesday.

“Protecting federal dollars, while enhancing IRS’s case management and protecting taxpayer dependents, can help bolster the public’s confidence in the tax system,” GAO said.

ID theft has been one of the IRS’ top concerns in recent years. GAO said that the IRS has improved some aspects of its customer service for ID-theft victims and has shrunk its backlog of cases.

However, GAO found that the IRS has some inefficiencies in its file-retrieval and scanning processes that could result in the agency delaying providing tax refunds to legitimate taxpayers.

The report also found that the IRS doesn’t have good enough data to track whether IRS employees are releasing refunds before ID-theft cases associated with those refunds are closed. Additionally, GAO said that the IRS hasn’t been notifying taxpayers when their dependents’ Social Security numbers are listed as dependents on fraudulent returns, according to the report.

GAO recommended that the IRS look at its document retrieval and scanning processes to find potential areas to improve its efficiency and revise notices to ID-theft victims to include information about whether dependents were listed on fraudulent returns. The IRS agreed with these suggestions.

The watchdog also suggested that the IRS improve its data to monitor how often IRS agents are releasing refunds before closing ID-theft cases relating to those refunds. But the IRS told GAO it thinks this problem is not widespread and its current methods for finding these errors work well. 

GAO also examined the IRS’ customer service during the 2016 filing season.

The IRS had increased funds from congressional appropriations and user fees last year, and GAO found that the IRS had significantly improved its telephone service in 2016.

During last year’s tax-filing season, 72 percent of people who wanted to talk to an IRS employee on the phone were able to do so, up from 37 percent the year before. The average telephone wait time during the 2016 filing season was 11 minutes, down from 23 minutes the year before, according to the report.

However, the IRS doesn’t make information about the level of telephone service and the average wait times easy to find on the agency’s website. GAO recommended that the IRS develop an online dashboard to display information about its customer service performance, and the agency agreed with the recommendation.