Without easily accessible customer  service information, taxpayers are less likely to be informed on what to  expect when requesting services from IRS. IRS Improved Aspects of Service but Inefficiencies and Potentially Weak Internal Controls Reduce IRS’s Ability to Serve IDT Victims and Protect Federal Dollars

		IRS Reduced Time to Resolve IDT Cases, but Inefficient Processes Contribute to Delays

IRS opens IDT cases when (1) it identifies potential IDT through its  automated filters and other reviews of taxpayer returns, or (2) taxpayers  alert IRS to potential IDT, such as when they are unable to file a tax  return electronically because a fraudster already filed one for that  taxpayer. In 3 of 16 cases we reviewed, file retrieval  and scanning contributed to delays and unnecessary requests for  documents. For cases 10 and 13, resolution was delayed by at least 1  month while the assistor waited for another unit to retrieve and scan  documents into IRS’s inventory system to use in reviewing the case. According to  IRS assistors and managers who participated in our discussion groups,  some assistors may release refunds that could be paid to fraudsters in  spite of having a refund hold in place on the taxpayer’s account. This can  occur even when indicators on the account show that the tax return is  under review for identity theft or that two returns have been filed for that  taxpayer’s account (duplicate return filing). IRS Does Not Notify Taxpayers When Any Dependents’ Information Appears on a Fraudulent Tax Return

IRS notifies primary and secondary taxpayers when it learns that either  have been a victim of IDT refund fraud, but it does not notify taxpayers  that their dependents’ information may have been used to commit fraud. However, this is not the case when a dependent’s identity is used as a  dependent on a fraudulent return, as we observed in case 11. IRS has previously provided guidance to taxpayers when a dependent  was a victim of identity theft. In the  letter, IRS provided information on actions that parents or guardians could  take to protect a minor’s identity. However, by not notifying the  taxpayers that their dependents’ information may have been used to  commit fraud, IRS is limiting taxpayers’ ability to take action to protect the  dependent’s identity. However, we  found instances where IRS’s processes for document retrieval and  scanning delayed case resolution. IRS agreed with our recommendations to develop and maintain an online  dashboard to convey customer service standards and performance  information; review its document retrieval and scanning processes to  provide additional training and guidance to ensure documents are not  requested unnecessarily; and revise its notices to IDT victims to alert  taxpayers of the need to protect dependent accounts from potential fraud  and supplement information on its website. IRS disagreed with the finding that it does not know the extent to which its  internal control processes prevent the release of fraudulent refunds and  with the related recommendation that it improve existing data and collect  new data to effectively monitor how often IRS issues refunds before  closing an IDT or duplicate return case. Further, IRS maintains that its current methods are sufficient for detecting  such errors and the problem is not widespread. In response to our draft report, in January 2017 officials  provided another analysis of IRS data that they said showed this type of  error does occur but may not be as widespread as the discussion group  participants suggested. We will continue to work with IRS to determine if  these additional data are sufficient to address our recommendation. Appendix I: Objectives, Scope, and Methodology

Our objectives in this report were to assess how well the Internal Revenue Service (IRS) provided customer  service compared to its performance in prior years and describe what  is known about the cost of calls on selected IRS telephone lines; how well IRS processed individual income tax returns compared to its  performance in prior years; and  IRS’s efforts to improve customer service for (IDT) victims, including  selected internal control processes. To answer the first two objectives, we obtained and analyzed IRS documents and data, including  performance, budget, and workload data for taxpayer services and  return processing, and used this information to compare IRS’s  performance in 2016 to 2011 through 2015, which allowed us to  identify trends and anomalies over a 6-year period;  collected data and interviewed IRS officials who manage IRS toll-free  telephone lines to understand how IRS plans and allocates its  resources managing its telephone service, and what data IRS has  available to achieve this, such as the average cost per call;  interviewed officials from IRS’s Wage and Investment division (which  is responsible for managing filing season operations) and external  stakeholders to obtain contextual information about IRS’s  performance. We held three discussion  groups with assistors and two groups with managers that oversee  assistors who handle IDT cases.
Why GAO Did This Study

GAO was asked to review IRS's 2016 filing season. This report assesses, among other things, how well IRS provided service to taxpayers compared to its performance in prior years, and its efforts to improve service for IDT victims, including selected internal control processes.
GAO analyzed IRS documents and data for fiscal years 2011 through 2016 and reviewed 16 randomly selected IDT cases open or closed during a 10-month period in 2015 and 2016. GAO also conducted 5 discussion groups with 15 IRS assistors and 13 managers who handle IDT cases, and interviewed IRS officials and external stakeholders, such as representatives from the tax preparation industry. The results of the case studies and discussion groups are not generalizable. GAO compared IRS actions to federal standards for evaluating performance and internal control.

What GAO Found

The Internal Revenue Service (IRS) provided better telephone service to callers during the 2016 filing season—generally between January and mid-April—compared to 2015. However, its performance during the full fiscal year remained low. IRS does not make this nor other types of customer service information easily available to taxpayers, such as in an online dashboard. Without easily accessible information, taxpayers are not well informed on what to expect when requesting services from IRS.
IRS has improved aspects of service for victims of identity theft (IDT) refund fraud. However, inefficiencies contribute to delays, and potentially weak internal controls may lead to the release of fraudulent refunds. In turn, this limits IRS's ability to serve taxpayers and protect federal dollars. While IRS has reduced its backlog of IDT cases and formed a team to improve its handling of these cases, GAO has identified areas for potential improvement. Specifically:
File retrieval and scanning processes contributed to delays and unnecessary requests for documents. For example, in 2 of 16 cases, resolution was delayed by at least 1 month while an assistor waited for another unit to retrieve and scan documents into IRS's system. In one of those cases, plus one other, the document request was unnecessary because the assistor closed the case without the document. Inefficient processes and unnecessary requests to retrieve and scan documents can delay case resolution and refunds to the legitimate taxpayer.
Potential weaknesses in IRS's internal control processes could lead to IRS paying refunds to fraudsters. In discussion groups with GAO, IRS assistors and managers said some assistors may release refunds even if indicators on the account show that the tax return is under review for IDT, or two returns have been filed for that taxpayer. Some participants said assistors answering telephone calls can release these holds because they do not understand the codes on the taxpayer's account. IRS officials said that these errors are not widespread and provided data to support their position. However, GAO identified weaknesses in those data, which IRS officials acknowledged. In response to this report, in January 2017 officials provided another analysis of IRS data that they said showed this type of error does occur but may not be as widespread as staff and managers suggested. GAO will continue to work with IRS to determine if these additional data are sufficient to address its recommendation.
IRS does not notify taxpayers when a dependent's identity appears on a fraudulent return. According to IRS officials, the agency does not consider a dependent to be a victim if his or her Social Security number had been used as a dependent on a fraudulent return. However, IRS has previously provided guidance to taxpayers when a dependent was a victim of identity theft. After one data breach in 2015, IRS notified taxpayers and provided information on actions that parents could take to protect a minor's identity when their dependents were also victims. By not notifying taxpayers that their dependents' information may have been used to commit fraud, IRS is limiting taxpayers' ability to take action to protect their dependents' identity.

What GAO Recommends

GAO recommends IRS display customer service standards and performance online; review its retrieval and scanning processes; improve existing data or collect new data to monitor how and why assistors release refunds before closing an IDT or duplicate return case; and revise its notices to IDT victims.
IRS disagreed with GAO's recommendation to improve data for monitoring refund releases, stating that the problem is not widespread and current processes are sufficient. GAO maintains that the data IRS uses are not sufficient to make such a determination. IRS agreed with the remaining three recommendations.