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MSP #16: IDENTITY THEFT (IDT)

The IRS’s Procedures for Assisting Victims of IDT, While Improved, Still Impose Excessive Burden and Delay Refunds for Too Long

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #16-1

For identity theft victims with multiple issues, assign a sole IRS contact person (and provide with a toll-free direct extension to this contact person) to interact with identity theft victims throughout and oversee the resolution of the case. Alternatively, the IRS should conduct a pilot where selected identity theft victims with multiple issues are assigned a sole employee, and compare results (case resolution time, number of contacts, taxpayer satisfaction, quality, etc.).

IRS RESPONSE TO RECOMMENDATION: NTA Recommendation Not Adopted, as Written, but IRS Actions Taken to Address Issues Raised by NTA.  We provide victims of IDT with a special toll-free hotline for assistance, ensuring taxpayers can reach a trained IDT specialist any time during business hours, and not depend on the availability of a single IRS employee. All customer service representatives staffing this specialty line can review the taxpayer’s case file and respond to the IDT victim’s call. While we believe that this approach provides the best possible experience for the victim, we are reviewing call flow to identify any possible improvements.

The IDTVA, as a centralized IDT victim assistance operation, consolidated work that was previously performed by different parts of the IRS, reducing hand-off and multiple cases, thus expediting the resolution of all taxpayer issues. We expanded the case assignment logic to ensure the victims are assigned to an employee with the best skill for all issues and years.  For example, if a taxpayer has an exam assessment on one year but no compliance issues for other years, then the taxpayer’s cases for each tax year are assigned to an IDTVA exam employee who will resolve both the exam and other issues and years. Assigning the case to one employee results in consistent resolution and provides one contact to initiate and receive correspondence if additional information is required to resolve the case. The correspondence sent at case closing addresses each tax year.  We will continue to look for improvements in case management as a part of our IDTVA re-engineering team, which includes TAS members.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS appreciates the improvements that accompanied the creation of the IDTVA.  However, we still believe that victims will benefit from having a sole contact person within the IRS when calling to inquire about their IDT case.  The creation of a centralized unit in IDTVA is a step in the right direction, but the sole contact person concept should be extended to IDT victims who deal with other IRS functions.  Giving IDTVA employees access to CIS is a good idea, but IDT victims, who have undergone a traumatic crime, will be put more at ease if they have the name and number of someone they can deal with every time they call the IRS about their IDT case.  For the IRS to dismiss our recommendation because a single employee may not always be available to the victim (due to time differences or sick/annual leave) is disappointing.  TAS uses the sole contact person model, and our case advocates have ways of ensuring coverage during periods of unavailability (including a buddy system).  Are we really to believe that the IRS cannot think of a similar way to deal with the occasional instances when an IDT victim is unable to reach the designated sole contact person?

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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2.

TAS RECOMMENDATION #16-2

Track identity theft cycle time in a way that reflects the taxpayer’s experience more accurately — from the time the taxpayer submits the appropriate documentation to the time the IRS issues a refund (if applicable) or otherwise resolves all related issues.

IRS RESPONSE TO RECOMMENDATION: NTA Recommendation Not Adopted, as Written, but IRS Actions Taken to Address Issues Raised by NTA.  The IDTVA organization tracks the cycle time of IDT cases from the received date of the documentation until all actions are taken to resolve the case, including the action to release the correct refund. The former compliance inventory is now on CIS, and we have one inventory system that provides a consistent method for calculating cycle time from the received date of the taxpayer’s documentation until all actions have been taken to resolve the case. The current time to resolve cases in IDTVA’s inventory is generally below 120 days.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The improvements made by centralization of work under IDTVA reorganization have not resulted in an accurate measurement of IDT case cycle time.  TAS continues to urge the IRS to compute IDT case cycle time from the taxpayer’s perspective — i.e., from the date the case is first received by an IRS function until the date all related actions have been taken to completely resolve the case.  For example, even if IRS has taken an action to release a taxpayer’s refund, it should keep the case open until the refund is actually issued to the taxpayer.  If the IRS closes an IDT case prematurely, it distorts cycle time and underrepresents the harm suffered by IDT victims.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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3.

TAS RECOMMENDATION #16-3

Review and adjust its global account review procedures to ensure all related issues are actually resolved (including issuance of a refund, if applicable) prior to case closure, and conduct appropriate training for its employees.

IRS RESPONSE TO RECOMMENDATION: IRS currently conducts a global review process to ensure all related issues are resolved for all cases closed by the IDTVA operation, with only 5% of cases reviewed flagged for further action. The IDTVA Re-engineering Team, which includes members from TAS, reviewed the global review process and as a result, the following changes will be implemented:

  • Decreasing the time it takes for the global review tool to analyze cases
  • Improving the skills of the IDTVA employees
  • Enhancing procedures to decrease the number of cases referred to other functions

Update: The IDT Reengineering Team completed a comprehensive review of the Global Review process and submitted three recommendations, all of which were approved.  The results of recommendations being implemented include:

  • Change to the Global Review process that reduces by over 45% the number of cases required to go through the tool.  This eliminates cases that do not meet the criteria for an action to be taken going through the tool.  The elimination of these cases allows employees to focus on cases with a potential issue more timely.
  • Established new priority for referrals to other functions to be worked with a 30 day required turnaround time that includes built in ability to track when the timeframe is not met.
  • Provided new authority to the Global Review employees to take more actions on cases that they can correct without referring the cases to the other functions.
  • A review of referrals to be conducted annually will allow the site to identify additional training needs as well as provide feedback to sites that are causing the cases to need to be corrected.

CORRECTIVE ACTION: The IDTVA Re-engineering Team, which includes members from TAS, reviewed the global review process and as a result, the following changes will be implemented:

  • Decreasing the time it takes for the global review tool to analyze cases
  • Improving the skills of the IDTVA employees
  • Enhancing procedures to decrease the number of cases referred to other functions

TAS RESPONSE: TAS looks forward to seeing the recommendations made by the IDTVA Re-engineering Team that would address our concerns about the global account review process.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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4.

TAS RECOMMENDATION #16-4

Expand its IP PIN pilot to allow taxpayers in every state the ability to receive an IP PIN, and convey this option to taxpayers using multiple modes of communication.

IRS RESPONSE TO RECOMMENDATION: NTA Recommendation Not Adopted, as Written, but IRS Actions Taken to Address Issues Raised by NTA.  The Identity Protection Personal Identification Number (IP PIN) is one tool in our identity protection strategy. The IP PIN is a six-digit number that adds an additional layer of protection for taxpayers who are eligible to receive one. The IRS has determined that expanding the program is cost prohibitive, we are exploring other ways to prevent IDT that are less burdensome to the taxpayer.
Combating the sophisticated criminals perpetrating identity theft requires significant resources. With our present resource constraints, it is not possible for us to offer an IP PIN to everyone who has been a victim of IDT through breaches at other agencies or in the private sector. The IP PIN may not be the best level of protection for those taxpayers who have not been victims of tax-related IDT.

We are exploring other tools and solutions to increase security of taxpayer data available to a wider cross-section of taxpayers. For example, as a result of the recent Security Summit we are looking at strengthening authentication at the point of filing through collaboration with state tax administrators, tax software leaders, and payroll processing agents. During the Summit, we identified numerous new data elements that can be shared at the time of filing to help authenticate a taxpayer and detect identity theft tax refund fraud. The data has been submitted to the IRS and states with the tax return transmission for the 2016 filing season.

Another example is our effort to prevent fraudulent use of Forms W-2. Anticipating identity thieves’ continued efforts to obtain Forms W-2 and create counterfeit Forms W-2 in order to file false returns, the IRS launched a pilot program earlier this year testing the idea of adding a verification code to Form W-2 that would verify the integrity of Form W-2 data being submitted to the IRS.

For this pilot, the IRS partnered with four major payroll service providers. These providers added a special coded number on approximately 2 million individual Forms W-2 in a new box on the Form W-2 labeled “Verification Code;” each number generated was known only to the IRS, the payroll service provider, and the individual who received the Form W-2. The verification code cannot be reverse engineered, and since this identifier is unique, any changes to the Form W-2 information provided when filed are detected by the IRS. Individuals whose Forms W-2 were affected by the pilot and who used tax software to prepare their return entered the code when prompted to by the software program. The IRS plans to increase the scope of this pilot for the 2017 filing season by expanding the number and types of Form W-2 issuers involved in the test.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate commends the IRS for its efforts in working with other agencies and the private sector to explore various options to make tax return filings more secure.  TAS will collaborate with the IRS to explore better, more cost-effective ways to protect the accounts of IDT victims than expanding the issuance of IP PINs.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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