IRS RESPONSE TO RECOMMENDATION: Letters are sent to taxpayers for each tax module in which a refund is frozen. Taxpayers can authenticate using various methods including over the phone, in person at a TAC office, and online. Further, the Where’s My Refund? app has been enhanced to provide Taxpayer Protection Program and non-identity theft letter information. If there is no response to the letter, the case moves into the appropriate IDT treatment stream.

CORRECTIVE ACTION: N/A

TAS RESPONSE: While the IRS sends letters to taxpayers for each tax module with a frozen refund, TAS Research has demonstrated that a follow-up letter significantly increases the taxpayer response rate. This conclusion is drawn from a study conducted by TAS in partnership with the IRS Refund Integrity Compliance Services office.

The study delved into the reasons behind the delays in the authentication process, revealing that many taxpayers reported never receiving the IRS letter requesting identity verification. This highlights the need for a more proactive communication strategy, in pursuit of the taxpayers’ right to be informed, to ensure that taxpayers can swiftly resolve their tax issues and access their rightful refunds. Declining to take what TAS considers to be a reasonable action of sending follow-up letters to taxpayers who did not respond to the initial letter is a missed opportunity by the IRS to provide quality service.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

IRS RESPONSE TO RECOMMENDATION: Letters are sent to taxpayers for each tax module in which a refund is frozen. Taxpayers can authenticate using various methods including over the phone, in person at a TAC office, and online. If there is no response, the case moves into the appropriate IDT treatment stream.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS acknowledges the current IRS procedures that inform taxpayers about their still frozen refunds and the multiple methods established to verify their identities. TAS study results demonstrated an increase in taxpayers proactively reaching out to the IRS for identity validation if they received a follow-up letter. Taking this step will ensure more taxpayers can access their refunds.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

IRS RESPONSE TO RECOMMENDATION: The IRS appreciates the support for detecting and mitigating refund fraud while working to decrease burden on taxpayers who have filed legitimate returns and continually evaluates the filters to address this balance. The filters are used to protect taxpayers that had their tax related data compromised due to data breaches/losses. Also included were schemes due to social media promotions that were originally identified as potential IDT. These cases were not treated as IDT; however, these cases were referred for other non-IDT compliance treatments including Frivolous Filer, audits, and/or Automated Questionable Credits. The IRS continues to collaborate with internal and external partners, including TAS, to refine and automate refund fraud filters where appropriate. Each year several factors are considered to make the most efficient selections and improve performance while continuing to achieve a continued high level of protection.

Roughly 98% of refund returns are not selected by fraud filters. The remaining 2% often have reported information that may not adhere to known patterns and may not have the information returns needed to validate reported amounts. Without proper validation, the IRS risks issuing improper refunds. The IRS strives to properly balance fraud detection and minimizing improper payments against the taxpayer experience and desire for fast return processing.

When a return is selected for pre-refund review, the goal is to validate the tax return and issue a refund as quickly as possible. Taxpayers can authenticate their identity by phone, on the web, or in person at a taxpayer assistance center. Once the authentication is successful, the processing of the taxpayer’s return is completed and the refund is quickly released, generally within 21 days. A positive taxpayer experience is critical, but the risks are too high in the current environment to modify the pre-refund return selection criteria to arbitrarily set the false detection rate at a certain percentage.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS appreciates the IRS involving us in the collaborative discussion and commends the proactive measures taken to safeguard taxpayer data. TAS study results identified an area of concern: More than half of the taxpayers currently identified by the IRS’s model do not appear to be victims of identity theft. To enhance the accuracy and efficacy of the IRS’s efforts, TAS strongly urges the IRS to reassess the IDT filter program. Developing more effective methods to accurately identify true victims can significantly reduce the incidence of false identity theft detections and better serve those genuinely in need of protection.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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