Mohana Ravindranath | Nextgov | April 6, 2017 | 0 Comments

IG: IRS Needs to Better Use Data to Crack Down on Tax Fraud

The Internal Revenue Service headquarters building in Washington. J. David Ake/AP File Photo

About two weeks from Tax Day, taxpayers should be especially wary of scams attempting to steal their personal information and file fraudulent returns, a congressional committee warned.

The House’s Small Business Committee on Wednesday probed the inspector general with the Treasury Department's IG for Tax Administration about whether the Internal Revenue Service is equipped to protect taxpayer data from criminals.

Tax fraud is a growing threat, and criminals are getting creative. The IRS has recently published several notices detailing phishing attempts in which criminals pose as customers for tax preparers, requesting last-minute changes to their deposit procedures; or another scam in which criminals pretend to be company executives asking payroll managers for lists of employees and their associated W-2 forms.

» Get the best federal technology news and ideas delivered right to your inbox. Sign up here.

But the IRS “is not using data it has readily available to proactively identify potential business identity theft,” according to a TIGTA report. The agency does use “identity-theft” filters that would flag suspicious tax returns by examining inconsistencies in the “amounts claimed for income and withholding, filing requirements, prisoner status, taxpayer age, and filing history,” the TIGTA report said.

Though he declined to recommend a specific number of filters he thought would be more effective in catching criminals, Inspector General J. Russell George noted the IRS is planning to expand the number and testified the agency is “proactive ... to help produce processes to identify” criminal activity.

The IRS has also struggled to resolve the accounts identified as fraudulent, the report noted. In TIGTA’s analysis of 100 accounts between 2012 and 2013, the IRS took 278 days on average to fix them—and 17 of those were not resolved correctly.

“To be clear, this is not an issue of funding at the IRS,” Committee Chairman Steve Chabot, R-Ohio, said. “It is an issue of priorities at the IRS. If the IRS can pay off big bonuses to its employees, some of whom were implicated in the targeting of Americans for their political views, it should be able to find the money to protect people’s data from identity thieves.”

And if the agency can “prioritize the enforcement of Obamacare over basic customer service, then there really is no excuse for failing to protect taxpayer information from thieves,” he added.

Asked whether the IRS should simply provide notices to taxpayers once their paper returns are filed so they’re immediately aware if someone else has filed on their behalf, George said the agency’s advice has been to “file early so that you beat the bad guy,” which was “extraordinarily troubling.”

Comments
JOIN THE DISCUSSION

Thank you for subscribing to newsletters from Nextgov.com.
We think these reports might interest you:

  • Modernizing IT for Mission Success

    Surveying Federal and Defense Leaders on Priorities and Challenges at the Tactical Edge

    Download
  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

    Download
  • Effective Ransomware Response

    This whitepaper provides an overview and understanding of ransomware and how to successfully combat it.

    Download
  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

    Download
  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

    Download

When you download a report, your information may be shared with the underwriters of that document.