According to a new report from the Treasury Inspector General for Tax Administration (TIGTA), the IRS has improved their investigations in fraudulent tax returns involving identity theft, but they need to be more factual with their identity theft estimates.
To determine the efficiency of the IRS when it comes to detecting and preventing identity theft, tax problems, and how they work with other agencies and tax industry partners to coordinate information, the TIGTA performed an audit.
Through this report, they found that 568,329 undetected fraudulent tax returns with refunds totaling more than $1.6 billion for tax year 2013, dropping more than $523 million from the prior year.
To reduce these fraudulent activities, the TIGTA believes the new Jan. 31 deadline for employers to file their W-2 forms with the Social Security Administration will be helpful.
Here are six recommendations that the TIGTA provided from investigating the audit, sourced from Accounting Web:
- Include all accelerated W-2s to compare with tax returns for possible identity theft.
- Identify and evaluate potential fraud in tax returns by creating a principle.
- Use state lead data to help evaluate tax returns
- Use tax return data to find the refund amount associated with electronically filed tax returns that were rejected when computing revenues
- Review revenues to ensure that duplicate tax returns are deleted.
- Tax returns with mismatched income because of duplicated income documents should not be considered for potential identity theft.