Identity Theft: Additional Actions Could Help IRS Combat the Large, Evolving Threat of Refund Fraud
Saturday, October 18th, 2014 @ 4:13AM
GAO-14-633: Published: Aug 20, 2014. Publicly Released: September 22, 2014
What GAO Found
Based on preliminary analysis, the Internal Revenue Service (IRS) estimates it paid $5.2 billion in fraudulent identity theft (IDT) refunds in filing season 2013, while preventing $24.2 billion (based on what it could detect). The full extent is unknown because of the challenges inherent in detecting IDT refund fraud.
IDT refund fraud takes advantage of IRS’s "look-back" compliance model. Under this model, rather than holding refunds until completing all compliance checks, IRS issues refunds after conducting selected reviews. While there are no simple solutions, one option is earlier matching of employer-reported wage information to taxpayers’ returns before issuing refunds.