IRS RESPONSE TO RECOMMENDATION: ​The IRS is aware of the impact of Identity Theft (IDT) on taxpayers and places a high priority on working this inventory. Limiting the scope of Identity Theft Victim Assistance (IDTVA) employees as suggested could have a negative impact on the overall taxpayer experience. While we cannot limit all IDTVA employees’ assignments, we are taking multiple actions to address the IDT inventory. Note, there are some resolution actions that may require longer than 90 days to resolve on some IDT casework.

The IRS is committed to implementing multiple strategies to reduce the identity theft inventory and average cycle time by: limiting toll-free phone assignments of IDTVA Customer Service Representatives (CSRs); adding additional resources – We trained over 500 additional IDTVA employees on full scope identity theft to address the increase in IDTVA casework; allocating overtime funding to the IDTVA program to increase case resolution volumes; screening identity theft cases to determine if they can be closed systemically or moved to another area within the IRS if they were referred to IDTVA in error (no evidence of identity theft), to reduce cycle time; providing additional guidance on the necessity of filing Form 14039, Identity Theft Affidavit, to reduce the number of Forms 14039 received; collaborating with Research Applied Analytics Statistics (RAAS) to identify IDTVA cases that fit within an identified scheme criteria to pre-identify the fraudulent return for the IDTVA caseworker, thereby reducing the amount of research needed while improving efficiency; and leveraging IRS Lean Six Sigma capabilities to identify process improvements in current work processes.

CORRECTIVE ACTION: ​We are taking multiple actions to address the IDT inventory. The IRS is committed to implementing multiple strategies to reduce the identity theft inventory and average cycle time.

TAS RESPONSE: The IRS’s processing times for IDTVA cases are far too long and completely unacceptable. It’s encouraging the IRS is taking steps to reduce these timeframes, but the processing times have gotten so unwieldy that the IRS must take drastic measures until it reduces the timeframes. One measure should include a prohibition on redirecting IDTVA employees to other tasks until timeframes have reached a reasonable level. TAS understands the IRS is faced with difficult choices, but it should not continue to revictimize these taxpayers with processing timeframes reaching nearly two years.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2025

IRS RESPONSE TO RECOMMENDATION: We appreciate your support of the IRS goals of detecting and mitigating refund fraud while working to decrease burden on taxpayers who have filed legitimate returns. 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 have the correct balance between fraud detection and minimizing improper payments with the taxpayer experience and desire for fast return processing. We continually evaluate our filters to address this balance. Our 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 identity theft (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. We continue to collaborate with internal and external partners, including Taxpayer Advocate Service, to refine and automate refund fraud filters where appropriate. Each year we consider several factors to make the most efficient selections and improve performance while continuing to achieve our continued high level of protection.

When we select a return for pre-refund review, our goal is to validate the tax return and issue a refund as quickly as possible. A taxpayer can authenticate their identity by phone, on the web, or in person at a taxpayer assistance center. Once the authentication is successful, we complete the processing of the taxpayer’s return and quickly release the refund, generally within 21 days. We recognize that positive taxpayer experience is critical, but the risks are too high in the current environment to modify our pre-refund return selection criteria to set the FDR at a certain percentage.

CORRECTIVE ACTION: N/A

TAS RESPONSE: It is critical the IRS take steps to prevent the issuance of improper refunds, but it must balance this objective against taxpayer burden. Maintaining an FDR somewhere below 50 percent is largely consistent with private sector targets and would prevent hundreds of thousands of taxpayers from undergoing the laborious process of authenticating their identity, such as trying to reach an assistor on the IRS’s Taxpayer Protection Program (TPP) toll-free line or make an appointment at a TAC to authenticate their identity in person. TAS appreciates the IRS’s efforts to leverage information to develop accurate filters, and it should strive for these filters to be as narrow as possible while simultaneously protecting the government fisc. An FDR target somewhere below 50 percent would reduce taxpayer burden while still providing the IRS the flexibility it needs to design filters in a way that will prevent it from issuing improper refunds. Along with a lower FDR, the IRS must provide better customer service, mainly a higher Level of Service on the TPP phone line, which was only about 17 percent during FS 2024, and make it easier for taxpayers to schedule appointments at TACs to authenticate their identity.

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 agrees on the importance of better understanding the customer experience during the authentication process and is currently conducting pilots to gauge taxpayer behavior and improve response rates. Two examples are below.

A new plain language Notice 5071C which is sent to taxpayers who need identity and tax return verification, was tested during the 2023 filing season. Results were promising, including:

•  Recipients that received the letter were 1.9% more likely to register with IDVerify (IDV) and nearly 2% more likely to use IDV as their first channel, reducing mean first cost by $3.51.
•  First channel cost savings on 14,910 responses resulted in an estimated total cost savings of $52,334.10.
•  Color printing yielded minimal performance gains compared to the black and white letters.

As a result of this pilot, a new 5071C letter was developed and will be issued during the 2024 filing season. Similar plain language rewrites will be implemented for the remaining Taxpayer Protection Program letters beginning October 2024 and into 2025

The IRS continues to partner with TAS, conducting a study to determine the difference in timeframes for identity verification that some taxpayers may encounter. The partnership garnered assistance from the Low Income Tax Clinic (LITC) to survey tax preparers and taxpayers. The survey was developed and subsequently disseminated to a test group within the LITC in August 2022. The IRS analyzed the survey feedback and met with TAS to discuss the survey results along with additional feedback.

Recommendations from the test group included: establish the ability to authenticate identity at other federal agency offices (for example, at a US Post Office); add additional Tax Experience Days; include QR codes for additional information and for information in other languages; create shorter letters and use plain language; provide an ID theft indicator on transcripts; establish additional focus groups and complete a study that will analyze readability of IRS letters; review filter selections; and provide additional information on the Where’s My Refund application.

Based on the findings, the team expanded the survey to a wider swath of taxpayers. Moving into 2023, the team developed a moderator guide and developed questions specific to taxpayers, rather than tax professionals. Throughout 2023, in partnership with Counsel, the Taxpayer Advocate Service and IRS developed the Customer Feedback Survey and worked on the logistics of distributing the survey to individual taxpayers. The package has moved to the Office of Management and Budget for approval.

CORRECTIVE ACTION: The IRS agrees on the importance of better understanding the customer experience during the authentication process and is currently conducting pilots to gauge taxpayer behavior and improve response rates. A new 5071C letter was developed and will be issued during the 2024 filing season. Similar plain language rewrites will be implemented for the remaining Taxpayer Protection Program letters beginning October 2024 and into 2025.

Throughout 2023, in partnership with Counsel, the Taxpayer Advocate Service and IRS developed the Customer Feedback Survey and worked on the logistics of distributing the survey to individual taxpayers. The package has moved to the Office of Management and Budget for approval.

TAS RESPONSE: TAS appreciates the IRS’s continued willingness to partner and ensure that IRS notices – particularly its authentication notice – are clear and concise. As pointed out in the IRS’s response, it has taken a number of steps to ensure its authentication notices are easy for taxpayers to understand. However, it is TAS’s position that both the IRS and taxpayers would benefit from a more expansive pilot that focuses on the substance of the notice rather than on stylistic differences. Ensuring that the authentication notice is easy for taxpayers to understand may assist in increasing the number of taxpayers who respond to these notices, which is currently only about 50 percent. Additionally, as part of this pilot, the IRS should test sending multiple notices to taxpayers to see if such efforts would yield better results than the current IRS approach to sending “one-and-done.”

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing

IRS RESPONSE TO RECOMMENDATION: We appreciate the efforts to improve taxpayer experience and continue to pursue an appropriate balance with efforts to protect taxpayer data, including address information. Due to the nature of the correspondence, Taxpayer Protection Program (TPP) letters are issued to the address on the return and not the address of record when the return moves to the TPP program as an unposted return. This ensures that the address of a return with potential identity theft will not post since this address may not belong to the legitimate taxpayer. The process acts as a de facto address review. A taxpayer that is able to authenticate will have the opportunity to update the address of record at that time.

If a legitimate taxpayer’s return is filed when the potential identity theft return is in unpostable status, our process will allow the good return to post. We will use the address from the good return to update the address of record if it is different from the current address of record.

We are evaluating the potential of using the Taxpayer Correspondence Digital Transaction, which provides information from the U.S. Postal Service with data about undeliverable mail as well as updated address information when available, to assist with re-issuing TPP letters when a valid move address is in place. A study will have to be performed to determine if the new addresses belong to the actual taxpayer or the invalid taxpayer before actions are taken on a larger scale.

CORRECTIVE ACTION: We are evaluating the potential of using the Taxpayer Correspondence Digital Transaction, which provides information from the U.S. Postal Service with data about
undeliverable mail as well as updated address information when available, to assist with re-issuing TPP letters when a valid move address is in place. A study will have to be performed to determine if the new addresses belong to the actual taxpayer or the invalid taxpayer before actions are taken on a larger scale.

TAS RESPONSE: TAS understands the IRS’s need to move prudently when determining if an address is valid. However, taking additional steps beyond merely relying on the address on the return may better ensure that taxpayers receive these notices, improving the authentication notice low response rate.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2024

IRS RESPONSE TO RECOMMENDATION: The IRS initially implemented three methods for taxpayers to obtain an Identity Protection Personal Identification Number (IP PIN): Online using the Get an IP PIN application; Mailing Form15227, Application for IP PIN; or Visiting a Taxpayer Assistance Center.

In June 2023, the IRS included Form 15227 in the list of forms to be incorporated into the Digital and Mobile Adaptive Forms (DMAF). This will provide taxpayers with the option to electronically submit their Form 15227 to the IRS. The Form 15227 is under consideration for a calendar year 2025 release in DMAF.

CORRECTIVE ACTION: The IRS included Form 15227 in the list of forms to be incorporated into the Digital and Mobile Adaptive Forms (DMAF). This will provide taxpayers with the option to electronically submit their Form 15227 to the IRS. The Form 15227 is under consideration for a calendar year 2025 release in DMAF.

TAS RESPONSE: The IRS’s agreement to provide taxpayers with an electronic means by which they can submit Form 15227 is beneficial to both the IRS and taxpayers.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 9/30/2025

IRS RESPONSE TO RECOMMENDATION: The IRS’s most effective tool to prevent taxpayers from becoming a victim of tax-related identity theft, is the Identity Protection Personal Identification Number (IP PIN). The IP PIN is a six-digit number that authenticates the return being filed is from the true taxpayer. The IP PIN is only known by the taxpayer and the IRS, which prevents the filing of fraudulent returns by rejecting any returns submitted without the correct IP PIN.

To encourage additional taxpayers to opt into the IP PIN program, the IRS is developing a more concise communication plan to conduct outreach efforts to make taxpayers aware of the availability of the IP PIN, the three methods to voluntarily opt into the IP PIN program, and information regarding the IP PIN program. This communications plan includes Identity Protection Seminars at the IRS Nationwide Tax Forums. The first seminar was presented during the 2023 IRS Nationwide Tax Forum Seminar and will be delivered again at the 2024 IRS Nationwide Tax Forums.

CORRECTIVE ACTION: The IRS is developing a more concise communication plan to conduct outreach efforts to make taxpayers aware of the availability of the IP PIN, the three methods to voluntarily opt into the IP PIN program, and information regarding the IP PIN program. This communications plan includes Identity Protection Seminars at the IRS Nationwide Tax Forums. The first seminar was presented during the 2023 IRS Nationwide Tax Forum Seminar and will be delivered again at the 2024 IRS Nationwide Tax Forums.

TAS RESPONSE:It is critical that the IRS conduct outreach and leverage its public/private partnerships to educate taxpayers about the IP PIN program, the best means to prevent identity theft. TAS appreciates the IRS taking steps to reach a variety of partners, including those who attend the IRS Nationwide Tax Forums. However, it is critical that the IRS also leverage a variety of partnerships, particularly organizations that work closely with the nation’s most vulnerable groups of taxpayers, and private institutions, such as banks, credit unions, and credit card companies, that taxpayers may also be working with to resolve problems arising from identity theft. Making taxpayers aware of the IP PIN program through outreach will assist in preventing future identity theft and will save both the taxpayer and the IRS the expenditure of resources. The IRS’s outreach plan is a good first step, but it needs to integrate the financial sector and other organizations such as AARP more fully.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2024

IRS RESPONSE TO RECOMMENDATION: Funding provided by the Inflation Reduction Act initiative to Improve Self-Service Options, allowed the IRS to modify the online Get an IP PIN application to add an optout option for taxpayers who opt-in the IP PIN program voluntarily. Voluntary participation in the IP PIN Program is for taxpayers who are not victims of tax-related identity theft. The opt-out option is scheduled for implementation in May 2024. Taxpayers assigned an IP PIN due to being a victim of tax-related identity theft will not have the option to opt out. Victims of identity theft are placed into the IP PIN program to prevent them from becoming a repeat victim of identity theft.

CORRECTIVE ACTION: The IRS will modify the online Get an IP PIN application to add an optout option for taxpayers who opt-in the IP PIN program voluntarily. Voluntary participation in the IP PIN Program is for taxpayers who are not victims of tax-related identity theft. The opt-out option is scheduled for implementation in May 2024.

TAS RESPONSE: TAS is pleased the IRS is providing taxpayers who voluntarily opt into the IP PIN program the choice to opt out if they no longer wish to participate. We believe this option may encourage participation in the program as taxpayers will no longer feel confined by their choice to opt in.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

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