Most Serious Problem: False Positive Rates

IRS fraud detection systems generate high false positive rates (FPRs) and long processing times, which increase taxpayer burden, generate phone calls to the IRS, and create TAS cases.  Several IRS policies affect the ability of taxpayers to timely receive legitimate refunds, including the IRS’s failure to capture necessary information to evaluate the accuracy and efficiency of its non-IDT and IDT refund fraud programs; its past failure to check for third-party information on a daily, versus weekly, basis; and its failure to implement systemic verification capabilities in its fraud detection systems.  Simple adjustments such as these could very well prevent taxpayers from being selected into the pre-refund wage verification process or could expedite the release of the return if selected, allowing the IRS to better use its resources to verify returns where there is a substantial potential for fraud.

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