Most Serious Problem: Processing Delays

Refund Fraud Filters Continue to Delay Taxpayer Refunds for Legitimately Filed Returns, Potentially Causing Financial Hardship  

The IRS has designed a number of filters to assist in the detection and prevention of non-identity theft (non-IDT) refund fraud (the Pre-Refund Wage Verification Program or PRWVH). Despite improvements to this program for filing season 2019, issues persisted that affected both taxpayers and TAS, including: delays in releasing legitimate refunds; false positive rates (FPR) as high as 71 percent; and inadequate information as to the reasons for refund delays and what steps taxpayers can take to expedite the process. 

Taxpayers whose returns are selected into the non-IDT refund fraud program often experience delays in receiving the refunds claimed on their original returns. About a quarter of the returns selected by a new filter for filing season 2019 took more than 40 days to be processed. This delay was due in part to the Social Security Administration’s (SSA) slow transmittal of paper Form W-2 information, which is used to verify information on returns. Further, half the legitimate returns that comprise the 71 percent FPR took more than four weeks to be processed. Additionally, out of a review of 309 TAS PRWVH case receipts between August 25 and August 31, 2019, 236 waited an average of 141 days from the date the returns were filed to be screened and determinations made that the information on the returns could not be verified. While it is essential for the IRS to prevent fraud and protect revenue, these processing delays caused a financial hardship for many taxpayers. Compounding taxpayers’ frustration is that not all taxpayers whose refunds are held as part of the non-IDT refund fraud program receive the same periodic update notices, and when taxpayers do receive a letter, it does not always provide guidance as to what they can do to expedite the process. The financial hardship caused by refund delays, along with inadequate IRS notices, contributed to a 405 percent increase in TAS non-IDT refund fraud inventory from January 1 through September 30, 2019, compared with the same timeframe in 2017. 

The National Taxpayer Advocate includes administrative recommendations to address this Most Serious Problem.

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