TAS Research Reports
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This report is a continuation of our study published in 2022 detailing the features of online accounts offered by state taxing authorities and a few foreign countries. The prior report focused on online accounts for individuals. The first part of this year’s report discusses the findings of a small number of targeted interviews conducted with individual taxpayers about their preferences and opinions of IRS online account resources and features as well as the authentication criteria necessary to access their account information. The second part of the report is similar to last year’s report but focuses on online accounts offered to businesses and tax professionals by the taxing authorities of states and some foreign countries.
The IRC authorizes the IRS to ban taxpayers from claiming certain refundable credits – the Earned Income Tax Credit, the Child Tax Credit, or the American Opportunity Tax Credit – for two years if it determines that the taxpayer claimed the credit recklessly or with intentional disregard of rules and regulations. Over the years, TAS has conducted several research projects to examine whether the IRS is following its own procedures when imposing the two-year ban on one of these credits. This study follows up on those earlier projects and revisits the IRS’s adherence to its procedures when imposing the two-year ban. TAS reviewed a representative sample of 352 cases where the IRS imposed the two-year ban as a result of audits closed in fiscal year (FY) 2022 or the first eight months of FY 2023. This review showed the IRS often did not follow its own procedures.
This brief report details a recently implemented TAS Research study on taxpayers likely eligible for refunds the IRS froze because of suspected identity theft. Each year, the IRS freezes a few million refund returns with characteristics possibly indicative of an identity thief having filed the return. However, at least half of these returns are shown to be submitted by the legitimate taxpayer. The IRS sends a single letter asking the taxpayer filing a return suspected of identity theft to authenticate their identity and verify their tax return information before it will release the claimed refund. But each year, some taxpayers wait months to complete this process with the IRS, and many other taxpayers contact TAS months after they should have received their refund to find out where it is. TAS believes many legitimate taxpayers may be entitled to refunds still frozen by the IRS and is exploring the effect of sending a letter to a sample of likely legitimate taxpayers offering TAS assistance to complete the IRS identity verification process. TAS mailed these outreach letters in early December 2023 and will send a follow-up letter in early January to taxpayers who did not respond to the first outreach letter. TAS will track both the number of respondents and whether the taxpayer could successfully verify their identity and tax return information. TAS will report the results of this study in a future report.