The Internal Revenue Service needs to do more to improve its new fraud detection system, according to a new audit released this morning by the Treasury Inspector General for Tax Administration (TIGTA). The new program is intended to help identify fraudulent tax refunds prior to issuance, but more needs to be done.
The IRS estimates tax refund fraud at more than $19.2 billion each fiscal year. The successful implementation of the IRS’s new fraud detection system, known as the Return Review Program, is expected to increase the dollar amount of fraudulent tax refunds identified annually and also to help the IRS to reduce improper payments.
TIGTA conducted this audit to determine if the IRS was adequately managing the development risks associated with its new fraud detection system. TIGTA found that improvements were needed to address system development risks inherent with the introduction of new technology.
The report also made six recommendations for system development process improvements. The IRS agreed with those recommendations and reported that it had completed two corrective actions prior to the issuance of TIGTA’s final report.
“Fraud detection systems are of critical importance in the fight against tax fraud,” said J. Russell George, Treasury Inspector General for Tax Administration . “If deployed correctly, the Return Review Program could significantly enhance the IRS’s capabilities to prevent, detect, and resolve tax refund fraud, including identity theft,” he added.
The full text of the TIGTA audit report is available for free here.
Frank Nemecek covers money, taxes, and investing. Read more of his work on his blog, ChiefMoneyNerd.com.