Late 2010 Legislation Resulted In IRS Having Electronic Return Originators Hold 6.5 Million E-Filed Tax Returns

The enactment of legislation in late 2010 resulted in IRS having Electronic Return Originators hold 6.5 million e-filed tax returns for transmission on Feb. 14, the Treasury Inspector General for Tax Administration (TIGTA) said in an audit released on April 18. (Audit Report No. 2011-40-032) In addition, the agency held some 100,000 paper tax returns received prior to that date. The audit provided interim results for the 2011 filing season through March 5. Auditors found programming errors that led to the issuance of erroneous First-Time Homebuyer Credits and Non-Business Energy Property Credits. According to the audit, IRS had received returns from 9,859 individuals claiming over $124 million in Adoption Credits, with 6,974 (or 71%) of the claims “either having invalid, insufficient, or missing documentation to support the legitimacy of the claims.” IRS also identified 335,341 tax returns with $1.9 billion claimed in fraudulent refunds and prevented the issuance of $1.8 billion (or 97%) of those fraudulent refunds. The agency also selected 63,501 tax returns filed by prisoners for fraud screening, representing an 88% increase compared to last filing season. In addition, auditors visited 26 Taxpayer Assistance Centers and “assistors answered all 35 tax law questions accurately.” On the downside, auditors encountered an average waiting time of 62 minutes before they received assistance. “Our interim report on the IRS filing season provides a valuable opportunity for review, which is mixed again this year,” said J. Russell George, the inspector general. “On the one hand, the IRS is to be commended for its sharpened focus on fraud interception and prevention,” George said, adding that “on the other, its efforts to prevent improper credits still leave much to be desired, and customer service problems continue.” He urged IRS officials to solve the problems that were identified “without delay.” The audit is available at http://www.treasury.gov/tigta/auditreports/2011reports/201140032fr.pdf.