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US Treasury Inspector Reviews 2013 Filing Season

by Mike Godfrey, Tax-News.com, Washington

24 December 2013


The Treasury Inspector General for Tax Administration (TIGTA) has issued his annual review of the United States Internal Revenue Service's (IRS) performance during the 2013 filing season, and, in particular, whether it processed individual paper and electronically filed tax returns accurately and on time.

The IRS announced it had to delay the start of the filing season to make the changes necessary to implement provisions of the American Taxpayer Relief Act, which became law on January 2, 2013. However, "despite the delays, the IRS timely processed the majority of tax returns, and tax refunds were issued within 45 days of the April 15 tax return due date," said J. Russell George, the TIGTA.

The TIGTA found that, as of May 4, 2013, the IRS received approximately 133.6m tax returns, down from the 134.6m returns filed during the same period in 2012. More than 113.5m (nearly 85 percent) of the returns were filed electronically, up from nearly 111.8m e-filed in 2012.

The TIGTA also found that the IRS issued more than 99.5m refunds totaling more than USD264bn, compared to nearly 101.2m refunds totaling more than USD274bn in 2012. The average refund decreased slightly to USD2,656 in 2013, compared with USD2,708 during the same period last year.

The IRS reported that it identified just over 579,000 tax returns with USD3.6bn claimed in fraudulent refunds during tax return processing and prevented the issuance of USD3.47bn (96.4 percent) of those refunds. "The IRS is continuing to expand its efforts to identify and prevent fraudulent tax returns from being processed," George noted.

However, the TIGTA's report also raised concerns about the potential misuse of the split refund option to direct multiple tax refunds to the same bank account. The TIGTA notified the IRS in February that it appeared some tax refunds were being incorrectly directed to tax preparers' accounts.

The TIGTA had identified 385,500 tax returns with direct deposits totaling more than USD150.8m made to almost 47,000 bank accounts that had three or more deposits from different taxpayers into these accounts. The TIGTA determined that 248,000 (64 percent) of these tax returns were prepared by a paid tax preparer.

In addition, it found that many paid tax return preparers continue to be non-compliant with Earned Income Tax Credit (EITC) due diligence requirements. As of March 2, the TIGTA identified over 122,100 paid tax return preparers filing 708,300 tax returns claiming USD2bn in EITC without the required checklist form attached to the tax return. This equates to more than USD354m in penalties that could potentially be assessed by the IRS.

TAGS: compliance | tax | tax compliance | law | United States | standards | penalties | individual income tax | Tax

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