IRS to launch im­proved dig­i­tal tax claim sys­tem

The Washington Times Daily - - POLITICS - BY DAVID SHERFINSKI

The IRS is about to launch yet an­other dig­i­tal sys­tem de­signed to spot “friv­o­lous” tax re­turns af­ter the last sev­eral sys­tems let too many bo­gus claims through, ac­cord­ing to a re­cent tax au­dit re­leased this month.

The tax agency had thought it had solved the prob­lem when it moved to a new sys­tem in 2012, but there was a ma­jor drop in the num­ber of friv­o­lous tax claims flagged. Em­ploy­ees even­tu­ally fig­ured out the new sys­tem was miss­ing a num­ber of bo­gus claims.

So they went back to the orig­i­nal sys­tem — one the agency ini­tially had said was too time con­sum­ing. Yet the agency’s in­spec­tor gen­eral said the IRS is still miss­ing a num­ber of friv­o­lous tax claims, ei­ther be­cause em­ploy­ees aren’t trained well enough to spot them or be­cause the dol­lar thresh­old for in­ves­ti­gat­ing is too high.

The IRS in­sists it has a new sys­tem ready for the up­com­ing fil­ing sea­son that will fi­nally set things right.

“Our re­view iden­ti­fied that the IRS’ pro­cesses and pro­ce­dures are con­tribut­ing to the re­duc­tion in claims it iden­ti­fies,” Michael E. McKen­ney, deputy as­sis­tant in­spec­tor gen­eral for au­dit, wrote in his re­port.

His probe found that about 58,000 re­turns in­ves­ti­ga­tors ex­am­ined from 2015 didn’t get flagged, even though they should have hit an in­ter­nal trig­ger for ex­ces­sive tax with­hold­ing.

“Fraud pat­terns are con­stantly evolv­ing. As such, the IRS needs to con­tin­u­ously adapt its de­tec­tion pro­cesses to in­clude eval­u­at­ing the use of specific dol­lar tol­er­ances that may be known to fraud­sters,” Mr. McKen­ney wrote.

The IRS lists more than 50 po­ten­tial friv­o­lous claims, which in­clude a wide range of ex­cuses tax­pay­ers make to get out of pay­ing what they owe. Among those is the friv­o­lous redemp­tion claim, in which tax­pay­ers sub­mit false in­for­ma­tion about what they earned and what was with­held.

Spot­ting those claims has long been a goal for the tax-col­lect­ing agency.

The orig­i­nal sys­tem re­lied on com­puter soft­ware that forced users to probe data sets for prob­lems, and the IRS said it re­sulted in em­ploy­ees man­u­ally in­spect­ing some 180,000 re­turns per year.

In 2012, the IRS switched to a new, more au­to­mated soft­ware sys­tem for iden­ti­fy­ing the friv­o­lous claims.

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