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IRS Misrouting Taxpayer Referrals of Suspected Tax Fraud

23 April 2013   (0 Comments)
Posted by: Author: Mike Godfrey
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Source: Mike Godfrey

Many reports by individuals of suspected instances of United States federal tax fraud are being improperly routed and screened by the Internal Revenue Service (IRS), according to a new audit report released by the Treasury Inspector General for Tax Administration (TIGTA).

Under the IRS's system, its Accounts Management function receives the forms containing the referrals, and determines where to send them to be screened. In September 2012, TIGTA reported that the Accounts Management function misrouted referrals, or sent incomplete or unrelated referrals, to the various other business units and offices.

From the 2010 to 2012 fiscal years, the IRS's Small Business/Self-Employed (SB/SE) and the Wage and Investment (W&I) Divisions received and screened almost 275,000 referral forms. However, during that same period, it was found that, while examinations initiated from referrals resulted in more than USD66.5m in tax assessments, the IRS's ineffective routing and screening processes caused many of the referrals not to be selected for examination.

It was suggested that improvements to the process and better communication with the Account Management function would reduce the number of referrals the divisions receive, allowing both the SB/SE and W&I Divisions to process the forms more efficiently and effectively, as TIGTA determined both SB/SE and W&I Division screeners improperly screened referrals.

Neither division has a routine review process to evaluate screened referrals not selected for examination. Furthermore, the SB/SE does not have specific guidelines or instructions for screeners to use when screening referrals. Improving the process could, it was said, allow the divisions to select more referrals with examination potential.

"The IRS must ensure that it makes effective use of information from those individuals who report suspected tax fraud," said J. Russell George, the TIGTA. "This is a critical component of the IRS's enforcement efforts."


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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