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United States: Further IRS Action Needed On New Fraud Detection System

Wednesday, 28 August 2013   (0 Comments)
Posted by: Author: Mike Godfrey
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Author: Mike Godfrey

According to a new audit released by the Treasury Inspector General for Tax Administration (TIGTA), the United States Internal Revenue Service (IRS) must take further action to ensure the successful deployment and implementation of its new fraud detection system.

The new system is intended to help identify fraudulent tax refunds prior to issuance, The IRS estimates the value of tax refund fraud at more than USD19.2bn each fiscal year, and the successful implementation of the 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, and it found that improvements were needed to address system development risks inherent with the introduction of new technology.

"Fraud detection systems are of critical importance in the fight against tax fraud," said J. Russell George, the TIGTA. "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."

The report 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.



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.

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