The National Taxpayer Advocate’s office recently revealed that the IRS’s automatic fraud-detection tools are not functioning properly. According to Tax Pro Today, thousands of tax returns have been unnecessarily flagged, resulting in delayed refund payments for many taxpayers.
The refund fraud filter, also known as “Filter X,” was only recently deployed to serve during the 2019 tax season. It has since marked over 1.1 million tax returns as potentially fraudulent. Once a return is marked by the filter, processing is halted until it can be determined whether the document is in violation of IRS guidelines or whether the program produced a false positive. The false positive rate for Filter X is a whopping 71%, meaning that out of every 100 tax returns flagged, only 29 of them were actually fraudulent.
While the IRS has shown attempts to improve the taxpayer experience with the changes made in accordance with the recently passed Taxpayer First Act, this level of dysfunction within the tax return processing system clearly shows that there is still a long way to go. In her recent annual report to Congress, temporary IRS Taxpayer Advocate Service head Bridget Roberts cited the limited funding of the IRS, the passing of the Taxpayer First Act, and the lack of a permanent head to her own department as issues in the IRS’s functionality.
Roberts acknowledged that “by passing the Taxpayer First Act, Congress has sent the IRS a clear message that it needs to rethink the way it operates – the services it provides, its organizational structure, the way it trains employees, and the technology it uses,” and detailed the funding issues that are proving to make this operational change difficult.
The IRS is one of the lowest-performing government agencies when it comes to customer experience, which Roberts attributes both to budgetary constraints as well as an internal culture which does not place enough emphasis on the needs of the taxpayers. The report also highlighted the lack of availability that the IRS shows to tax payers, with only 29% of all calls to the agency actually being answered. It also detailed issues with actual tax collection, as well as the File Free program, which is currently only being used by about 2% of taxpayers, with even fewer returning to use the program the following year.
The IRS responded to the report, reaffirming the important of the National Taxpayer Advocate’s role within the IRS and assuring taxpayers that the agency is doing everything it can to address the issues that Roberts raised, with IRS Spokesperson Dean Patterson saying that “IRS leadership will be reviewing this year’s report to help us in our continuing efforts to help the nation’s tax agency improve and evolve.” Hopefully this means more positive changes in the functionality and customer experience of the IRS in the near future.