The process that the IRS uses to assess the risk of improper payments in its revenue program is unreliable, the Treasury Inspector General for Tax Administration has said.
It said that while the process resulted in a reasonable assessment of the risk of improper payments for IRS administrative programs, that the assessment results may not accurately reflect the risk of improper payments in the IRS’s revenue program funds.
According to TIGTA, the assessment uses a questionnaire that fails to provide an adequate assessment of the risk associated with tax refunds and does not include areas of potential risk within tax administration, the assessment process selects programs for evaluation based on fund groups rather than by significant broad-based activities, and it did not follow Department of the Treasury guidance.
The agency determined that only the Earned Income Tax Credit Program was at high risk for improper payments but TIGTA said past reports indicate otherwise.
For example in 2012, TIGTA reported that the Individual Taxpayer Identification Number Program was so deficient that there was no assurance that ITINs are not being assigned to individuals submitting questionable applications. It also said the Additional Child Tax Credit and fraudulent refunds posed a risk.
The IRS agreed with recommendations to work with Treasury to better identify the programs to be included in the risk assessment for improper payments and refine the questionnaire to ensure that all questions are applicable to tax administration, as well as to develop a formal process for assigning responsibility for the completion of the risk assessments, and develop a process to ensure Treasury guidance is being followed.
