The IRS should ensure that performance measures suitable for assessing the effectiveness of its identity theft initiatives, and associated data collection procedures, are in place at the beginning of the 2010 filing season, GAO has said.
IRS’s ability to detect identity theft-related refund and employment fraud is limited, but by the end of 2008, IRS had cataloged over 50,000 incidents, according to GAO-09-882.
It said that about 90 percent of fraudulent refunds were stopped in 2008 with about $15 million issued before IRS became aware of the fraud.
IRS does not know the amount of refund or employment fraud that goes undetected, GAO said.
It said that in 2008, IRS began implementing four new initiatives in an effort to better detect and resolve identity theft cases, including an identity theft indicator that IRS places on victims’ accounts so that IRS personnel can more easily recognize and assist the legitimate taxpayer in case of future account problems.
The agency has also decided to resolve legitimate taxpayers’ identity theft problems using a decentralized process whereby the work unit that discovers a problem has the responsibility to resolve it.
While the IRS is considering whether to expand screening, it does not know how well its current strategy is working. It told GAO it would develop performance measures, but GAO said it is not known whether the measures will be suitable for determining the effectiveness of the new initiatives, such as the number of false positives and negatives in the screening process or the success of the decentralized resolution process.
