GAO: Low-Income Housing Tax Credit: Actions Needed to Strengthen Oversight and Accountability
The LIHTC program, established under the Tax Reform Act of 1986, is the largest source of federal assistance for developing affordable rental housing and will represent an estimated $8.5 billion in forgone revenue in 2017. LIHTC encourages private-equity investment in low-income rental housing through tax credits. The program is administered by IRS and allocating agencies, which are typically state or local housing finance agencies established to meet affordable housing needs of their jurisdictions.
In its 2015 and 2016 reports, GAO found IRS oversight of the LIHTC program was minimal. Additionally, IRS collected little data on or performed limited analysis of compliance in the program. Report.
GAO: Employment Taxes: Timely Use of National Research Program Results Would Help IRS Improve Compliance and Tax Gap Estimates
The IRS uses its National Research Program to study tax compliance issues. The program recently completed a study on employment tax returns filed between 2008 and 2010, but the IRS has not made plans to analyze the results of this study.
GAO looked at the study results and found that noncompliance in reporting taxable wages most frequently involved how workers were classified (and whether employers had to withhold and pay employment taxes for them), and fringe benefits (such as moving expenses). Report.
TREASURY OIG: Without Expanded Error Correction Authority, Billions of Dollars in Identified Potentially Erroneous Earned Income Credit Claims Will Continue to Go Unaddressed Each Year
This report presents the results of the Treasury Inspector General for Tax Administration's (TIGTA) review to determine whether the Internal Revenue Service complied with the annual improper payment reporting requirements for Fiscal Year 2015.
In the report, the IRS estimates that 23.8 percent ($15.6 billion) of EITC payments were issued improperly in Fiscal
Year 2015. In addition, TIGTA estimates that the potential Additional Child Tax Credit improper payment rate for Fiscal Year 2015 is 24.2 percent, with potential improper payments totaling $5.7 billion, and estimates that the potential American Opportunity Tax Credit improper payment rate for Fiscal Year 2015 is 30.7 percent, with potential improper payments totaling $1.8 billion. Report.
Breitbart: IRS Paid Out More than $23 Billion in Bogus Tax Credits Last Year
GAO: Internal Revenue Service: Preliminary Observations on the Fiscal Year 2017 Budget Request and 2016 Filing Season Performance
TREASURY OIG: Interim Results for the 2016 Filing Season
One of the continuing challenges the IRS faces each year in processing tax returns is the implementation of new tax law changes as well as changes resulting from expired tax provisions. This review addresses the major management challenge of Implementing the Affordable Care Act and Other Tax Law Changes. Report.
Life Health Pro: Watchdog finds 194 weird PPACA tax credit claims
TREASURY OIG: Affordable Care Act: Internal Revenue Service Verification of Premium Tax Credit Claims During the 2015 Filing Season
The Affordable Care Act created the refundable Premium Tax Credit (PTC) to help offset the cost of health care insurance for those with low or moderate income. According to the IRS, almost $11 billion in Advance PTCs (APTC) was paid to insurers in Fiscal Year 2014. During the filing season, 7,849 taxpayers received approximately $21 million more in PTCs than they were entitled to receive and 46 taxpayers received $5,390 less in PTCs than they were entitled to receive. Report.
Washington Examiner: Watchdog: IRS gave out $30M too much to Obamacare enrollees
GAO: Information Security: IRS Needs to Further Improve Controls over Financial and Taxpayer Data
The Internal Revenue Service (IRS) made progress in implementing information security controls; however, weaknesses in the controls limited their effectiveness in protecting the confidentiality, integrity, and availability of financial and sensitive taxpayer data.
The agency had not always (1) implemented controls for identifying and authenticating users, such as applying proper password settings; (2) appropriately restricted access to servers; (3) ensured that sensitive user authentication data were encrypted; (4) audited and monitored systems to ensure compliance with agency policies; and (5) ensured access to restricted areas was appropriate. In addition, unpatched and outdated software exposed IRS to known vulnerabilities. Report.
Federal Times: GAO: Access issues continue to hamper IRS cybersecurity
GAO: IRS Referral Programs: Opportunities Exist to Strengthen Controls and Increase Coordination across Overlapping Programs
Reports by the public of suspected underreporting of taxes or other tax violations can help IRS detect millions of dollars in taxes that would otherwise go uncollected. IRS received about 87,000 information referrals in fiscal year 2015.
Fragmentation and overlap across IRS’s general information referral process and eight specialized referral programs, such as for reporting identity theft and misconduct by return preparers, can confuse the public trying to report tax noncompliance to IRS. Yet coordination between referral programs is limited, and IRS does not have a mechanism for sharing information on crosscutting issues and collaborating to improve the efficiency of operations across the mix of referral programs. As a result, IRS may be missing opportunities to leverage resources and reduce the burden on the public trying to report possible noncompliance. Report.
TREASURY OIG: Continued Inconsistent Use of Over-age Correspondence Lists Contributes to Taxpayer Burden and Unnecessary Interest Payments
Delays in processing taxpayers’ correspondence create a burden for taxpayers who must wait to obtain assistance and, in some cases, receive refunds. Over-aged correspondence has steadily increased from 40 percent in Fiscal Year 2012 to 49 percent in Fiscal Year 2015. The Treasury Inspector General for Tax Administration (TIGTA) found some managers continue to not adhere consistently to the required use of over-age reports, which contributes to the IRS’s inability to effectively reduce over-aged inventory. Report.
Government Executive: The IRS’ Slow Response to Taxpayer Letters Is Costing Everyone
GAO: Treasury and OMB Need to Reevaluate Long- standing Exemptions of Tax Regulations and Guidance
The public relies on IRS guidance to understand complex tax laws and meet their responsibilities. GAO was asked to examine IRS guidance and rulemaking processes.
In a review of tax guidance, GAO found few instances in which the Office of Management and Budget (OMB) determined that a tax regulation was likely to have significant economic effects and would thus be subject to additional analysis. OMB’s significance determinations largely result from initial assessments by the Department of Treasury (Treasury) and IRS that many administrative law or executive order requirements do not apply to most tax regulations and other guidance.
GAO also reviewed eight case files of non-regulatory IRS guidance documents published in 2015 and found that IRS did not consistently document required steps during key phases of the issuance process. Report.
GAO: Tax Debt Collection: IRS Needs to Define Field Program Objectives and Assess Risks in Case Selection
RS’s Field Collection program is where IRS revenue officers make in-person contact with noncompliant individuals and business officials to enforce tax return filing and payment requirements. Sound processes for selecting cases are critical to maintain taxpayer confidence in the tax system and use federal resources efficiently.
GAO found weaknesses in the Field Collection program’s internal controls for case selection, including: program objectives are not clearly defined and communicated and documentation and assessment of case selection risks are inadequate. Report.
GAO: Program Integrity: Views on the Use of Commercial Data Services to Help Identify Fraud and Improper Payments
Federal agencies may use commercial data services in conducting program integrity activities designed to identify fraud and improper payments, which pose a significant risk to the integrity of federal programs. For example, federal agencies may obtain commercial data—subject to applicable laws and protections—that identifies individuals' deaths, income and assets, or other information that may help the agency determine whether individuals or entities are eligible for a government program or benefit.
Officials from selected federal agencies told GAO that using commercial data services can help their agencies improve the efficiency of program integrity activities. For example, Internal Revenue Service (IRS) officials told GAO that using commercial data service providers to provide web and phone-based services to help authenticate certain taxpayer's identities likely allowed their staff to focus on other work rather than deal with large volumes of in-person requests for identity authentication. Commercial data services can also provide federal agencies access to private sector data, such as bank deposit information, that is not available from federal government sources. This financial information may help agencies to determine whether individuals have income from work or assets that indicate they are not eligible for certain programs, such as disability programs. Report.
FedScoop: Audit: How some agencies are using commercial data services
GAO: IRS Whistleblower Program: Billions Collected, but Timeliness and Communication Concerns May Discourage Whistleblowers
The Internal Revenue Service (IRS) Whistleblower Office (WO) is responsible for processing thousands of tax whistleblower claims annually for two related whistleblower programs: for claims of $2 million or less, the 7623(a) program, and for claims over $2 million, the 7623(b) program. The whistleblower claim review process takes several years to complete, and GAO found that the WO is not using available capabilities to track and monitor key dates in its claim management system. Without available information on key dates related to award review and payments, the WO is unable to assess its performance against timeliness targets and risks unnecessarily delaying award payments.
Tax whistleblowers who report on the underpayment of taxes by others have helped IRS collect almost $2 billion in additional revenue since 2011, when the first high-dollar claim was paid under the expanded program that pays qualifying whistleblowers a minimum of 15 percent of the collected proceeds. These revenues help reduce the estimated $450 billion tax gap—the difference between taxes owed and those paid on time. Report.
GAO: Low-Income Housing Tax Credit: Joint IRS-HUD Administration Could Help Address Weaknesses in Oversight
Internal Revenue Service (IRS) oversight of the Low-Income Housing Tax Credit (LIHTC) program has been minimal. Specifically, since 1986 IRS conducted seven audits of 56 state housing finance agencies (HFA) on which IRS relies to administer and oversee the program.
Oversight of HFAs has been minimal, partly because LIHTC is viewed as a peripheral program in IRS in terms of its mission and priorities for resources and staffing. Without such reviews, IRS cannot determine the extent of noncompliance and other issues at HFAs.
Joint administration with HUD could better align program responsibilities with each agency's mission and more efficiently address existing oversight challenges. Under joint administration, IRS could retain responsibilities consistent with its mission (as it does in the other two tax credit programs). Report.
GAO: Identity Theft and Tax Fraud: Enhanced Authentication Could Combat Refund Fraud, but IRS Lacks an Estimate of Costs, Benefits and Risks
IRS estimated it prevented $24.2 billion in fraudulent identity theft (IDT) refunds in 2013, but paid $5.8 billion later determined to be fraud. Because of the difficulties in knowing the amount of undetected fraud, the actual amount could differ from these point estimates. IDT refund fraud occurs when an identity thief uses a legitimate taxpayer's identifying information to file a fraudulent tax return and claims a refund.
The Internal Revenue Service's (IRS) fraud estimates met several GAO Cost Guide best practices, such as documenting data sources and detailing calculations. However, the estimates do not reflect the uncertainty inherent in measuring IDT refund fraud because they are presented as point estimates. Report.
Forbes: IRS Paid $5.8 Billion In Fraudulent Refunds, Identity Theft Efforts Need Work
GAO: Identity Theft: Additional Actions Could Help IRS Combat the Large, Evolving Threat of Refund Fraud
Based on preliminary analysis, the Internal Revenue Service (IRS) estimates it paid $5.2 billion in fraudulent identity theft (IDT) refunds in filing season 2013, while preventing $24.2 billion (based on what it could detect). IDT refund fraud takes advantage of IRS's “look-back” compliance model. Under this model, rather than holding refunds until completing all compliance checks, IRS issues refunds after conducting selected reviews. Report.
Ways and Means: GAO: Action Needed to Combat $5 Billion Tax Refund Fraud
GAO: Federal Tax Collection: Potential for Using Passport Issuance to Increase Collection of Unpaid Taxes
According to the Internal Revenue Service (IRS), as of the end of fiscal year 2010, the balance of reported unpaid federal taxes was about $330 billion. Given the many challenges that IRS faces, the enforcement of the tax laws and the tax code is on GAO's list of high-risk areas.
State issued passports to about 16 million individuals during fiscal year 2008; of these, over 224,000 individuals (over 1 percent) owed over $5.8 billion in unpaid federal taxes as of September 30, 2008. State is not authorized to restrict the issuance of passports to individuals because they owe federal taxes.
If Congress is interested in pursuing a policy of linking federal tax debt collection to passport issuance, it may consider taking steps to enable State to screen and prevent individuals who owe federal taxes from receiving passports. This could include asking State and IRS to jointly study policy and practical issues and develop options with appropriate criteria and privacy safeguards. Report.
Forbes: 2016 Brings IRS Power Over Passports, Use Of Private Debt Collectors