As detailed previously, we provided the Director, Return Integrity and Compliance Services, Wage and Investment Division, with notifications and files detailing erroneous payments we identified and recommended that the IRS evaluate the discrepancies to identify why the payments were made to prevent additional periodic payments to ineligible taxpayers. In addition, we recommended that the IRS add a stop payment transaction code to taxpayer accounts to prevent them from receiving additional improper advance Child Tax Credit payments.

2 - Closed

On August 9, 2021, we notified the Director, Return Integrity and Compliance Services, Wage and Investment Division, of our concerns related to eligible taxpayers who did not receive their advance Child Tax Credit payments. We recommended that the IRS evaluate the discrepancies to identify why periodic payments were not made to eligible taxpayers.

3 - Closed

On June 29, 2021, we notified the Director, Return Integrity and Compliance Services, Wage and Investment Division, that the messaging provided on the IRS’s eligibility assistant tool and the presentation of information related to the advance Child Tax Credit payments on IRS.gov may be confusing to taxpayers. For example, the link to “Get Answers on the Advance Child Tax Credit” that is located on the IRS.gov main page takes taxpayers to the Advance Child Tax Credit Payments in 2021 web page; however, the links to get the questions and answers is at the bottom of the screen. We recommended that the IRS consider revising the messaging and presentation of information on its platforms to make it clear for taxpayers.

4 - Closed

On January 28, 2022, we notified the Director, Return Integrity and Compliance Services, Wage and Investment Division, that we identified 2.2 million taxpayers who had their direct deposit information updated by the IRS between August 23 and October 5, 2021. We recommended that the IRS conduct an outreach effort to inform taxpayers of the possibility that their advance payments may have been sent to payroll allotment accounts. This outreach effort could include sending a separate letter to the impacted taxpayers.

5 - Closed

The Director, Return Integrity and Compliance Services, Wage and Investment Division, should develop and implement processes and procedures to include data validation on incoming files from third-party sources prior to their use.

Treasury Inspector General for Tax Administration

Delays in Management Actions Contribute to the Continued Tax Processing Center Backlogs

Full Details: Oversight.gov Report Page

Audit | 9/16/2022

1 - Closed

On September 16, 2021, we notified the Director, Submission Processing, Wage and Investment Division, that the IRS needed to identify when to stop coding and editing9 prior year tax returns to prevent having to rework these returns (a situation that occurred during the 2020 Filing Season). For example, the IRS needed to send 822,994 business tax returns back to the Code and Edit function at the beginning of Processing Year 2021 to be re-edited to allow for processing. This occurred because these tax returns, although edited, had not been entered into the IRS’s tax processing system by the end of Processing Year 2020. This resulted in an inefficient use of the IRS’s resources because IRS employees needed to re-edit the tax returns. We recommended that the IRS develop a plan to not only limit the number of returns that would require rework, but also any potential downtime in the Code and Edit function so that resources can be maximized for processing tax returns.

2 - Closed

On September 29, 2021, we notified the Director, Submission Processing, Wage and Investment Division, of our observation that paper-filed information returns were being sorted and batched. According to both Tax Processing Centers, a decision had not yet been made regarding if the information return documents will be processed or destroyed. As we reported in September 2021,10 the IRS faced similar decisions during Processing Year 2020 and destroyed approximately 30 million paper-filed information return documents around March 19, 2021, because the documents could no longer be processed through its systems. We recommended that the IRS determine if/when Processing Year 2021 paper-filed information return documents would be processed. As an alternative to destroying these documents, we recommended that management evaluate and consider scanning the information return documents using the Service Center Recognition Image Processing System while forgoing the data validation process.

3 - Closed

On September 17, 2021, we notified the Director, Submission Processing, Wage and Investment Division, of our concerns with the processing of a backlog of taxpayer address changes using a first-in/first-out method. As of August 27, 2021, the Ogden Entity function had more than 173,000 address change requests in its ending inventory. In our discussions with Ogden Entity function management, they estimated that due to the backlog of inventory, more than 50 percent of the address change requests the staff were working had already been made by other means, e.g., the filing of a tax return that automatically updates the taxpayer’s address. As such, Entity function employees were needlessly expending resources working address change requests for which the address was already updated. We recommended that the IRS evaluate changing the order in which address changes are worked to a last-in/first-out method.

4 - Closed

On October 21, 2021, we notified the Director, Submission Processing, Wage and Investment Division, of our concerns related to the accuracy of information communicated to taxpayers regarding transcript request methods. For example, our review of information posted on IRS.gov found that non-paper-based methods for requesting tax transcripts were not communicated clearly. Whereas, the Form 4506-T, Request for Transcript of Tax Return, and Form 4506, Request for Copy of Tax Return, provide information for automated self-help service tools. We also found that the instructions on the Forms 4506 and 4506-T do not align with the website wording and could cause confusion for taxpayers. We recommended that IRS management update IRS.gov to provide clear communications on available resources. This includes updating the Forms 4506 and 4506-T tip sections to match IRS.gov language and conducting outreach to encourage individual taxpayers to obtain tax transcripts using the various automated methods.

5 - Closed

On September 16, 2021, we notified the Director, Submission Processing, Wage and Investment Division, of our concerns about the printing capacity of the new electronic fax (e-fax) equipment in the Error Resolution System functional area, noting that this new equipment can only print about 20,000 to 30,000 pages/month (approximately 240,000/year) whereas, the prior equipment printed roughly 2 million documents per year. In addition, in the three months since Ogden received this new equipment, it has burned out and needed new parts. Although Ogden ordered new multifunctional print devices, those were not to be delivered until January 2022. As a workaround, Ogden used two printers that had a capacity of about 15,000 pages per month. We recommended that the Submission Processing function collaborate with Managed Print Services and the Information Technology organization to identify and expeditiously resolve all instances of printer capacity, break/fix, etc. issues that are causing work stoppages in the Tax Processing Centers.

6 - Closed

On December 17, 2021, we notified the Commissioner, Wage and Investment Division, of our concern that the resources assigned to the RAIVS unit were not commensurate between the Kansas City and Ogden Tax Processing Centers. In our discussions, IRS management advised that taxpayer tax transcript requests had been previously transshipped from the Kansas City Tax Processing Center to the Austin Tax Processing Center with the last transshipment of work occurring in October 2021. On January 11, 2022, we notified the Director, Submission Processing, Wage and Investment Division, of the same concern noting that during our December 2021 walkthroughs, Kansas City management stated they have 70 full-time employees in the RAIVS/Income Verification Express Service’s unit. Whereas, Ogden management stated they have 183 full-time employees. As of December 10, 2021, the Kansas City RAIVS unit had over 751,000 unprocessed requests compared to a little more than 145,000 unprocessed requests in the Ogden RAIVS unit. We recommended that the IRS evaluate alternatives to address the volume of RAIVS inventory at the Kansas City Tax Processing Center. This should include an evaluation of the capacity to reallocate staffing at the Kansas City Tax Processing Center to assist the RAIVS unit, and/or realignment of work among the various Tax Processing Centers, i.e., transship inventory from Kansas City to Ogden.

7 - Closed

The Commissioner, Wage and Investment Division, should immediately take steps to address the imbalance of Tax Processing Center staffing and inventory to address the continued backlog of transcript requests.

8 - Closed

The Commissioner, Wage and Investment Division, should develop a detailed strategy to show how current and future staffing resources, including available surge team members, will be used to address the significant backlog of amended returns in the Submission Processing function’s inventory.

9 - Closed

The Commissioner, Wage and Investment, should ensure that the various products and IRS.gov landing pages are updated to reflect acceptable methods for faxing information to the IRS.

Special Inspector General for Pandemic Recovery

Independent Review of 4003(b) Loan Recipient’s Validation Memo – Republic Airways, Inc.

Full Details: Oversight.gov Report Page

Treasury Inspector General for Tax Administration

The IRS’s Inability to Keep Pace with Non-Corporate Applications for Refund of Net Operating Losses Under the CARES Act Has Cost Taxpayers Millions of Dollars in Additional Interest

Full Details: Oversight.gov Report Page

Audit | 9/07/2022

Date Range

Report Type

Report Category

Submitting Agency

Agency Reviewed

Related Organizations

Management Challenges

Any Recommendations

Any Open Recommendations

Reports

Independent Review of 4003(b) Loan Recipient’s Validation Memo – Timco Engine Center, Inc.

Independent Review of 4003(b) Loan Recipient’s Validation Memo – Timco Engine Center, Inc.

Independent Review of 4003(b) Loan Recipient’s Validation Memo – Ovation Travel Group, Inc.

Independent Review of 4003(b) Loan Recipient’s Validation Memo – Caribbean Sun Airlines, Inc.

Independent Review of 4003(b) Loan Recipient’s Validation Memo – SpinLaunch Inc.

Reporting on the Use of Coronavirus Response Funding Could Be Enhanced

American Rescue Plan Act: Accuracy of Advance Child Tax Credit Periodic Payments

Delays in Management Actions Contribute to the Continued Tax Processing Center Backlogs

Independent Review of 4003(b) Loan Recipient’s Validation Memo – Republic Airways, Inc.

The IRS’s Inability to Keep Pace with Non-Corporate Applications for Refund of Net Operating Losses Under the CARES Act Has Cost Taxpayers Millions of Dollars in Additional Interest

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