The IRS acknowledged that the system they use to detect digital fraud was not updated before the 2006 tax year. This failure may have led to $300 million being paid in bogus tax returns.
The “Electronic Fraud Detection System,” or EFDS was supposed to have been updated before the filing system began. But it wasn’t, and the IRS estimates that only about one-third of fraudulent returns were discovered. The Treasury Inspector General for Tax Administration (TIGTA) is conducting its own investigation into the mess.
Congressional response was predictable—anger. Senator Chuck Grassley (R-IA) noted, “I wonder if the IRS ever would have come clean if Congressional committees hadn’t started looking into this issue.”
In our opinion, the answer is easy—No.