Posts Tagged ‘TIGTA’

IRS to Tax Professionals: Rules for Thee but Not for Us

Thursday, October 8th, 2015

Today I received an alert from the IRS that a new version of Publication 4557 is available. (At this point, only the web version of the publication is available.) Interestingly, the IRS notes the following:

To safeguard taxpayer information, you must determine the appropriate security controls for your environment based on the size, complexity, nature and scope of your activities. Security controls are the management, operational and technical safeguards you may use to protect the confidentiality, integrity and availability of your customers’ information. Examples of security controls are:

1. Locking doors to restrict access to paper or electronic files;
2. Requiring passwords to restrict access to computer files;
3. Encrypting electronically stored taxpayer data;
4 .Keeping a backup of electronic data for recovery purposes;
5. Shredding paper containing taxpayer information before throwing it in the trash.
6. Do not mail unencrypted sensitive personal information.

Further, Authorized IRS e-file Providers that participate in the role as an Online Provider must follow the six security, privacy and business standards to better serve taxpayers and protect their individual income tax information collected, processed and stored. See “Safeguarding IRS e-file” in Publication 1345 for more information. [emphasis added]

There’s nothing wrong with these recommendations; in fact, they’re excellent. But note that the IRS says that authorized e-file providers that participate in the role as an Online Provider must follow these rules.

I highlighted the last rule (#6, above) regarding mailing unencrypted sensitive personal information. Why? Because the IRS is one of the biggest offenders in this area. Indeed, just yesterday TIGTA (the Treasury Inspector General for Tax Administration) issued a report stating this. From the TIGTA press release:

In Fiscal Year 2014, the IRS mailed more than 141 million notices and 37 million letters to taxpayers for various reasons, to help them understand and meet their tax obligations. In a prior review, TIGTA reported that the IRS had not made significant progress in redacting or masking taxpayers’ SSNs from systems, notices, and forms. This audit was initiated to assess the IRS’s progress in eliminating taxpayer SSNs from correspondence.

TIGTA found that as of January 2015, the IRS estimates that it has removed SSNs from 58 (2 percent) of the 2,749 types of letters and 93 (48 percent) of the 195 types of notices it issues.

“A person’s Social Security Number is the most valuable piece of personal data identity thieves can obtain.” said J. Russell George, Treasury Inspector General for Tax Administration. “The fact that the IRS does not have processes and procedures to accurately identify all correspondence that contain Social Security Numbers remains a concern.”

There’s not much to add to this. The IRS needs to act on this as they are a far larger source of identity theft than tax professionals. I state that as I open up an IRS letter and an IRS notice to clients that both contain their social security numbers. And there was the IRS notice which didn’t have the full social security number but put the number within a bar code instead….

TIGTA: “IRS Can’t Track International Correspondence.” IRS: “So What.”

Wednesday, September 30th, 2015

The nature of my practice is such that I have a relatively large number of clients who live outside the United States. When one of my expatriate clients gets an IRS notice, I shudder. The IRS offices that handle international issues have issues with correspondence coming from the US. I’ve had to send the same item five times to the ITIN office…where it was lost five times. (At least they were consistent.) It turns out that the IRS doesn’t know what happens to much of the mail the agency sends overseas.

It was no surprise when I read a report issued by TIGTA (the Treasury Inspector General for Tax Administration) today titled, “Planned Improvements Have Not Been Made to Manage and Track Correspondence With International Taxpayers.” Here’s what TIGTA found:

Even though the IRS sent approximately 855,000 notices and letters to U.S. taxpayers living in other countries during Calendar Year 2014, it cannot determine taxpayer response rates. The lack of data on response rates for international taxpayers is problematic because this information is needed to determine the effectiveness of international correspondence on increasing taxpayer compliance and to make program improvements.

IRS data systems are not designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable. Other factors complicate the delivery of international mail, making its delivery less certain than domestic correspondence.

In addition, the IRS generally does not know if international taxpayers receive the tax correspondence sent to them. Without specific controls to monitor and metrics to measure international tax correspondence, the IRS cannot determine the impact of its international tax correspondence on taxpayer compliance.

TIGTA made five recommendations; the IRS disagreed with all but one of them:

While the IRS generally agreed that TIGTA’s recommendations could provide additional insight into the factors contributing to undeliverable international mail, it does not believe this information would permit the IRS to overcome budgetary, statutory, and operational constraints as needed to achieve appreciable improvement in its current processes. TIGTA does not believe that the IRS’s response is adequate because current IRS processes for addressing international mail issues are ineffective or nonexistent.

So what should you do if you’re an international taxpayer? The easiest solution is to have someone in the US designated to receive a copy of your correspondence from the IRS. You can do this by completing Form 8821 and checking box 5a (“If you want copies of tax information, notices and other written communications sent to the appointee on an ongoing basis, check this box”). The instructions for Form 8821 are here.

By the way, I completely agree with what TIGTA wrote–that the IRS’s response is inadequate. But don’t worry, the IRS’s Annual Filing Season Program is continuing….

The Scamsters Haven’t Stopped

Thursday, May 1st, 2014

One of my clients called me first thing this morning (we’ll call him Joe from Richmond, Virginia; all names and cities have been changed to protect the innocent and guilty). Joe said he got a phone call from David. David identified himself as working for the IRS in Seattle. David accused Joe of not paying his taxes from 2008 – 2011; that Joe had not responded to a threat of a lawsuit that was mailed to him in December 2013; that unless Joe acted that lawsuit would be filed by the IRS. David told Joe Joe’s address and the first five digits of Joe’s social security number to “verify” his story.

Joe hung up the phone on David.

The phone call Joe received was almost certainly a variation of this scam:

TIGTA Warns of “Largest Ever” Phone Fraud Scam Targeting Taxpayers

WASHINGTON — The Treasury Inspector General for Taxpayer Administration (TIGTA) today issued a warning to taxpayers to beware of phone calls from individuals claiming to represent the Internal Revenue Service (IRS) in an effort to defraud them.

“This is the largest scam of its kind that we have ever seen,” said J. Russell George, the Treasury Inspector General for Tax Administration. George noted that TIGTA has received reports of over 20,000 contacts and has become aware of thousands of victims who have collectively paid over $1 million as a result of the scam, in which individuals make unsolicited calls to taxpayers fraudulently claiming to be IRS officials.

“The increasing number of people receiving these unsolicited calls from individuals who fraudulently claim to represent the IRS is alarming,” he said. “At all times, and particularly during the tax filing season, we want to make sure that innocent taxpayers are alert to this scam so they are not harmed by these criminals,” George said, adding, “Do not become a victim.”

Inspector General George urged taxpayers to heed warnings about the sophisticated phone scam targeting taxpayers, noting that the scam has hit taxpayers in nearly every State in the country. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. The scammers threaten those who refuse to pay with arrest, deportation or loss of a business or driver’s license.

The truth is the IRS usually first contacts people by mail – not by phone – about unpaid taxes. And the IRS won’t ask for payment using a pre-paid debit card or wire transfer. The IRS also won’t ask for a credit card number over the phone.

“If someone unexpectedly calls claiming to be from the IRS and uses threatening language if you don’t pay immediately, that is a sign that it really isn’t the IRS calling,” he said.

The callers who commit this fraud often:

  • Use common names and fake IRS badge numbers.
  • Know the last four digits of the victim’s Social Security Number.
  • Make caller ID information appear as if the IRS is calling.
  • Send bogus IRS e-mails to support their scam.
  • Call a second time claiming to be the police or department of motor vehicles, and the caller ID again supports their claim.

If you get a call from someone claiming to be with the IRS asking for a payment, here’s what to do:

  • If you owe Federal taxes, or think you might owe taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.
  • If you don’t owe taxes, call and report the incident to TIGTA at 800-366-4484.
  • You can also file a complaint with the Federal Trade Commission at www.FTC.gov. Add “IRS Telephone Scam” to the comments in your complaint.

TIGTA and the IRS encourage taxpayers to be alert for phone and e-mail scams that use the IRS name. The IRS will never request personal or financial information by e-mail, texting or any social media. You should forward scam e-mails to phishing@irs.gov. Don’t open any attachments or click on any links in those e-mails.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes winner) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

Given that Joe has paid his taxes without fail every year, that the IRS would send multiple notices about unpaid taxes, and the fact that the IRS doesn’t file lawsuits (the US Department of Justice acts as the legal arm for the IRS when the IRS initiates legal action), the chance that David was telling the truth is about the same as it snowing in Las Vegas in August.

Joe did the right things. He reported this to TIGTA (see above on how to do that), and he has saved (for now) the follow-up phone message where David whined at Joe for hanging up the phone on him and that action “wasn’t professional.” Joe also sent in an Identity Theft Affidavit to the IRS because it appears others do have his confidential personal information. (He’ll also be adding fraud alerts to his credit reports.)

Almost always, the IRS initiates contact through the US mail. If you owe significant money, IRS Collections will sometimes knock on your door and leave a business card. If you file an appeal with the IRS, that conversation may come by phone (but you would first get a letter from IRS Appeals).

If you get a phone call like Joe did, it probably is a scam. If you owe taxes, call the IRS back (800-829-1040); they can tell you if your account has been assigned to collections and whom to contact. If you don’t owe the IRS money, call TIGTA.

I’m hopeful that David and his ilk see the inside of ClubFed for a long, long time.

While I Was Out: TIGTA Assails IRS’s ITIN Management and Did Harry Reid Violate the Law?

Wednesday, August 8th, 2012

My vacation is over, and that’s not a good thing (for me). While I was enjoying my time off, our Congresscritters remain in a bickering mood. A close election–and this year’s presidential race will likely be one such race–means that neither side wants to give. Who cares about all those expiring tax laws at year-end, or the AMT patch….

Meanwhile, the Taxgirl (Kelly Phillips Erb) has a post regarding Senator Harry Reid’s remarks about Republican presidential candidate Mitt Romney’s taxes. A CPA is claiming that Senator Reid’s remarks are illegal. As a Nevadan, the remarks appear distasteful. IRS Commissioner Shulman, I suppose, will have to decide whether to forward the case to the Department of Justice. And given that Senator Reid is a Democrat, the chance of any prosecution is the same as it snowing today in Las Vegas (it’s 101 F right now).

Meanwhile, TIGTA (the Treasury Inspector General for Tax Adminstration) released a report that’s very critical on the Individual Taxpayer Identification Number (ITIN) program. From the Highlights of the report:

This audit was initiated because TIGTA received IRS employee complaints referred from members of Congress alleging that IRS management responsible for overseeing the ITIN operation was encouraging employees to assign ITINs to applicants when the ITIN application was fraudulent…

TIGTA substantiated many of the allegations set forth in the IRS employees’ complaints. The complaints alleged that IRS management is not concerned with addressing questionable applications and is interested only in the volume of applications that can be processed, regardless of whether they are fraudulent.

The audit found that the ITIN application review and verification process is so deficient that there is no assurance that ITINs are not being assigned to individuals submitting questionable applications. Because of lax documentation requirements to obtain an ITIN, tax fraud can go undetected.

Ouch. This report is absolutely scathing. The IRS has “Eliminated successful processes used to identify questionable ITIN application fraud patterns and schemes.” There’s plenty more, and the entire report should be read. Reuters has a report on it, too.

At Least They Got 30% Right…

Thursday, December 24th, 2009

Government efficiency is usually thought of as an oxymoron. Yet another example of this has come to light—this time, in the world of tax. The Treasury Inspector General for Tax Administration (TIGTA) audited the IRS’ assignment of Individual Taxpayer Identification Numbers (ITINs) and found:

“TIGTA reviewed a sample of ITIN applications and found that almost 70% contained significant errors and/or raised concerns that should have prevented the issuance of an ITIN. The IRS estimates that it has issued more than 14 million ITINs as of December 2008.”

And we’re going to be giving healthcare work to the IRS, too?!?

HatTip: TaxProf Blog