Watchdog: IRS needs new tech to fight fraud

A Government Accountability Office report flagged identity theft and unpaid taxes as two of the most pressing challenges facing IRS. Better tech and planning could help solve both.

shutterstock image id ID: 186823331 by DD Images
 

The IRS must do a better job implementing new tools, technologies and strategies to combat identity theft and refund fraud and collect unpaid taxes.

That's the conclusion the Government Accountability Office reached in its latest annual report on high-risk government programs, released Mar. 6. While the agency has made notable strides in both areas over the past few years, GAO flagged the two issues as the most pressing challenges IRS must overcome to improve enforcement of its tax laws.

The IRS has reported that incidents of tax-related identity theft have continued to drop precipitously since the agency improved coordination with industry and tax providers on security issues in 2015. However, the GAO report notes that an explosion of hacks against government and private-sector entities over the years has flooded the black market with much of the same personally identifiable information about Americans that IRS relies on to authenticate taxpayers and process returns.

The report recommends that the agency continue to work on and improve its authentication policies, including looking at new tools and technology. James McTigue, Director of Strategic Issues at GAO, said there are over 100 different types of interactions between a taxpayer and IRS that require some form of authentication.

The GAO report said IRS officials have not completed updating authentication procedures to align with 2017 guidance from the National Institute of Standards and Technology. While the agency has developed a road map for how it wants to improve authentication across the agency, it currently lacks a solid plan for how to implement that vision.

"What we did find was that even though IRS was very careful about identifying these initiatives that it needs to undertake, it really hasn't estimated how much it would cost to do these things and haven't come up with a way to prioritize different initiatives," said McTigue.

McTigue laid out a number of ideas that should be on the table: implementing security keys or tokens; expanding a pilot program that assigns identity protection PIN numbers to previous victims of tax fraud; developing distinct taxpayer identifiers to cut down on the overlap of PII; and developing a way to send event-driven notifications to taxpayers, similar to how banks alert customers about potentially fraudulent activity on their accounts.

"The point is that it may be the case that one size doesn't fit all -- maybe not everybody would be comfortable with a secure key device," he said. "For those folks, maybe an IT pin is a better approach."

An IRS spokesperson declined to comment on the GAO report, but  pointed to Sept. 2018 congressional testimony by Chief Privacy Officer Edward Killen.

Killen told the House Ways and Means Committee then that changes put in place have led to a sharp decrease in reported instances of tax related identity theft, but he also acknowledged that "the proliferation of personally-identifiable information that is out in the ecosystem [from data breaches] makes it fundamentally more difficult to authenticate an individual."

While the agency is attempting to adapt to those realities, it won't be able to solve the problem alone.

"There will be some things we can do on our own, unilaterally, but in many instances we will need to partner with folks, both in the public sector and in the private sector…to help us work through this."

Closing the 'tax gap'

The tax gap is defined as the difference between true tax liability in a given year and the amount the IRS actually receives at the end of filing season. The most recent figures provided by the IRS show that between 2008 and 2010, the tax gap averaged $458 billion, though McTigue said the agency is able to recoup about $52 billion every year with current efforts.

That leaves more than $400 billion in uncollected tax revenue every year, and the GAO report makes it clear that IRS could do more to leverage the data it collects to further close the gap. In 2017, then-IRS commissioner John Koskinen said the agency's main fraud detection tool, the Return Review Program, had expanded to incorporate more than 200 different data filters designed to root out tax return fraud.

However, the research that feeds into the program is "ad-hoc" and the report recommends that the agency develop a more comprehensive data strategy.

NEXT STORY: Census braces for cyberattacks

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.