Sunday, November 3, 2013

IRS Audit Finds 1 in 4 Error Rate in Scanned Taxpayer Correspondence

    An audit by the Office of the Inspector General (OIG) released on October 24 found that while the IRS has improved the timeliness of scanning taxpayer correspondence into its Correspondence Imaging System (CIS) since an audit six years ago, the accuracy rate has apparently declined during that same time period.  The declining accuracy rate occurred even as the volume of paper correspondence fell nearly 20% from 10 million documents annually to about 8.1 million.  While the 2007 audit found database input errors in 18 percent of cases sampled, the 2013 rate was closer to 1 in 4 (24 percent.)
    From the report:
In its new audit, TIGTA found that the IRS has taken corrective actions to address the timeliness of scanning correspondence concerns that were raised in the prior audit report. However, the TIGTA found there is still inaccurate and incomplete data in the CIS. TIGTA compared 118 paper documents received from taxpayers to the images scanned into the CIS and found that 28 (24 percent) had one or more scan errors and documents scanned into the CIS are often incomplete, illegible, or inaccurate.
     The relatively small sample did not allow the OIG to project the 24 percent rate onto the entire CIS inventory, but Inspector General J. Russell George, who rose to prominence this summer during Congressional hearings on IRS treatment of non-profits applying for tax exempt status, found the results disturbing nonetheless:
“The continued problems in this area are troubling,” said J. Russell George, the Treasury Inspector General for Tax Administration. “Miscoded or illegible scanned documents can result in taxpayers being asked multiple times to provide the same information, delay the issuance of refunds, change the order in which cases are worked, or result in the incorrect calculation of interest owed to taxpayers.”
   The report also found that more than half of open cases in the CIS inventory involve correspondence from taxpayers regarding identity theft.  Since identity theft cases are not always properly linked to existing cases in the CIS, the result is "multiple cases and different IRS employees working with the same taxpayers and taking conflicting actions to resolve the taxpayer’s case."  The audit found that as many as 46,000 taxpayers could have multiple case files that are not linked in the IRS's system.
    The IRS agreed to take steps to correct the findings in the audit report.

Note: A version of this article first appeared at The Weekly Standard.

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