With 2014 Tax Season Delayed, A Look at How the IRS Handled the Late 2013 Season

WASHINGTON – The Treasury Inspector General for Tax Administration (TIGTA) has released its annual review of the Internal Revenue Service’s (IRS) performance during the 2013 Filing Season. The objective of this review was to evaluate whether the IRS timely and accurately processed individual paper and electronically filed tax returns.

On January 8, 2013, the IRS announced it was delaying the start of the filing season by one week to make the changes necessary to implement provisions of the American Taxpayer Relief Act, which became law on January 2, 2013. However, some taxpayers were further delayed because several tax forms required more extensive programming changes, TIGTA found.

“Despite the delays, the IRS timely processed the majority of tax returns, and tax refunds were issued within 45 days of the April 15 tax return due date,” said J. Russell George, Treasury Inspector General for Tax Administration.

TIGTA found that as of May 4, 2013, the IRS received approximately 133.6 million tax returns, down from 134.6 million returns filed during the same period in 2012. More than 113.5 million (nearly 85 percent) of the returns were filed electronically, up from nearly 111.8 million e-filed in 2012. TIGTA also found that the IRS issued more than 99.5 million refunds totaling more than $264 billion, compared to nearly 101.2 million refunds totaling more than $274 billion in 2012. The average refund decreased slightly to $2,656 in 2013, compared with $2,708 during the same period last year.

The IRS reported that it identified 579,183 tax returns with $3.6 billion claimed in fraudulent refunds during tax return processing and prevented the issuance of $3.47 billion (96.4 percent) of those refunds. “The IRS is continuing to expand its efforts to identify and prevent fraudulent tax returns from being processed,” George noted.

In addition, TIGTA’s report raised concerns about the potential misuse of the split refund option to direct multiple tax refunds to the same bank account. TIGTA notified the IRS in February that it appeared some tax refunds were being incorrectly directed to tax preparers’ accounts. As of May 2, 2013, taxpayers filed 385,591 tax returns with a Form 8888, Allocation of Refund (Including Savings Bond Purchases), requesting multiple direct deposits to the same bank account. Direct deposits totaling more than $150.8 million were made to 46,897 bank accounts.

Each of the 46,897 bank accounts identified by TIGTA had three or more Form 8888 deposits from different taxpayers into these accounts. TIGTA determined that 248,027 (64 percent) of the 385,591 tax returns were prepared by a paid tax preparer.

Other significant findings:

Customer Self-Service Options Have Expanded: The IRS offered a number of different options for taxpayers to seek information and assistance, and more taxpayers are using self-assistance customer service options. As of May 4, the IRS reported a 24.7 percent increase in the number of visits to IRS.gov over the same period in the 2012 filing season and a 55.6 increase in the number of taxpayers obtaining their refund information online from the “Where’s My Refund” feature found on IRS.gov. However, the “Where’s My Refund” tool did not always provide accurate refund status information early in the filing season.

Declining Assistance at the Taxpayer Assistance Centers: The IRS assisted approximately 6.8 million taxpayers during FY 2012 and planned to assist six million taxpayers in FY 2013, a projected 11.8 percent decline.

Improvement in Level of Service for Toll-Free Telephone Assistance: The IRS reported answering 15.6 million calls from taxpayers on its toll-free assistance lines through May 4, up from the 14.6 million calls answered in 2012. The level of service was 69.8 percent in 2013, compared with 67.8 percent in 2012

Noncompliance with EITC Due Diligence Reporting Requirements: Many paid tax return preparers continue to be noncompliant with Earned Income Tax Credit (EITC) due diligence requirements. As of March 2, TIGTA identified 122,133 paid tax return preparers filing 708,298 tax returns claiming $2 billion in EITC without the required Form 8867 attached to the tax return. This equates to more than $354 million in penalties that can potentially be assessed by the IRS.

Questionable Credits Still Being Issued: TIGTA identified 42,961 questionable education credits totaling $58.5 million and $2.6 million in questionable Plug-in Electronic Drive Motor Vehicle Credits issued by the IRS as of May 2.

TIGTA made eight recommendations to the IRS, including: improving the identification of questionable claims for education credits and Plug-In Electric Motor Vehicle credits. In addition, TIGTA recommended that the IRS initiate programs to recover the erroneous and questionable credits TIGTA identified and to ensure that EITC due diligence requirements are assessed when appropriate.