Walorski Questions National Taxpayer Advocate on IRS Fraud Detection System
Taxpayers Face Burdensome Bureaucratic Red Tape When Tax Returns Wrongly Flagged as Fraudulent
WASHINGTON – U.S. Rep. Jackie Walorski (R-Ind.) today questioned National Taxpayer Advocate Nina Olson about the Internal Revenue Service’s (IRS) outdated fraud detection system as the House Ways and Means Committee examines reforms to ensure the IRS puts taxpayer service first.
In a hearing of the Oversight Subcommittee entitled “IRS Reform: Lessons Learned from the National Taxpayer Advocate,” Walorski described delays in replacing the outdated Electronic Fraud Detection System (EFDS) with the Return Review Program (RRP).
“The EFDS is still the principal fraud detection system because the RRP still isn’t ready for prime time,” Congresswoman Walorski said. “In fact, TIGTA says there is no estimated date for full implementation, and GAO estimates the program has incurred over $86.5 million in cost overruns. When the RRP has run as a pilot, it yielded a high false positive rate, and it missed $313 million in fraudulent filings.”
Asked by Walorski about the real-life impact when tax returns are incorrectly flagged as fraudulent, Olson testified that resolving false positives with the IRS often cost people significant time and money.
“This affects people who are low-income, high-income, it doesn’t matter,” Olson said. “People are having to get their preparers to call, and people often submit documentation multiple times. There is no one person assigned to their case, so every time they call they have to tell their story to a different person.”
The Taxpayer Advocate Service helps taxpayers resolve disputes with the IRS and informs taxpayers of their rights. With the Internal Revenue Service Restructuring and Reform Act of 1998, Congress created the National Taxpayer Advocate and mandated Local Taxpayer Advocates in each state. Nina Olson has served as National Taxpayer Advocate since 2001.
Video of Walorski questioning Olson at the hearing is available here. The text of her remarks is below.
Thank you, Mr. Chairman. Thanks, Ms. Olson. Again, many thanks from my constituents in Indiana’s 2nd District you have helped. In the five years I have been here, you’ve been able to mitigate and help somewhere over 90 percent of the questions that we’ve had, and I’m very, very grateful to you for what you’ve done.
You’ve probably seen everything in 16 years, so I just wanted to pick up on what you said that you learned from the hearings that you guys had on the issues of ID theft, tax fraud, and scams. That’s what we really get burdened by, folks in our district that have gotten caught in these issues.
On this Return Review Program, the RRP, that started in 2009, this thing has tended to end up like a boondoggle. It’s the successor of the Electronic Fraud Detection System, or EFDS, which in 2010 the IRS said was “too risky to maintain, upgrade, or operate beyond 2015.” But here we are in 2017. The EFDS is still the principal fraud detection system because the RRP still isn’t ready for prime time. In fact, TIGTA says there is no estimated date for full implementation and GAO estimates the program has incurred over $86.5 million in cost overruns. When the RRP has run as a pilot, it yielded a high false positive rate and it missed $313 million in fraudulent filings.
Let’s set aside the numbers and stats and talk about the actual people behind them. You’ve documented well what taxpayers go through in your annual reports, but for the benefit of everyone here, can you walk us through what happens to a single mother, a small business owner, a person who either gets flagged as a false positive or a fraudulent return? Can you just go through how they find out, what hoops they go through, and what this really means to people?
Aside from the time element and the frustration, does it not cost taxpayers, as well, money if they need to seek professional services to be their advocate?
What about commercially available technology that’s there? Is it your opinion that just from a common-sense perspective this would be where we would move to with an unbelievable amount of errors in fraud and money that’s being spent and this whole lack of accountability on this system, would you not agree that that would be some place where we could look and say let’s mitigate this as quickly as we can on behalf of the taxpayers?
Walorski represents the 2nd Congressional District of Indiana, serving as a member of the House Ways and Means Committee.