IDENTITY THEFT

Additional Actions 

Could Help IRS 

Combat the Large, 

Evolving Threat of 

Refund Fraud

Report to Congressional Requesters

August 2014

GAO-14-633

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-633, a report to

congressional requesters.

August 2014

IDENTITY THEFT

Additional Actions Could Help IRS Combat the Large, 

Evolving Threat of Refund Fraud

Why GAO Did This Study

Identity theft tax refund fraud is a 

persistent, evolving threat to honest 

taxpayers and tax administration. It

occurs when an identity thief files a 

fraudulent tax return using a legitimate 

taxpayer’s identifying information and 

claims a refund. 

GAO was asked to review IRS’s efforts 

to combat IDT refund fraud. This 

report, the first of a series, examines

(1) what IRS knows about the extent of 

IDT refund fraud and (2) additional 

actions IRS can take to combat IDT 

refund fraud using third-party 

information from, for example, 

employers and financial institutions. 

To understand what is known about 

the extent of IDT refund fraud, GAO

reviewed IRS documentation, including 

the Identity Theft Taxonomy. To 

identify additional actions IRS can 

take, GAO assessed IRS and SSA 

data on the timing of W-2s; and 

interviewed SSA officials and selected 

associations representing software 

companies, return preparers, payroll 

companies, and others. 

What GAO Recommends

GAO recommends that Congress 

should consider providing Treasury 

with authority to lower the annual 

threshold for e-filing W-2s. In addition, 

IRS should fully assess the costs and 

benefits of shifting W-2 deadlines, and 

provide this information to Congress.

IRS neither agreed nor disagreed with 

GAO’s recommendations, and it stated 

it is determining how these potential 

corrective actions align with available 

resources and IRS priorities. 

What GAO Found

Based on preliminary analysis, the Internal Revenue Service (IRS) estimates it 

paid $5.2 billion in fraudulent identity theft (IDT) refunds in filing season 2013, 

while preventing $24.2 billion (based on what it could detect). The full extent is 

unknown because of the challenges inherent in detecting IDT refund fraud. 

IDT refund fraud takes advantage of IRS’s “look-back” compliance model. Under 

this model, rather than holding refunds until completing all compliance checks, 

IRS issues refunds after conducting selected reviews. While there are no simple 

solutions, one option is earlier matching of employer-reported wage information 

to taxpayers’ returns before issuing refunds. IRS currently cannot do such 

matching because employers’ wage data (from Form W-2s) are not available 

until months after IRS issues most refunds. Consequently, IRS begins matching 

employer-reported W-2 data to tax returns in July, following the tax season. If 

IRS had access to W-2 data earlier—through accelerated W-2 deadlines and 

increased electronic filing of W-2s—it could conduct pre-refund matching and

identify discrepancies to prevent the issuance of billions in fraudulent refunds. 

Time Delay Between Refund Issuance and IRS W-2 Posting Date, Filing Season 2012

Accelerated W-2 deadlines. In 2014, the Department of the Treasury (Treasury)

proposed that Congress accelerate W-2 deadlines to January 31. However, IRS 

has not fully assessed the impacts of this proposal. Without this assessment, 

Congress does not have the information needed to deliberate the merits of such 

a significant change to W-2 deadlines or the use of pre-refund W-2 matching.

Such an assessment is consistent with IRS’s strategic plan that calls for 

analytics-based decisions, and would help IRS ensure effective use of resources. 

Increased e-filing of W-2s. Treasury has requested authority to reduce the 250-

return threshold for electronically filing (e-filing) information returns. The Social 

Security Administration (SSA) estimated that to meaningfully increase W-2 efiling, the threshold would have to be lowered to include those filing 5 to 10 W-2s. 

In addition, SSA estimated an administrative cost savings of about $0.50 per efiled W-2. Based on these cost savings and the ancillary benefits they provide in

supporting IRS’s efforts to conduct more pre-refund matching, a change in the efiling threshold is warranted. Without this change, some employers’ paper W-2s 

could not be available for IRS matching until much later in the year, due to the 

additional time needed to process paper forms.

View GAO-14-633. For more information, 

contact James R. White at (202) 512-9110 or 

whitej@gao.gov.
Page i GAO-14-633 Identity Theft

Letter 1

Background 3

In Filing Season 2013, IRS Estimates Paying $5.2 Billion in 

Fraudulent IDT Refunds While Preventing $24.2 Billion; 

However, the Full Extent of IDT Refund Fraud Is Unknown 10

Stronger Pre-refund and Post-refund Strategies Can Help Combat 

IDT Refund Fraud 13

Conclusions 27

Matters for Congressional Consideration 28

Recommendations for Executive Action 29

Agency Comments and Our Evaluation 29

Appendix I IRS Identity Theft Taxonomy Limitations 32

Appendix II Objectives, Scope, and Methodology 35

Appendix III Comments from the Internal Revenue Service 38

Appendix IV Comments from the Social Security Administration 42

Appendix V GAO Contact and Staff Acknowledgments 44

Related GAO Products 45

Table

Table 1: List of Third Parties Interviewed 36

Contents
Page ii GAO-14-633 Identity Theft

Figures

Figure 1: Example of the Typical Process for Filing a Tax Return 5

Figure 2: Examples of Identity Theft Refund Fraud That IRS 

Detects 6

Figure 3: Examples of IRS Tools Used to Combat Identity Theft 

Refund Fraud, by Processing Stage 7

Figure 4: IRS Preliminary Estimates of Attempted Identity Theft 

Refund Fraud, Filing Season 2013 10

Figure 5: Time Delay Between Refund Issuance and IRS W-2 

Posting Date, Filing Season 2012 15

Abbreviations

CDW Compliance Data Warehouse

DDb Dependent Database

EFDS Electronic Fraud Detection System

e-file electronically file

IDT identity theft

IP PIN Identity Protection Personal Identification Number

IRS Internal Revenue Service

RRP Return Review Program

SSA Social Security Administration

SSN Social Security number

Taxonomy IRS Identity Theft Taxonomy

Treasury Department of the Treasury

W-2 Form W-2, Wage and Tax Statement

W-2c Form W-2c, Corrected Wage and Tax Statement

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-14-633 Identity Theft

441 G St. N.W.

Washington, DC 20548

August 20, 2014

The Honorable Ron Wyden

Chairman

The Honorable Orrin Hatch

Ranking Member

Committee on Finance

United States Senate

The Honorable Bill Nelson

Chairman

The Honorable Susan M. Collins

Ranking Member

Special Committee on Aging

United States Senate

The Honorable Dave Camp

Chairman

Committee on Ways and Means

House of Representatives

Tax refund fraud associated with identity theft (IDT) continues to be an 

evolving threat, one that imposes a serious financial and emotional toll on 

honest taxpayers and threatens the integrity of the tax administration 

system. Within the tax system, IDT refund fraud occurs when a refundseeking identity thief files a fraudulent tax return using a legitimate 

taxpayer’s identifying information. The Internal Revenue Service (IRS) 

estimates that millions of IDT refund fraud attempts claiming tens of 

billions of dollars in fraudulent refunds occurred in 2013. IDT refund fraud

also creates administrative costs: In 2014, IRS has approximately 3,000 

people working on cases of IDT victims—more than twice the number of 

people working on these cases in 2011. In light of this, IRS recognized 

refund fraud and IDT as a major challenge affecting the agency in its 

recently issued strategic plan.1

To craft a response to IDT refund fraud, IRS must understand the extent 

and nature of the fraud. In 2012, we reported that IRS managers did not 

 1

IRS, Strategic Plan: FY2014-2017, (Washington, D.C.: 2014). 
Page 2 GAO-14-633 Identity Theft

have a complete picture.2

IRS has taken a number of steps to address this threat, including 

developing an estimate of the extent of IDT refund fraud and using thirdparty information (such as leads about suspicious refunds) to help in its 

IDT efforts. However, available information suggests that the problem is 

persistent and evolving.

For example, IRS did not know the full extent of 

IDT refund fraud, nor did IRS systematically track the characteristics of 

known identity theft tax returns. While complete knowledge about 

identities stolen and perpetrators responsible will likely never be attained, 

the more thoroughly IRS understands the problem, the more effectively 

IRS and policymakers can respond.

Within this context, you asked us to examine IRS’s efforts to combat IDT 

refund fraud, which we will review in a series of reports. This report 

answers the following questions:

1. What does IRS know about the extent of IDT refund fraud?

2. What additional actions can IRS take to combat IDT refund fraud 

using third-party information (for example, from employers and 

financial institutions)?

A report to be issued later in 2014 will address a broader set of actions 

that IRS could take to combat IDT refund fraud.

To understand what IRS knows about the extent of IDT refund fraud, we 

reviewed IRS’s Identity Theft Taxonomy (Taxonomy)—a matrix of IDT 

refund fraud categories—which estimates the amount of IDT refund fraud 

that IRS is, and is not, preventing. We conducted manual data testing for 

obvious errors and compared underlying data to IRS’s Refund Fraud & 

Identity Theft Global Report. We confirmed Taxonomy components where 

we had data available to cross check. We also interviewed IRS officials to 

better understand the methodology used to create the estimates. For a 

summary of Taxonomy limitations, see appendix I.

To identify opportunities to improve IRS’s IDT refund fraud efforts, we 

reviewed Internal Revenue Manual sections detailing IRS’s Identity 

 2

GAO, Identity Theft: Total Extent of Refund Fraud Using Stolen Identities is Unknown, 

GAO-13-132T (Washington, D.C.: Nov. 29, 2012).
Page 3 GAO-14-633 Identity Theft

Protection Program and IRS documentation for its External Leads 

Program (where third parties, often financial institutions, report suspicious 

refunds to IRS), Opt-In Program (where financial institutions can flag and 

reject suspicious refunds sent via direct deposit), and other third-party 

efforts. We interviewed officials from the Social Security Administration 

(SSA) and from associations representing software companies, return 

preparers, financial institutions, and payroll companies. To help ensure 

our analysis covered a variety of viewpoints, we selected a nonprobability 

sample of 22 associations and stakeholders with differing positions and 

characteristics, based on IRS documentation and suggestions, prior GAO 

work, and other information. Because we used a nonprobability sample, 

the views of these associations are not generalizable to all potential third 

parties. We then communicated with IRS offices, including (1) Privacy, 

Government Liaison, and Disclosure; and (2) Return Integrity and 

Correspondence Services, to determine the feasibility of various options 

and the challenges of pursuing them. See appendix II for details on our 

scope and methodology.

We conducted this performance audit from May 2014 to August 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

IRS has reported a substantial increase in IDT refund fraud; however, it is 

unclear whether this reported increase is due to an overall increase in IDT 

refund fraud, to an improvement in IRS’s ability to detect IDT refund 

fraud, or to a combination of the two. For example, IRS instituted IDT 

filters in 2012, which helped IRS find additional IDT incidents, but it is not 

known how much of the reported increase can be attributed to filters or to 

an increase in IDT refund fraud.

There are two types of tax-related IDT fraud: (1) refund fraud and (2) 

employment fraud. IDT refund fraud occurs when a refund-seeking 

identity thief files a fraudulent tax return using the legitimate taxpayer’s 

identifying information. Employment fraud occurs when an identity thief 

uses a taxpayer’s name and Social Security number (SSN) to obtain a 

job. This report’s discussion focuses on IDT refund fraud and not 

employment fraud.

Background
Page 4 GAO-14-633 Identity Theft

IDT refund fraud takes advantage of the typical process of filing a tax 

return. Taxpayers receive information returns from third parties, such as 

the Form W-2, Wage and Tax Statement (W-2), and use this information 

to complete their tax returns. As shown in figure 1, taxpayers with wage 

income typically receive a Form W-2 from their employer by late January. 

Taxpayers copy the information from the W-2 to prepare their returns. 

Taxpayers filing paper returns are required to attach a copy of the W-2 to 

the return. Taxpayers filing electronically (e-file), as most do, are not 

required to send W-2s to the IRS. Most taxpayers entitled to a refund, 

along with many identity thieves attempting refund fraud, file early in the 

filing season—many in February. During return processing, IRS performs 

some compliance checks and issues refunds, but at this time it cannot 

verify the W-2 information for all returns (paper W-2s can be forged and 

fictitious wage information can be entered on a tax return).3 By the end of 

March, employers are also required to send a copy of the W-2 to SSA, 

which performs verification checks before sending the information to 

IRS.4

 3

In certain instances, IRS requests W-2 information from employers to validate information 

on returns selected by fraud filters. 

However, IRS only begins matching W-2 information from 

employers to tax returns in July. This gap between when IRS issues 

refunds and when IRS matches W-2s to tax returns creates the 

opportunity for fraudsters to file returns using a stolen identity and to 

receive a tax refund.

4

Employers must provide W-2s to employees by January 31 and to SSA by February 29 

(for paper W-2s) and March 31 (for e-filed W-2s). 
Page 5 GAO-14-633 Identity Theft

Figure 1: Example of the Typical Process for Filing a Tax Return

Issuing refunds before fully verifying the information on tax returns is an 

example of what IRS officials refer to as a “look-back” compliance model: 

rather than holding refunds until all compliance checks can be completed, 

IRS issues refunds after doing some selected, automated reviews of the 

information the taxpayer submits to verify identity (e.g., name and SSN 

matching); filtering out returns with indicators of fraud such as a 

mismatched name and SSN; and correcting obvious errors, such as 

calculation mistakes and claims for credits and deductions exceeding 

statutory limits. IRS’s intent is to issue refunds quickly.5

After refunds are issued, IRS does further checks. Two of these checks 

enable IRS to detect significant amounts of IDT refund fraud after the fact. 

One, shown at the top of figure 2, is checking for duplicate returns. If an 

identity thief and a legitimate taxpayer file returns using the same name 

and SSN, IRS will have duplicate returns. The other is matching tax 

returns to third-party information provided to IRS by employers, financial 

 5

For 2014, IRS informed taxpayers that it would generally issue refunds in less than 21 

days after receiving a tax return. IRS is required by law to pay interest if it takes longer 

than 45 days after the due date of the return to issue a refund. 26 U.S.C. § 6611(e). 
Page 6 GAO-14-633 Identity Theft

institutions, and others (bottom of figure 2). Matching tax returns to W-2s 

is an example of these checks. As we have reported, these post-refund 

compliance checks can take a year or more to complete.6

Figure 2: Examples of Identity Theft Refund Fraud That IRS Detects

Note: Numbers represent the order in which these actions occur in the examples.

 6

GAO, Tax Refunds: IRS is Exploring Verification Improvements, but Needs to Better 

Manage Risks, GAO-13-515 (Washington, D.C.: June 4, 2013).
Page 7 GAO-14-633 Identity Theft

Recognizing the limitations of the look-back compliance model, IRS’s 

efforts to combat IDT refund fraud occur at three different stages of the 

refund process: (1) before accepting a tax return, (2) during tax return 

processing, and (3) after issuing tax refunds. At each stage of the 

process, IRS uses specific tools to detect IDT refund fraud (see figure 3 

for examples of IRS tools at each stage).

Figure 3: Examples of IRS Tools Used to Combat Identity Theft Refund Fraud, by Processing Stage

Identity Protection Personal Identification Number (IP PIN). IP PINs 

are single-use identification numbers sent to IDT victims who have 

validated their identities with IRS. Tax returns with IP PINs pass through 

IRS’s IDT fraud filters, avoiding false positives—where a legitimate 

taxpayer is identified as an identity thief—and a delayed tax refund. 

Taxpayers who were issued an IP PIN but e-filed without using it or 

entered it incorrectly are prompted to enter the IP PIN on their tax return 

or to file on paper, according to IRS officials. Paper returns filed with the 

SSN of these taxpayers and without an IP PIN are subject to additional 

checks. (In January 2014, IRS offered a limited IP PIN pilot program to 

eligible taxpayers in Florida, Georgia, and the District of Columbia.)

IRS Tools to Combat 

Identity Theft Refund 

Fraud

Before Accepting a Tax Return 

(Pre-Acceptance)
Page 8 GAO-14-633 Identity Theft

Duplicate return rejects. Once IRS receives an e-filed return for a given 

SSN, it automatically rejects subsequent returns filed using that SSN and 

sends a notice of duplicate filing, as shown at the top of figure 2.7

IDT and other fraud filters. IDT filters screen returns, using 

characteristics that IRS has identified in previous IDT refund fraud 

schemes.8

IDT indicators. Indicators—account flags that are visible to all IRS 

personnel with account access—are a key tool IRS uses to resolve and 

detect IDT. IRS uses different indicators (e.g., to denote whether the 

incident was identified by the IRS or a taxpayer), depending on the 

circumstances in which IRS learns of an identity theft-related problem.

The filters also search for clusters of returns with similar 

characteristics, such as the same bank account or address, which could 

indicate potential fraud. If an IDT filter flags a return, IRS stops 

processing the return and sends a letter asking the taxpayer to validate 

his or her identity.

Third-party leads. IRS receives third-party leads regarding suspected 

IDT refund fraud and other types of refund fraud through efforts including 

the External Leads Program and the Opt-In Program. The External Leads 

Program involves third parties providing lead information to IRS. If a 

questionable refund is confirmed as fraudulent, IRS requests that the 

financial institution return the refund. The Opt-In Program allows financial 

institutions to electronically reject suspicious refunds and return them to 

IRS, indicating why the institution is rejecting the refunds.

Taxpayer alerts. IRS often identifies IDT refund fraud after receiving a 

phone call from a taxpayer who cannot file because an identity thief 

already filed with the SSN (i.e., a duplicate return) or because the 

taxpayer received a notice from IRS. For example, IRS can discover IDT 

when a taxpayer responds to an IRS compliance notice stating that the 

 7

If a subsequent return using the SSN is filed on paper, IRS systems detect the return 

during processing. 

8

Two of the tax-administration systems employing filters are the Dependent Database 

(DDb) and Electronic Fraud Detection System (EFDS). DDb incorporates IRS, Health & 

Human Services, and Social Security Administration data to identify compliance issues 

involving IDT, refundable credits, and prisoners. EFDS is a legacy system built in the mid1990s. To replace EFDS, IRS is developing the Return Review Program. 

During Tax Return Processing

After Issuing Refunds 

(Post-Refund)
Page 9 GAO-14-633 Identity Theft

IRS has income and/or payment information that does not match the 

information reported by the taxpayer on his return.

A key practice in results-oriented management of federal agencies is the 

establishment of agency-wide, long-term strategic goals. IRS’s strategic 

plan for fiscal years 2014-2017 identifies two strategic goals: (1) deliver 

high quality and timely service to reduce taxpayer burden and encourage 

voluntary compliance and (2) effectively enforce the law to ensure 

compliance with tax responsibilities and combat fraud. The strategic plan 

also outlines several objectives relevant to its efforts to combat identity 

theft, including

• strengthening refund fraud prevention by balancing the speed of 

refund delivery with the assurance of taxpayer identity, using analysis 

of third-party and historical taxpayer data, and educating taxpayers 

and tax professionals on fraud risk factors and fraud prevention 

methods;

• implementing enterprise-wide analytics and research capabilities to 

make timely, informed decisions; and

• implementing and maintaining a robust enterprise risk management 

program, which includes establishing routine reporting procedures to 

external stakeholders on operational risks.

As a complement to the potential benefits of strategic planning, internal 

control is a major part of managing an organization.9

 9

GAO, Standards for Internal Control in the Federal Government, 

Internal control 

comprises the plans, methods, and procedures used to meet missions, 

goals, and objectives: this supports performance-based management. 

Internal control helps agency program managers achieve desired results 

and provides reasonable assurance that program objectives are being 

achieved through—among other things—effective and efficient use of 

agency resources. Managers are to design internal controls based on 

related costs and benefits. In addition, internal control standards in the 

federal government call for agencies to record and communicate relevant, 

reliable, and timely information on internal and external events to agency 

managers and others who need it.

GAO/AIMD-00-21.3.1

(Washington, D.C.: Nov. 1, 1999). 

Performance Management 

Information and Controls 

Help Agencies Assure 

Results and Best Use of 

Federal Resources
Page 10 GAO-14-633 Identity Theft

Based on IRS’s preliminary Identity Theft Taxonomy (Taxonomy), the 

agency estimated that $29.4 billion in IDT refund fraud was attempted in 

filing season 2013. IRS estimated it prevented or recovered about $24.2 

billion (82 percent) of the estimated attempted refund fraud. However, 

IRS estimated it paid $5.2 billion (18 percent) in IDT refunds during the 

same timeframe (see figure 4). IRS officials noted that they are updating 

their analysis and anticipate revising the Taxonomy’s estimate of IDT 

refunds paid. The officials said the revised estimates could be somewhat 

higher (perhaps by $0.6 billion) but the analysis was not completed in 

time for us to include it in figure 4.

Figure 4: IRS Preliminary Estimates of Attempted Identity Theft Refund Fraud, Filing Season 2013

Note: IRS officials are updating their analysis and anticipate revising the estimate of IDT refunds paid.

IRS’s Taxonomy demonstrates a significant effort on the part of IRS and 

is an important first step in estimating how much identified IDT refund 

fraud IRS is stopping or failing to stop. IRS has made substantial 

progress in its efforts to estimate IDT refund fraud. For example, IRS 

developed an estimate of IDT refund fraud by identifying characteristics of 

fraudulent returns, matching and analyzing information returns and tax 

returns based on these characteristics, and researching other sources. 

In Filing Season 

2013, IRS Estimates 

Paying $5.2 Billion

in Fraudulent IDT 

Refunds While 

Preventing $24.2 

Billion; However,

the Full Extent of

IDT Refund Fraud

Is Unknown
Page 11 GAO-14-633 Identity Theft

However, the estimates will continue to evolve as IRS updates its 

methodology to better reflect new IDT refund fraud schemes and to 

improve the accuracy of its estimates, according to IRS officials.10

IRS’s Taxonomy is a valuable tool to help inventory, characterize, and 

analyze available IDT refund fraud data and to assess the performance of 

IRS’s IDT refund fraud defenses. For example, the Taxonomy may help 

IRS

• Monitor progress. Given the evolving, persistent nature of IDT 

refund fraud, IRS will constantly need to monitor and adapt its IDT 

defenses to protect against new and emerging schemes. The 

Taxonomy provides IRS with a methodology for monitoring IDT refund 

fraud and the progress of IRS defenses over time. However, IRS will 

continue to face challenges in evaluating its defenses. For example, it 

is difficult to differentiate whether an increase in returns detected by 

the IDT filters is due to improved filter performance or to an increase 

in the overall number of IDT refund fraud attempts. In addition, future 

methodology updates which reflect evolving schemes and improve 

accuracy could make comparisons between filing seasons difficult.

• Identify schemes. The Taxonomy may help IRS develop a better 

understanding of taxpayer characteristics related to current, 

successful IDT refund fraud, including filing status, the size of the 

refund, filing method, and filing history. This could help IRS identify 

IDT refund fraud scheme trends and assist it in further developing and 

modifying its defenses.

• Communicate the extent of the problem to stakeholders. While 

the Taxonomy has limitations, it may help improve IRS managers’ 

understanding of the problem, allowing them to better communicate 

with policymakers about schemes and resource needs. It may also 

improve the ability of Congress (and other decision makers) to 

oversee IRS’s efforts. In addition, the data collected could be of use to 

IRS partners, including tax preparers and financial institutions.

 10During the course of our audit, we found that IRS’s methodology for counting returns did 

not include two categories of duplicate returns that should have been included in the 

estimates. IRS officials estimated that including these returns would increase IRS’s 

original 2013 estimates of refunds paid out by $0.47 billion, from $4.75 billion to $5.22 

billion in filing season 2013.
Page 12 GAO-14-633 Identity Theft

Although IRS’s Taxonomy estimates are valuable in helping estimate IDT 

refund fraud, they are, by their nature, incomplete. This is in part because 

IRS’s estimate of IDT refunds paid (the $5.2 billion shown in figure 4) is 

based on duplicate returns, information return mismatches, and criminal 

investigations identified after the refunds are paid. However, for cases 

where there are no duplicate returns, information returns, or criminal 

investigations associated with a tax return, IRS has been unable to 

estimate the amount of IDT refund fraud (the unidentified IDT refund fraud 

shown in figure 4). Also, certain Taxonomy estimates are based on 

assumptions using the characteristics of past IDT refund fraud. While the 

assumptions are based on IRS’s research from known cases and appear 

reasonable, we could not verify the accuracy and comprehensiveness of 

these assumptions. This is because the accuracy of the Taxonomy

estimates is largely based on whether the estimate includes all true IDT 

refund fraud returns and excludes all legitimate returns. IRS officials 

acknowledged their estimates for returns flagged during information 

return matching could include legitimate returns that are not actual IDT 

refund fraud.

Other limitations11

• The Taxonomy underestimates the number of IDT refund fraud 

returns and refund amounts for some IDT categories and 

overestimates others. The Taxonomy underestimates IDT refund 

fraud because, as previously discussed, IRS has been unable to 

estimate the amount of IDT refund fraud for cases where there are no 

criminal investigations, duplicate returns, or information returns—such 

as a W-2—associated with a tax return (the unidentified IDT refund 

fraud shown in figure 4). An example of an overestimated category is 

that of “refunds recovered,” which includes refunds returned to IRS as 

a result of external leads. However, IRS data on external leads do not 

distinguish whether the type of fraud was IDT refund fraud or some 

other type of fraud. Our analysis of the Taxonomy found that IRS did 

not adjust its estimate to account for other types of refund fraud.

that we identified in the Taxonomy include the 

following:

• While IRS provided Taxonomy estimates for filing seasons 2012 

and 2013, methodology changes make it difficult to compare 

these estimates over time. For example, the filing season 2013 

 11See appendix I for additional details on limitations. 
Page 13 GAO-14-633 Identity Theft

estimate uses a different data source to estimate the number of IDT 

refunds paid and eventually detected after the filing season (when IRS 

matches tax returns to information return data, such as W-2s). In 

addition, it is unclear whether changes in the number of IDT refund 

fraud returns are due to overall changes in fraud patterns, such as an 

increase or decrease in fraud attempts; to improvements in IRS IDT 

defenses; or to identity thieves’ ability to file returns using schemes 

IRS has not yet learned to detect.

IRS has responded to the problem of IDT refund fraud with new ways to 

combat fraud. However, according to IRS officials, identity thieves are 

“adaptive adversaries” who are constantly learning and changing their 

tactics as IRS develops new IDT strategies. Therefore, IDT refund fraud 

remains a persistent, evolving threat that requires stronger pre-refund and 

post-refund strategies to combat.

A robust pre-refund strategy is important because preventing fraudulent 

refunds is easier and more cost-effective than trying to recover them after 

they have been issued. We have previously reported that implementing 

strong preventive controls can help defend against invalid payments, 

increasing public confidence and avoiding the difficult “pay and chase” 

aspects of recovering invalid refunds.12 According to IRS, the agency’s 

Return Review Program (RRP) is one way that IRS is trying to improve its 

pre-refund detection efforts.13

 12GAO, Improper Payments: Remaining Challenges and Strategies for Governmentwide 

Reduction Efforts, 

As IRS processes tax returns, other 

strategies can assist in identifying and stopping suspicious refunds. 

Moreover, improving post-refund programs may help IRS work with 

financial institutions to stop refunds that earlier controls have missed. 

However, recapturing a fraudulent refund after it is issued can be 

challenging—if not impossible—because identity thieves often spend or 

transfer the funds immediately, making them very difficult to trace.

GAO-12-573T (Washington, D.C.: Mar. 28, 2012). 

13RRP is intended to be a web-based automated system designed to enhance IRS’s 

capabilities to detect, resolve, and prevent criminal and civil noncompliance. While IRS 

recently launched an initial version of RRP to run parallel with EFDS, IRS officials told us 

that the next version is on a “strategic pause” while IRS officials clarify RRP’s functionality.

Stronger Pre-refund 

and Post-refund 

Strategies Can

Help Combat IDT 

Refund Fraud
Page 14 GAO-14-633 Identity Theft

Agency officials and third-party stakeholders we spoke to identified the 

following potential pre- and post-refund strategies that may help IRS 

combat IDT refund fraud:

• Pre-refund. Improve W-2 matching by (1) adjusting W-2 deadlines, 

(2) lowering the threshold for e-filed W-2s,14

• Post-refund. Improve external leads programs by providing timely, 

accurate, and actionable feedback to third parties.

(3) delaying refunds, and 

(4) delaying the filing season.

Characteristics of the current tax processing system hamper IRS’s ability 

to effectively verify taxpayer information prior to issuing refunds. As part 

of a broader proposal, the Department of the Treasury (Treasury) has 

proposed accelerating W-2 deadlines. This proposal will help ensure that 

IRS has accurate, timely W-2 data to conduct pre-refund matching. IRS 

has also requested funding to support timelier processing of W-2s.

IRS issues most refunds before it has access to employers’ W-2 

data. IRS issues most refunds months before receiving and matching 

information returns, such as W-2s. For 2012, IRS received more than 

148.3 million tax returns and issued more than $309.6 billion in refunds to 

110.5 million taxpayers. By March 1, 2012 IRS had issued about 50 

percent of all 2012 refunds, but did not have access to most of the 2012 

W-2 data verified by the Social Security Administration (SSA) (see figure 

5).15

 14Currently, employers who file 250 or more W-2s annually must e-file those forms. 26 

C.F.R. § 301.6011-2(b)(2). IRS is generally prohibited from requiring those filing fewer 

than 250 returns annually to e-file. 26 U.S.C. § 6011(e)(2)(A). 

As previously noted, IRS’s look-back compliance model does not 

allow it to match tax returns to information returns until early summer.

15We used analysis from GAO-13-515, which included data on the timing of W-2s and tax 

returns. SSA transmits wage data to IRS immediately upon receiving electronic W-2s, 

according to SSA officials. Paper W-2s require manual handling and therefore have a 

significantly longer processing time.

Earlier, Pre-refund W-2 

Matching May Prevent 

Billions of Dollars in 

Estimated IDT Refund 

Fraud but Would

Involve Costs
Page 15 GAO-14-633 Identity Theft

Figure 5: Time Delay Between Refund Issuance and IRS W-2 Posting Date, Filing 

Season 2012

Note: Due dates in filing season 2012 differed because March 31, 2012 (the electronic filing deadline) 

fell on a Saturday. Dates in this figure refer to the date when IRS posts tax return data to the master 

file, which represents when the tax return data are available for matching. Officials noted that IRS 

must refine the data prior to posting to IRS systems. This may include identifying and correcting 

incomplete or inaccurate data before posting the data to IRS systems.

IRS is under pressure to issue refunds promptly. IRS is required by 

law to pay interest if it takes longer than 45 days after the due date of the 

return to issue a refund.16

 1626 U.S.C. § 6611(e). 

IRS informs taxpayers to anticipate their 

refunds generally within 21 days after filing and actively tries to meet this 

target. For tax year 2013, IRS reported that for tax returns filed through 
Page 16 GAO-14-633 Identity Theft

early March, taxpayers received refunds an average of 9.6 days after 

filing.17

To facilitate the use of W-2 information in detection of noncompliance

(which includes IDT refund fraud) earlier in the filing season, Treasury 

recently proposed to Congress that the W-2 deadlines be moved to 

January 31 (for both paper and e-filing).18 IRS also requested funding for 

processing W-2s more quickly as part of its fiscal year 2015 budget 

request.19 The IRS Commissioner has also advocated for earlier 

deadlines, testifying that challenges with IDT refund fraud have led IRS to 

propose an accelerated W-2 filing deadline.20 Further, the National 

Taxpayer Advocate has repeatedly written about the need to develop an 

accelerated information reporting system to enable IRS to match thirdparty reports to return data before issuing refunds.21

According to IRS officials, earlier, pre-refund W-2 matching would provide 

a number of benefits, including

• Combating IDT refund fraud. According to IRS officials, having 

earlier access to W-2s, and time to match W-2s to tax returns before 

issuing refunds, would give IRS more opportunities to prevent billions 

 17Estimated based on 99 percent of all refund returns. 

18Treasury, General Explanations of the Administration’s Fiscal Year 2015 Revenue 

Proposals, (Washington, D.C.: Mar. 2014). Each February, Treasury releases this 

publication in conjunction with the President’s budget. As part of its proposal to stagger 

tax return filing dates, Treasury proposed implementing an accelerated deadline for filing 

information returns and eliminating the extended due date for e-filed returns. Under the 

proposal, paper and e-filed W-2s would be due to SSA by January 31, the same date W2s are due to employees. 

19IRS, Fiscal Year 2015 President’s Budget, (Washington, D.C.). IRS requested $21.6 

million and 51 full time equivalents to fund five information technology projects, including a 

project to improve access to SSA data. 

20John Koskinen, Commissioner of Internal Revenue, oral testimony before the Senate 

Appropriations Subcommittee on Financial Services and General Government, 113th

Cong., Apr. 30, 2014. 

21See, for example, National Taxpayer Advocate, 2013 Annual Report to Congress, Vol. 

II: (Washington, D.C.: Dec. 31, 2013).

Treasury’s Proposal for 

Accelerated W-2 Deadlines

is Intended to Benefit IRS

and Taxpayers
Page 17 GAO-14-633 Identity Theft

of dollars of IDT refund fraud.22 Returns flagged during IRS’s 

information return matching make up a substantial portion of the $5.2 

billion in IDT refunds that IRS estimated it paid in filing season 2013, 

according to IRS’s Taxonomy. With earlier access to W-2 data, IRS 

could validate information reported on a tax return (e.g., wages and 

compensation) with information reported by employers before issuing 

refunds.23

• Benefiting taxpayers and employers. In addition to protecting 

revenue, accelerated W-2 reporting and pre-refund matching could 

improve taxpayer service and reduce burden. IRS officials said that 

having W-2 data at the beginning of the filing season would reduce 

taxpayer burden by allowing IRS to verify income immediately and to 

release legitimate tax returns caught by the IDT filters (false 

positives). Earlier W-2 data could also help IRS reduce employer 

burden, as IRS would no longer have to contact employers of 

taxpayers whose returns are flagged by IDT and other fraud filters.

Even without automatic matching, IRS officials said that 

earlier W-2 data would speed up manual reviews of high-risk 

returns—such such as those flagged by the IDT filters—because the 

information they rely on to perform those checks would be readily 

available.

• Providing other benefits. Earlier W-2 matching could reduce IRS’s 

workload of collection cases and help taxpayers avoid penalties and 

interest on under-paid taxes, according to IRS officials.

Implementing accelerated W-2 deadlines could result in an increased 

number of corrected W-2s filed as well as other technical and logistical 

challenges. SSA officials and all three payroll and information reporting 

associations we interviewed told us that accelerating the W-2 deadline 

would increase the number of corrected W-2s.24

 22While IRS could conduct pre-refund matching using other types of information returns 

(such as Forms 1099), we focus on W-2s in this report because IRS officials and third 

parties we spoke with discussed the Form W-2 as a specific tool for combating IDT refund 

fraud.

(These are W-2s that 

23According to IRS officials, under the current pre-refund process, IRS only uses 

employer-reported W-2 data to verify information on returns selected by fraud filters (about 

1 percent of all returns IRS receives). To perform these verification checks, IRS contacts 

individual employers to verify wage and withholding information. 

24Employers file Form W-2c, Corrected Wage and Tax Statements (W-2c), when they 

need to make changes to previously submitted W-2s. For example, employers may file W2cs to correct errors reported by employees. 

Accelerated W-2 Deadlines 

Could Create Other 

Challenges that Would

Need to be Addressed
Page 18 GAO-14-633 Identity Theft

employers correct after sending the first incorrect version to SSA.)

Corrected W-2s represent less than 1 percent of the 213.5 million W-2s 

IRS received from SSA in tax year 2011, according to IRS data. The 

correction rate is currently low because the deadlines for filing with SSA 

are well after the January 31 deadline for sending W-2s to employees, 

giving employers a window of time to make corrections before they file 

with SSA. Based on data tracking payroll submissions and subsequent 

adjustments, the National Payroll Reporting Consortium estimated that 

should the deadline be accelerated to before January 31, corrections may 

increase from 1 percent of filed W-2s to greater than 6 percent.25

While most W-2s are filed in a timely manner, SSA currently receives 

some W-2s after the March 31 deadline for submitting e-filed returns.

To 

mitigate potential corrections, SSA officials and all three payroll and 

information reporting associations we interviewed recommended allowing 

a corrections window of time (e.g., 1 to 2 weeks) between submission to 

employees and to SSA.

26

For tax year 2012, SSA received 16 percent (36.5 million of 233.2 million) 

of W-2s after April 5, 2013.27

 25National Payroll Reporting Consortium, Inc. (NPRC), Internal Revenue Service Public 

Hearing: Proposed Real-Time Tax System, (Washington, D.C.: Jan. 25, 2012). To provide 

information about the potential volume of corrected W-2s arising from an earlier deadline, 

NPRC analyzed payroll firm data on client submissions at the end of each quarter and 

subsequent adjustments submitted after the cutoff dates. NPRC did not analyze the 

impact of a January 31 deadline but based on this analysis, an NPRC official indicated a 

January 31 deadline would not dramatically increase corrections from current levels. 

According to SSA officials, employers may 

submit W-2s to SSA after the filing deadline for several reasons, including 

(for example) human error, resubmittal of an e-filed submission previously 

rejected by SSA, or to report back pay under a court order. In addition, 

according to SSA officials, moving deadlines to January 31 or earlier 

would create logistical and technical challenges for SSA; however, 

moving the e-file deadline up to the end of February would not create 

issues. For example, SSA officials told us that moving the deadline to 

January 31 or earlier would require shifting its software development 

cycle because SSA’s computer experts are working on another system 

26Employers must submit W-2 forms to employees by January 31 and to SSA by February 

29 (if filing on paper) and March 31 (if e-filing).

27SSA provided weekly data on W-2s. April 5, 2013 was the Friday following the March 

31, 2013 deadline for e-filing W-2s. 
Page 19 GAO-14-633 Identity Theft

during that timeframe; however, the computer experts are available to 

implement an accelerated W-2 filing date of February 29. 

While Treasury and IRS officials have proposed moving up W-2 

deadlines, the costs and benefits have not been identified, estimated, or 

documented. How IRS decides to implement pre-refund matching using 

W-2 data would affect the costs and benefits for itself and other 

stakeholders. Some of the stakeholder issues that we identified and that 

remain unaddressed include the following:

• IRS. IRS has not identified cost-effective options for updating the 

information technology systems or work processes (such as the 

process for correcting refund amounts if mismatches are detected) 

needed to implement pre-refund matching using W-2 data. IRS 

officials said that a lack of budgetary resources is the primary reason 

IRS has not conducted planning and analysis of the costs and 

benefits related to accelerating W-2 deadlines. The full costs will not 

be known until IRS analyzes details regarding how the agency would 

implement this change (e.g., the thresholds IRS uses to match W-2s 

will influence the number of W-2 mismatches due to IDT refund fraud 

or false positives, where legitimate returns are flagged during 

matching). Similarly, IRS does not have a well-developed estimate of 

the magnitude of the benefits of pre-refund W-2 matching. Treasury 

developed revenue projections for moving all information reporting 

deadlines, but did not develop projections specific to the W-2 

deadline. While IRS has a basis for estimating the revenue protected 

from pre-refund matching (from its Taxonomy), other benefits—such 

as employer savings from fewer queries from IRS—may be harder to 

estimate.

• SSA. Moving the deadline to January 31 would create logistical and 

technical challenges for SSA. As previously discussed, SSA officials 

told us that moving the deadline to January 31 or earlier would require 

shifting its software development cycle because SSA’s computer 

experts are working on another system during that timeframe; 

however, the computer experts are available to implement an 

accelerated W-2 filing date of February 29. If concurrent changes in 

the e-file threshold are not made, SSA may also incur administrative 

costs, should the number of W-2 corrections increase or a processing 

backlog occur (see next section for details).

• Third parties. The costs and benefits to employers and payroll 

providers have not been quantified. SSA officials stated that moving 

any W-2 deadline (other than the current e-file deadline of March 31) 

The Costs and Benefits of 

Accelerated W-2 Deadlines 

and Pre-refund Matching Have 

Not Been Assessed Fully
Page 20 GAO-14-633 Identity Theft

involves a degree of risk that cannot be quantified at present. They 

recommended surveying employers and payroll providers to better 

understand the impact of shortening or eliminating the time gap 

between when W-2s must be provided to employees and when they 

must be provided to SSA.

Estimating the costs and benefits of options to accelerate W-2 deadlines 

and to conduct earlier W-2 matching is consistent with IRS’s strategic 

plan, which includes objectives to strengthen refund fraud prevention 

through the use of third-party data and to use analytics for timely, 

informed decision making.28 It is also consistent with Standards for 

Internal Control in the Federal Government, which calls for IRS 

management to design and implement internal controls within its 

programs based on the related costs and benefits.29

Agency officials and third-party stakeholders we spoke to noted that other 

policy changes may also be needed in concert with moving W-2 

deadlines. This is because W-2 matching is part of a much larger taxadministration system that provides IRS with information needed to help 

verify the identity, employment, and earnings of taxpayers. These 

changes could include lowering the e-file threshold for employers, 

delaying refunds, or delaying the start of the filing season. IRS has not yet 

undertaken efforts to understand the full costs of implementing earlier, 

pre-refund W-2 matching, and the costs associated with these other 

changes.

However, without 

better analysis of the costs and benefits of options for implementing 

accelerated W-2 deadlines and pre-refund matching, Congress does not 

have the information needed to consider Treasury’s proposal and 

deliberate the merits of making such a significant change.

Lowering the E-File Threshold for Employers

Because of the additional time and resources associated with processing 

paper W-2s submitted by employers, SSA officials told us that a change 

in the e-file threshold would be needed to sufficiently increase the number 

of e-filed W-2s. Reducing the e-file threshold would allow IRS to obtain 

timely, accurate data from a significant number of employers and would 

 28IRS, Strategic Plan: FY2014-2017.

29GAO/AIMD-00-21.3.1. 

Other Policy Changes May Be 

Needed to Implement Earlier, 

Pre-refund W-2 Matching
Page 21 GAO-14-633 Identity Theft

enhance the benefits IRS could obtain from the accelerated W-2 deadline 

and pre-refund W-2 matching. Currently, employers who file 250 or more 

W-2s annually must e-file those forms.

30

More than 4.5 million establishments have fewer than 10 employees,

Low-volume filers (filing fewer 

than 250 information returns annually) can file on paper, and for tax year 

2011 these employers sent about 27.6 million paper W-2s (13 percent of 

all W-2s filed), according to IRS data. Because of the additional time SSA 

needs to process paper W-2s before sending them to IRS, changes in the 

e-file threshold would be necessary for earlier W-2 deadlines to have the 

intended effect. Without a change in the e-file threshold, backlogs in 

paper W-2s could result in IRS receiving W-2 data after the end of the 

filing season. For example, SSA officials said they can have a large 

backlog of paper W-2s and can process some paper W-2s as late as 

August or September. Having more e-filed W-2s would speed processing 

time for SSA (as compared to paper W-2 processing time) and would 

enable IRS to receive a larger percentage of W-2 data earlier, according 

to SSA officials.

31

and SSA officials estimated that the e-file threshold would need to be 

reduced to 5 to 10 information returns for the change to result in a 

meaningful increase in the number of e-filed W-2s. Many states have 

already implemented lower e-file thresholds. According to the American 

Payroll Association, 19 states, the District of Columbia, and Puerto Rico 

have a W-2 e-file threshold that is lower than IRS’s information return 

requirement.32

Two of the three payroll and information reporting associations we 

interviewed said lowering the e-file threshold would not create problems 

for most employers.33

 3026 C.F.R. § 301.6011-2(b)(2). IRS is generally prohibited from requiring those filing 

fewer than 250 returns annually to e-file. 26 U.S.C. § 6011(e)(2)(A). 

An organization representing small businesses was 

generally supportive of lowering the e-file threshold, but also noted that a 

minority of small businesses may oppose a threshold reduction. However, 

there are ways to mitigate the burden on small businesses, including 

31According to 2011 U.S. Census Bureau data. 

32American Payroll Association, PayState Update, vol. 16, iss. 2 (2014). Thresholds vary 

by state. For example, Connecticut and Virginia mandate e-filing for all employers. Other 

states require e-filing for more than 11-100 information returns.

33The third association did not comment on the e-file threshold during our interview. 
Page 22 GAO-14-633 Identity Theft

implementing a gradual reduction in the threshold and/or allowing 

employers to file for hardship waivers.34

In addition to contributing to the IRS’s ability to verify employment 

information on tax returns, lowering the e-file threshold could reduce 

administrative costs for SSA. Based on fiscal year 2013 data, SSA 

officials stated that an e-filed W-2 costs about $0.002 to process, while a 

paper W-2 costs about $0.53 to transcribe and process.

Additionally, small employers can 

e-file W-2s at no cost through SSA’s web application, Business Services 

Online.

35

Treasury recently requested that Congress expand legal authority to allow 

a reduction of the 250-return e-filing threshold for a broad set of 

information returns, including W-2s.

Moreover, SSA 

officials said it is more difficult to ensure data quality with paper W-2s, as 

transcription errors can occur while processing paper W-2s.

36 According to Treasury, benefits 

such as enhancing taxpayer compliance, improving IRS service to 

taxpayers, and modernizing tax administration make this change 

worthwhile. For example, expanding e-filing will help IRS focus its audit 

activities, as IRS will receive information in a useable form, according to 

Treasury. The cost savings described above, as well as compliance and 

other benefits, could be realized before Congress decides on whether to 

accelerate W-2 deadlines (as proposed by Treasury). The change would 

support IRS’s strategic objectives to encourage compliance while 

minimizing costs and taxpayer burden.37 In addition, increasing e-filing is 

consistent with internal controls, which require that information be 

recorded and communicated to management and others within the entity 

who need it and in a form and within a timeframe that enables them to 

carry out their internal control and other responsibilities.38

 34IRS made similar gradual threshold reductions when implementing e-filing requirements 

for paid preparers. 

For an entity to 

run and control its operations, it must have relevant, reliable, and timely 

communications relating to internal as well as external events. 

35We did not verify SSA’s estimates. 

36Treasury, General Explanations of the Administration’s Fiscal Year 2015 Revenue 

Proposals.

37IRS, Strategic Plan: FY2014-2017. 

38GAO/AIMD-00-21.3.1. 
Page 23 GAO-14-633 Identity Theft

Implementing a lower e-filing threshold would have the ancillary benefit

(described above) of supporting pre-refund matching.

Delaying Refunds and Delaying the Start of the Filing Season

In conjunction with other strategies such as earlier filing of W-2s, delaying 

the filing season or delaying refunds would provide more time for IRS to 

receive W-2s, conduct pre-refund matching, and identify IDT refund fraud, 

according to IRS and third-party officials.39 IRS could delay the start of the 

filing season—the date IRS begins to process tax returns—but changing 

IRS’s obligation to issue refunds within 45 days of the due date of the 

return would require a statutory amendment.40 Both changes would have 

costs associated with educating taxpayers about the changes and 

potential costs to taxpayers who receive refunds later (discussed below). 

In our discussions with third parties about ways to prevent IDT refund 

fraud, 10 of the 22 groups we interviewed—ranging from financial 

institution associations to software companies to payroll associations—

specifically suggested the option of delaying refunds or delaying the filing 

season until IRS could match W-2 data to tax returns.41

Delaying refunds is likely to burden taxpayers, according to IRS and thirdparty officials. Taxpayers who file early and who are financially dependent 

on a refund, such as low-income taxpayers receiving refundable credits, 

could be burdened. For example, according to the National Taxpayer 

Advocate, delayed refunds would have a detrimental effect on low-income 

taxpayers who use their tax refunds to pay winter utility bills.42

 39Currently, IRS delays refunds for suspicious returns. For example, IRS’s Taxpayer 

Protection Program reviews suspicious returns flagged by IRS’s identity theft filters and 

requires taxpayers to confirm their identities before IRS issues the refund. 

According 

to our analysis, the changes would also result in a permanent shift in the 

annual cycle of refunds on which some taxpayers depend. Once the 

change is made, the time interval between annual refunds will be the 

same length as it is now; however, during the first year of implementation, 

40The start of the filing season is typically in mid January, although IRS has delayed the 

start date of the filing season in the past, such as in 2013 and 2014.

41In our semistructured interviews, we did not specifically ask all 22 groups about the 

options of delaying refunds or delaying the filing season. Ten groups discussed delaying 

refunds or the filing season as a potential way for IRS to combat IDT refund fraud. 

42National Taxpayer Advocate, 2013 Annual Report to Congress, Vol. II. 
Page 24 GAO-14-633 Identity Theft

that interval may be increased by several months. This additional waiting 

time in the first year could be burdensome for some taxpayers; however, 

there should be no added burden in subsequent years (i.e. the interval 

between refunds will be approximately 12 months in those later years).43

Through its external leads programs, IRS collaborates with financial 

institutions, software companies, prepaid card companies, and other third 

parties. These partnerships provide valuable information about emerging 

IDT trends and fraudulent returns that have passed through IRS’s 

prevention and detection systems. External leads help IRS identify 

fraudulent refunds and understand emerging trends in IDT refund fraud 

and other refund fraud. According to IRS officials, the agency has used 

third-party leads to improve detection of IDT refund fraud.44 Between 

January 1, 2014 and May 31, 2014, IRS reported that more than 350 

sources sent IRS successful leads for nearly 94,000 taxpayer accounts: 

these leads were for all types of refund fraud including, but not limited to,

IDT refund fraud.45

Communicating with third parties is consistent with IRS’s strategic plan 

objective to implement a robust enterprise risk management program by 

establishing routine reporting procedures to inform external stakeholders 

about operational risks.

IRS reported that financial institutions returned $214.8 

million in fraudulent refunds during this period.

46 Also, it is consistent with internal controls, which 

require relevant, reliable, and timely communications relating to external 

events.47

 43IRS has a legal obligation to pay interest on refunds issued after 45 days from the due 

date of the tax return, and this requirement would apply to refund delays associated with 

pre-refund matching and IDT refund fraud detection. Taxpayers who currently receive their 

refunds prior to the 45-day deadline may incur opportunity costs to the extent they would 

not be able to accrue interest on the refund during the time period between the date they 

currently receive their refund and the 45-day deadline. 

As such, management should ensure there are adequate 

44According to IRS officials, IRS has received many suggestions from third parties. When 

deciding whether to implement these suggestions, officials consider factors such as 

budget, operational, and administrative constraints. 

45IRS does not distinguish between leads based on suspicion of IDT refund fraud or other 

types of fraud.

46IRS, Strategic Plan: FY2014-2017. 

47GAO/AIMD-00-21.3.1. 

Weaknesses in ThirdParty Partnership 

Programs Limit PostRefund Fraud Detection
Page 25 GAO-14-633 Identity Theft

means of communicating with external stakeholders and of obtaining 

information from them that could help IRS achieve its goal of reducing 

IDT refund fraud.

Disclosure constraints limit what IRS can share. Section 6103 of the 

Internal Revenue Code limits the types of information IRS can share with 

external parties, even for fraudulent returns.48

IRS feedback to third parties is limited. While IRS’s feedback differs by 

external leads program, third parties receive limited feedback across both 

programs.

However, section 6103 

does not limit IRS’s ability to share general information about how to 

manage IDT refund fraud or emerging fraud trends. Disclosure of 

individual taxpayer information could be prevented by aggregating 

information so that no individual taxpayers could be identified. IRS 

officials told us that aggregated feedback to third parties may be possible, 

as long as a sufficient number of leads are discussed.

49

 48Tax returns and other information submitted to and, in some cases, generated by IRS, 

are confidential and protected from disclosure, except as specifically authorized by 

statute. 26 U.S.C. § 6103. Section 6103 protections apply equally to all tax returns and tax 

information that IRS receives, and it has no exceptions for fraudulent returns. In instances 

where a fraudulent return is under investigation, section 6103 allows IRS to share the 

minimum amount of tax return information necessary with financial institutions to facilitate 

the return of a fraudulent refund to IRS. In cases where financial institutions have rejected 

direct deposit refunds as part of the Opt-In Program, section 6103 does not allow IRS to 

share specific tax information with the financial institution.

Eight of the eleven financial institution and tax software 

associations/companies we interviewed said that IRS provides little to no 

feedback in response to leads sent through the External Leads Program 

or the Opt-In Program, or they told us they requested additional feedback

from IRS. Furthermore, IRS officials told us that the agency has received 

millions of leads from software companies, but while IRS makes an effort 

to examine and address the highest priority leads (e.g., high refund 

dollars), IRS has not analyzed or provided feedback about many of these 

leads because it does not have the resources to do so. Without accurate, 

timely, and actionable feedback, external parties do not know if the leads 

they provide to IRS are useful. Five of these eleven financial institution 

associations and tax software associations/companies volunteered that 

49For leads submitted by financial institutions through the External Leads Program, IRS 

contacts the institutions to request that a suspicious refund be returned to IRS, thereby 

indicating some information about whether the lead helped to identify fraud. In contrast, 

IRS cannot provide similar feedback to financial institutions participating in the Opt-In 

Program because of legal restrictions.
Page 26 GAO-14-633 Identity Theft

they are not able to assess their success in identifying IDT refund fraud, 

or to improve their own detection tools.50

IRS’s general and aggregated feedback is limited to particular 

groups. IRS shares general information about high-level schemes and 

IDT refund fraud trends during meetings with BITS, the technology policy 

division of the Financial Services Roundtable.

Useful feedback may include 

aggregated information about the share of each institution’s leads that 

helped to identify suspicious returns and other information about IDT 

refund fraud trends. This type of aggregated information would also 

comply with section 6103 disclosure requirements.

51 However, financial 

institutions that are not part of that organization may not have the 

opportunity to learn from these discussions.52

IRS does not use metrics for tracking external leads. To provide 

aggregated feedback by institution, IRS would need to begin tracking this 

information. IRS officials said they have not implemented metrics by 

institution because of a lack of resources. While IRS compiles 

information—including the total number of external lead sources, leads 

submitted, and associated refund dollars—the agency does not use the 

information to develop metrics to track leads by the submitting third party. 

For the External Leads Program, IRS officials told us that while IRS 

monitors the volume of leads and associated refund dollars to assess 

accomplishments and program value, it does not use metrics to monitor 

and follow up on leads, including the tracking of leads by the third party 

In addition, IRS officials 

said they provide aggregated data about leads received to tax software 

companies that request the information, but companies that do not 

request the information may not receive this feedback.

 50In our semistructured interviews, we asked an open question about the extent to which 

IRS provided feedback. The five groups volunteered this particular impact. 

51According to a BITS official, the Financial Services Roundtable represents the largest 

integrated financial services companies providing banking, insurance payment and 

investment products and services to the American consumer. BITS addresses emerging 

technology and operational opportunities for the financial services industry, helping 

members manage risk, particularly in cybersecurity, fraud reduction, vendor management, 

and critical infrastructure protection. BITS is not an acronym. At one time, BITS stood for 

“Banking Industry Technology Secretariat.” However, with financial modernization and the 

emergence of integrated financial services companies, that term is no longer used. 

52According to a BITS official, this information is available upon request through BITS for 

any financial institutions that are not its members. However, financial institutions need to 

know this information is available through BITS in order to request it. 
Page 27 GAO-14-633 Identity Theft

that submitted them. In addition, IRS officials said while IRS provides 

some overall data for the Opt-In Program, it does not track this 

information by financial institution. Because IRS does not track external 

leads by institution, it cannot use this information to improve IDT refund 

fraud programs or to provide feedback to third parties about the

effectiveness of their leads.

Strengthening IRS’s partnerships with third parties would require IRS to 

expend resources analyzing leads and providing feedback to third parties. 

These costs could vary, depending on the systems involved and the level 

of feedback IRS provides. IRS has some of the information needed to 

track leads in this way. For example, spreadsheets submitted through the 

External Leads Program contain the institutions’ names, so entirely new 

data collection systems may not be needed. Our past work has shown 

that developing metrics to track external leads by submitting party is 

consistent with practices that enhance the use of performance 

information, such as communicating that information frequently and 

effectively.53 In addition, tracking external leads would support IRS’s 

strategic goal of supporting effective tax administration by providing timely 

information to external partners in the tax community.54 Metrics would 

allow IRS to communicate information to specific third parties, who could 

then adapt their own IDT detection tools. Given the millions of dollars in 

refund fraud returned by financial institutions in the first five months of 

2014, even a modest increase in IDT refunds returned due to institutionspecific feedback may be worth the investment of tracking external leads.

IDT refund fraud is a large problem: IRS estimates it issued at least $5.2 

billion in fraudulent IDT refunds in filing season 2013. Given the size and 

scope of IDT refund fraud, additional bold and innovative steps are 

needed from Congress and IRS. For IRS to successfully combat IDT 

refund fraud, it will need to develop heightened awareness in its 

understanding of emerging trends, and in its ability to leverage both 

internal and external resources. While there is no “silver bullet” available 

to resolve the problem, developing strategies that focus on both 

preventing IDT refund fraud and resolving it can help IRS respond to this 

 53GAO, Managing for Results: Enhancing Agency Use of Performance Information for 

Management Decision Making, GAO-05-927 (Washington, D.C.: Sept. 9, 2005). 

54IRS, Strategic Plan: FY2014-2017, (Washington, D.C.: 2014). 

Conclusions
Page 28 GAO-14-633 Identity Theft

evolving threat. These strategies are likely to include constantly adapting 

and strengthening present defenses while also developing new strategies 

for both electronic and paper returns that stop IDT refund fraud at all 

stages of return processing.

Given the billions in dollars of successful IDT refund fraud, IRS must 

strive to stay one or more steps ahead of identity thieves, or the risk of 

issuing fraudulent IDT refunds could grow. Staying ahead of identity 

thieves will require a significant resource investment from IRS as it 

strengthens and develops new tools. Accelerating the W-2 deadline to 

January 31—as proposed by Treasury—would provide a powerful tool for 

IRS to detect and prevent IDT refund fraud. At the same time, the full 

costs and benefits are not known because IRS has not considered how it 

would implement pre-refund matching using W-2 data. The burden this 

would impose on employers, the costs to IRS for systems changes, and 

the likely need for other changes (such as increased e-filing) means this 

step should not be taken without an informed discussion among all 

stakeholders, including Congress. Further, taxpayers’ expectations about 

the filing season and when they can anticipate receiving refunds may 

need to shift. Also, IRS has not fully leveraged third parties, having 

provided only limited feedback on the IDT refund leads third parties are 

submitting and offering limited general information on IDT refund fraud 

trends. However, to provide this information, IRS will need metrics to 

track external leads by the third party that submitted them, which it 

currently does not have. While the cost of providing third-party feedback 

could vary depending on the level of feedback IRS provides, third-party 

leads returned hundreds of millions of dollars in all refund fraud to the IRS 

in 2014, and are a valuable information resource about fraudulent returns 

that have bypassed IRS’s prevention and detection systems. 

Congress should consider providing the Secretary of the Treasury with 

the regulatory authority to lower the threshold for electronic filing of W-2s 

from 250 returns annually to between 5 to 10 returns, as appropriate.

Matters for 

Congressional 

Consideration
Page 29 GAO-14-633 Identity Theft

We recommend the Commissioner of Internal Revenue fully assess the 

costs and benefits of accelerating W-2 deadlines and provide information 

to Congress on

• the IRS systems and work processes that will need to be adjusted to 

accommodate earlier, pre-refund matching of W-2s and then identify 

timeframes for when these changes could be made;

• potential impacts on taxpayers, IRS, SSA, and third parties; and

• what other changes will be needed (such as delaying the start of the 

filing season or delaying refunds) to ensure IRS can match tax returns 

to W-2 data before issuing refunds.

We recommend that the Commissioner of Internal Revenue take the 

following two actions to provide timely, accurate, and actionable feedback 

to all relevant lead-generating third parties:

• provide aggregated information on (1) the success of external party 

leads in identifying suspicious returns and (2) emerging trends

(pursuant to section 6103 restrictions); and

• develop a set of metrics to track external leads by the submitting third 

party.

We provided a draft of this product to IRS and SSA for review and 

comment. In its written comments, reproduced in appendix III, IRS neither 

agreed nor disagreed with our recommendations. IRS stated that it is

determining how potential corrective actions align with available 

resources and IRS priorities before deciding whether to implement the 

recommendations. With regard to our first set of recommendations, IRS 

acknowledged that accelerating W-2 deadlines or delaying the tax filing 

season represents a significant change to tax administration. IRS stated 

that in order to determine the best course of action, Congress needs an 

understanding of the costs and benefits for IRS and other stakeholders. 

With regard to our second set of recommendations, IRS stated that 

information sharing, as permitted under the law—such as providing 

feedback to third parties—fosters good working relationships and 

promotes ongoing program improvements. IRS provided technical 

comments that we incorporated, as appropriate. 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
Page 30 GAO-14-633 Identity Theft

We recognize the need for IRS to assess its priorities given the fiscal 

constraints it faces. We previously reported that since fiscal year 2010, 

IRS has absorbed approximately $900 million in budget cuts while facing 

increasing workloads as a result of legislative mandates and priority 

programs, such as work related to the Patient Protection and Affordable 

Care Act.

55

In its written comments, reproduced in appendix IV, SSA stated that its 

implementation of a redesigned Annual Wage Reporting system for 

processing W-2s in January 2015 and W-2cs in January 2016 will position 

the agency to support an accelerated W-2 deadline as well as support 

lowering the threshold for e-filing W-2s. SSA also said that it transmits 

wage data to IRS immediately upon receiving electronic W-2s. Paper W2s require manual handling and therefore have a significantly longer 

processing time. SSA also recommended that IRS consider the impact of 

Form 1099 reporting in making decisions to accelerate the W-2 reporting 

and change IRS business processes. SSA also provided technical 

comments that we incorporated, as appropriate.

Even with these constraints and other potentially competing 

priorities, we believe the size of the IDT problem warrants additional 

action now. Pre-refund matching of W-2 data is one option that IRS 

agrees has the potential to prevent a substantial portion of the estimated 

$5.2 billion in IDT refunds paid in filing season 2013. However, such a 

change may require a significant resource investment by IRS as well as 

impact taxpayers and employers. Without better information about the 

benefits and costs of such a significant change, Congress cannot make 

an informed decision about implementing it. With respect to our 

recommendations regarding the External Leads Program, IRS highlighted 

the fact that the program has generated more than $2.3 billion in refunds 

returned to the U.S. Treasury from 2010 to 2014. Given that IRS already 

has some of the information needed to better track external lead results, 

IRS should be able to control the costs of implementing our 

recommendations. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Commissioner of 

 55GAO, Internal Revenue Service: Absorbing Budget Cuts Has Resulted in Significant 

Staffing Declines and Uneven Budget Performance, GAO-14-534R (Washington, D.C.: 

Apr. 21, 2014). 
Page 31 GAO-14-633 Identity Theft

Internal Revenue. In addition, the report will be available at no charge on

the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-9910 or whitej@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix V.

James R. White

Director, Tax Issues

Strategic Issues
Appendix I: IRS Identity Theft Taxonomy 

Limitations

Page 32 GAO-14-633 Identity Theft

IRS developed the Identity Theft Taxonomy (Taxonomy) to monitor the 

volume of identity theft (IDT) refund fraud attempts and assess the impact 

of its IDT defenses over time, among other reasons. The Taxonomy is a 

matrix of IDT refund fraud categories that estimate the amount of 

identified IDT refund fraud IRS prevented or recovered, as well as the 

identified IDT refund fraud IRS paid. The estimates are based on IRS’s 

administrative records of known IDT refund fraud (e.g., data on the 

number of duplicate returns or returns detected by identity theft filters). 

The Taxonomy also estimates likely identity theft by identifying returns 

with the characteristics of IDT refund fraud, which are found when IRS 

matches returns to W-2 and other information return data after the tax 

filing season. The Taxonomy is a valuable step toward inventorying 

available IDT refund fraud data and assessing the performance of IRS’s 

IDT refund fraud defenses. However, we identified limitations in the 

Taxonomy, specifically

• Taxonomy estimates are preliminary. After we provided a draft for

comment, IRS officials stated that the Taxonomy estimates are 

preliminary, as they are updating their analysis using information 

return matching to identify likely returns where IRS paid IDT refunds. 

They anticipate their estimates for IDT refunds paid will increase 

somewhat (perhaps by $0.6 billion), but an updated Taxonomy 

estimate was not completed in time for us to include in this report.

• Using administrative records could result in imprecise estimates.

Taxonomy estimates could be imprecise because the returns 

identified may not accurately represent the true universe of IDT refund 

fraud. If only certain kinds of criminals (or fraudsters) are more likely 

to be detected by IRS defenses, IRS records on detected IDT refund 

fraud may not accurately represent all individuals attempting to 

commit IDT refund fraud.

• Certain Taxonomy estimates are based on assumptions using 

the characteristics of past IDT refund fraud. While the assumptions 

are based on IRS’s research from known cases and appear 

reasonable, we could not verify the accuracy and comprehensiveness 

of these assumptions. This is because the accuracy of the Taxonomy

estimates is largely based on whether the estimate includes all true 

IDT refund fraud returns and excludes all legitimate returns. IRS 

officials acknowledged their estimates for returns flagged during 

information return matching could include legitimate returns that are 

not actual IDT refund fraud. For example, the estimate could include 

returns flagged due to taxpayer or employer error or other non-IDT 

fraud by taxpayers (e.g., the taxpayer deliberately enters false 

Appendix I: IRS Identity Theft Taxonomy

Limitations
Appendix I: IRS Identity Theft Taxonomy 

Limitations

Page 33 GAO-14-633 Identity Theft

information on his tax return to obtain a larger refund). Changes in 

these assumptions can substantially affect the estimates, but this 

uncertainty is not reflected in IRS’s Taxonomy estimates for filing 

season 2013 (e.g., IRS does not present a range of estimates based 

on differing assumptions).

• IRS’s Taxonomy underestimates the number of IDT refund fraud 

returns and refund amounts for some IDT categories. IRS’s 

estimate of IDT refunds paid is based on duplicate returns, 

information return mismatches, and criminal investigations identified 

after the refunds are paid. However, for cases where there are no 

duplicate returns, information returns, or criminal investigations 

associated with a tax return, IRS has been unable to estimate the 

amount of IDT refund fraud. IRS officials have considered using 

surveys to estimate unidentified IDT refund fraud, but have not been 

able to come up with a survey method that would avoid significant 

taxpayer burden.

• IRS’s Taxonomy overestimates the number of IDT refund fraud 

returns and refund amounts for some IDT categories. For 

example, IRS’s estimates for “refunds protected” include refunds 

returned to IRS as a result of external leads. However, IRS data on 

external leads do not distinguish whether the type of fraud was IDT 

refund fraud or some other type of fraud. Our analysis of the 

Taxonomy found that IRS did not adjust its estimate to account for 

other types of refund fraud.

• Methodology changes and other factors prevent comparisons 

between filing seasons 2012 and 2013 estimates. For filing season 

2012, IRS estimates it prevented or recovered about $21.6 billion (71 

percent) of the estimated IDT refunds and paid $8.9 billion (29 

percent). Comparing filing season 2012 and 2013 estimates is 

problematic because it is unclear whether the changes are due to 

methodological changes, such as using different data sources or 

changing the criteria for querying data. IRS officials said they update 

their methodology to better reflect evolving IDT refund fraud schemes 

and improve the accuracy of Taxonomy estimates, although they 

attempt to use consistent definitions to promote comparability of 

estimates across years. In addition, it is unclear whether changes are 

due to overall changes in fraud patterns, such as an increase or 

decrease in fraud attempts; improvements in IRS IDT defenses; or 

identity thieves’ ability to file returns using schemes IRS has not yet 

learned to detect.
Appendix I: IRS Identity Theft Taxonomy 

Limitations

Page 34 GAO-14-633 Identity Theft

It is likely that IRS’s estimates of the IDT refund fraud for filing seasons 

2012 and 2013 will continue to evolve as IRS improves the Taxonomy

methodology. For example, during the course of our audit, we found that 

IRS’s methodology for counting returns did not include two categories of 

duplicate returns that should have been included in the estimates. IRS 

officials estimated that including these returns would increase IRS’s 

original 2013 estimates of refunds paid out by $0.47 billion, from $4.75 

billion to $5.22 billion in filing season 2013.
Appendix II: Objectives, Scope, and 

Methodology

Page 35 GAO-14-633 Identity Theft

This report examines (1) what the Internal Revenue Service (IRS) knows 

about the extent of identity theft (IDT) refund fraud and (2) what additional 

actions IRS can take to combat IDT refund fraud using third-party 

information (for example, from employers and financial institutions). As 

described earlier, the report discusses IDT refund fraud and not 

employment fraud, unless otherwise noted.

To understand what IRS knows about the extent of IDT refund fraud, we 

reviewed IRS’s Identity Theft Taxonomy (Taxonomy), which estimates the 

amount of IDT refund fraud that IRS is, and is not, preventing. We 

conducted manual data testing for obvious errors and compared 

underlying data to IRS’s Refund Fraud & Identity Theft Global Report. We 

confirmed Taxonomy components where we had data available to cross 

check. We also interviewed IRS officials to better understand the 

methodology used to create the estimates and the changes in 

methodology, data sources, and assumptions across the years of data 

available. For details on our findings about the Taxonomy components we 

evaluated, see appendix I.

To identify opportunities to improve IRS’s IDT refund fraud efforts, we 

reviewed Internal Revenue Manual sections detailing IRS’s Identity 

Protection Program and IRS documentation for its External Leads 

Program, the Opt-In Program, and other third-party efforts. We also 

reviewed Treasury’s legislative proposals and Congressional testimony of 

IRS officials. We interviewed officials and reviewed documentation from 

the Social Security Administration (SSA) and several of the third parties 

shown in table 1 below, where applicable. We selected a nonprobability 

sample of 22 associations and stakeholders with differing positions and 

characteristics to help ensure our analysis covered a variety of 

viewpoints, based on IRS documentation and suggestions, our prior work, 

and other information. For example, to select associations representing

financial institutions, we considered, among other factors, the size and 

type of institutions they represented (e.g., large or small banks, credit 

unions, and prepaid debit card companies). Because we used a 

nonprobability sample, the views of these associations are not 

generalizable to all potential third parties.

Appendix II: Objectives, Scope, and 

Methodology
Appendix II: Objectives, Scope, and 

Methodology

Page 36 GAO-14-633 Identity Theft

Table 1: List of Third Parties Interviewed

Software and Analytics Companies 1. Equifax

2. H&R Block

3. Intuit

a

4. LexisNexis

5. SAS

Tax Software and Return Preparer Associations and Advisory Committees 6. American Coalition for Taxpayer Rights

7. American Institute of CPAs

8. Electronic Tax Administration Advisory Committee

9. Free File Alliance

Financial Institution and Payment Associations 10. American Bankers Association

11. BITS

12. The Clearing House

b

13. Credit Union National Association

14. NACHA – The Electronic Payments Association

c

15. National Association of Federal Credit Unions

16. Network Branded Prepaid Card Association

Payroll, Information Reporting, and Small Business Associations 17. American Payroll Association

18. Information Reporting Program Advisory 

Committee

19. National Federation of Independent Businesses

20. Reporting Agent Forum

Others 21. Federation of Tax Administrators

22. National Taxpayer Advocate

Source: GAO. | GAO-14-633

a

Also offers in-person tax preparation and banking services.

b

Technology policy division of the Financial Services Roundtable. BITS is not an acronym. At one 

time, BITS stood for “Banking Industry Technology Secretariat.” However, with financial 

modernization and the emergence of integrated financial services companies, that term is no longer 

used.

c

When possible, we used a standard set of questions in interviewing these 

associations and summarized the results of the semistructured interviews. 

However, as needed, we also sought perspectives on additional 

questions tailored to these associations’ expertise and sought their 

opinions on key issues. We then discussed these options with officials 

from IRS offices, including (1) Privacy, Government Liaison, and 

Disclosure and (2) Return Integrity and Correspondence Services to 

determine the feasibility of various options and the challenges of pursuing 

them.

Provided written comments.
Appendix II: Objectives, Scope, and 

Methodology

Page 37 GAO-14-633 Identity Theft

To describe the timing of refunds issued compared to W-2 submissions, 

we analyzed SSA data for filing season 2013 and IRS data for filing 

season 2012.1

For IRS data, we used analysis developed for 

SSA provided data on the cumulative number of W-2s it 

received for filing season 2013. We assessed the reliability of SSA data 

by performing electronic tests to identify obvious errors and discussing 

the data with SSA officials. We found the data were sufficiently reliable for 

the purposes of providing contextual information on when SSA receives 

W-2s.

GAO-13-515 on the timing 

of W-2s and tax returns. This analysis obtained data from IRS’s 

Compliance Data Warehouse (CDW) database, which provides a variety 

of tax return, enforcement, compliance, and other data.2

We conducted this performance audit from May 2014 to August 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

In analyzing 

when tax returns were received by IRS, we used the cycle posting date

(when IRS posts tax return data to the master file), as it represents when 

the tax return data are available for matching. Officials noted that IRS 

must refine the data prior to posting to IRS systems. This may include 

identifying and correcting incomplete or inaccurate data before posting 

the data to IRS systems. We assessed the reliability of CDW data by (1) 

performing electronic or manual testing of required data elements to 

identify obvious errors, (2) reviewing existing information about the data 

and the system that produced them, and (3) interviewing agency officials 

knowledgeable about the data. We determined that the data were 

sufficiently reliable for the purposes of this report.

 1

Our analysis of IRS data on the timing of information returns is from a previous report 

(GAO-13-515). 

2

Our analysis of IRS data is based on return data extracted from CDW April 17, 2013. For 

our previous review, IRS officials reviewed our information return counts as of this date 

and confirmed that our data were substantially the same as their counts at that time.
Appendix III: Comments from the

Internal Revenue Service

Page 38 GAO-14-633 Identity Theft

Appendix III: Comments from the

Internal Revenue Service
Appendix III: Comments from the

Internal Revenue Service

Page 39 GAO-14-633 Identity Theft
Appendix III: Comments from the

Internal Revenue Service

Page 40 GAO-14-633 Identity Theft
Appendix III: Comments from the

Internal Revenue Service

Page 41 GAO-14-633 Identity Theft
Appendix IV: Comments from the

Social Security Administration

Page 42 GAO-14-633 Identity Theft

Appendix IV: Comments from the

Social Security Administration 
Appendix IV: Comments from the

Social Security Administration

Page 43 GAO-14-633 Identity Theft
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 44 GAO-14-633 Identity Theft

James R. White, (202) 512-9110 or whitej@gao.gov.

In addition to the individual named above, Neil Pinney, Assistant Director; 

Shannon Finnegan, Analyst-in-Charge; Amy Bowser; Deirdre Duffy; 

Michele Fejfar; Timothy Guinane; Katharine Kairys; Donna Miller; Dae 

Park; and Ellen Rominger made key contributions to this report. Gary 

Bianchi, Nina Crocker, Mary Evans, Ron Jones, David Lewis, Paul 

Middleton, Susan E. Murphy, Sabine Paul, Sara Pelton, Julie Spetz, Jim 

Wozny, and John Zombro also provided assistance.

Appendix V: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
GAO. Financial Audit: IRS’s Fiscal Years 2013 and 2012 Financial 

Statements. GAO-14-169. Washington, D.C.: December 12, 2013.

GAO. Internal Revenue Service: 2013 Tax Filing Season Performance to 

Date and Budget Data. GAO-13-541R. Washington, D.C.: April 15, 2013.

GAO. Identity Theft: Total Extent of Refund Fraud Using Stolen Identities 

is Unknown. GAO-13-132T. Washington, D.C.: November 29, 2012.

GAO. Financial Audit: IRS’s Fiscal Years 2012 and 2011 Financial 

Statements. GAO-13-120. Washington, D.C.: November 9, 2012.

GAO. Taxes and Identity Theft: Status of IRS Initiatives to Help Victimized 

Taxpayers. GAO-11-721T. Washington, D.C.: June 2, 2011.

GAO. Taxes and Identity Theft: Status of IRS Initiatives to Help Victimized 

Taxpayers. GAO-11-674T. Washington, D.C.: May 25, 2011.

GAO. Tax Administration: IRS Has Implemented Initiatives to Prevent, 

Detect, and Resolve Identity Theft-Related Problems, but Needs to 

Assess Their Effectiveness. GAO-09-882. Washington, D.C.: September 

8, 2009.

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