TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION 

Case Processing Delays and 

Tax Account Errors Increased 

Hardship for Victims of Identity Theft 

September 26, 2013 

Reference Number: 2013-40-129 

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process 

and information determined to be restricted from public release has been redacted from this document. 

Redaction Legend: 

1 = Tax Return/Return Information 

Phone Number / 202-622-6500 

E-mail Address / TIGTACommunications@tigta.treas.gov

Website / http://www.treasury.gov/tigta
HIGHLIGHTS

CASE PROCESSING DELAYS AND on these 100 identity theft cases averaged 

TAX ACCOUNT ERRORS INCREASED 277 days. In addition, tax accounts were not 

HARDSHIP FOR VICTIMS OF IDENTITY correctly resolved for 25 cases, resulting in 

THEFT delayed refunds and/or incorrect refunds. 

Highlights Finally, processes to ensure the accuracy of 

identity theft management information need to 

be developed. In the Calendar Year 2012 

Refund Fraud and Identity Theft Global Report Final Report issued on (Global Report), the Accounts Management September 26, 2013 function’s open case inventory was overstated 

Highlights of Reference Number: 2013-40-129 by 95,429 cases. In addition, documentation 

to the Internal Revenue Service Deputy was not maintained supporting the inventory 

Commissioner for Operations Support and the provided by the Accounts Management function. 

Commissioner, Wage and Investment Division. The Global Report is the IRS’s authoritative 

IMPACT ON TAXPAYERS source for identity theft management 

information. It provides key statistics on the 

The Federal Trade Commission reported that number of identity theft open and closed cases, 

identity theft was the number one complaint in incidents, and affected taxpayers and on the 

Calendar Year 2012, and government amount of fraudulent refunds the IRS identified. 

documents and benefits fraud was the most 

common form of reported identity theft. The IRS WHAT TIGTA RECOMMENDED 

reported that this crime affected 1.2 million TIGTA recommended that the IRS: 1) ensure taxpayers in Calendar Year 2012, and an that assistors assigned to identity theft cases additional 1.6 million were affected in Calendar work these cases exclusively and are provided Year 2013 as of June 29, 2013. Case with ongoing training and the ability to perform processing delays and tax account errors actions to work these cases to conclusion; increased hardship for victims of identity theft. 2) develop clear and consistent processes and 

WHY TIGTA DID THE AUDIT procedures to ensure that taxpayer accounts are 

correctly updated when cases are resolved; 

This audit was initiated to follow up on concerns 3) develop a standard format for information 

raised in a prior audit that the IRS was not provided for inclusion in the Global Report; 

providing quality customer service to identity 4) develop validation processes and procedures 

theft victims. Our overall objective was to to ensure the accuracy of information included in 

determine whether the IRS improved its the Global Report; and 5) develop retention 

assistance to victims of identity theft. requirements for the documentation supporting 

information included in the Global Report. WHAT TIGTA FOUND 

The IRS agreed with the recommendations and Our review of a statistical sample of 100 identity plans to continue to ensure that there are theft cases closed August 1, 2011, through sufficient resources assigned to identity theft July 31, 2012, found that the IRS correctly inventory and phones and that processes and determined the rightful owner of the Social procedures are developed to ensure that all Security Number in all cases. However, appropriate actions are taken on identity theft taxpayers continued to face delays, with some victims’ accounts. The IRS also plans to cases having significant inactivity during case develop a template for use when reporting processing. In addition, tax accounts were not inventory for the Global Report and plans to use always correctly resolved before the cases were a certification process for each function to verify closed. For the 100 cases reviewed, case the data it provided. Lastly, the IRS plans to resolution averaged 312 days and cases had ensure that each function maintains significant periods of inactivity (i.e., no work was documentation in accordance with retention being performed to resolve the case). Inactivity standards. 
DEPARTMENT OF THE TREASURY 

WASHINGTON, D.C. 20220

TREASURY INSPECTOR GENERAL 

FOR TAX ADMINISTRATION 

September 26, 2013 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT 

COMMISSIONER, WAGE AND INVESTMENT DIVISION

FROM: Michael E. McKenney 

Acting Deputy Inspector General for Audit 

SUBJECT: Final Audit Report – Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft (Audit # 201240041) 

This report presents the results of our review to determine whether the Internal Revenue Service 

(IRS) is improving its assistance to victims of identity theft. This audit is included in the 

Treasury Inspector General for Tax Administration’s Fiscal Year 2013 Annual Audit Plan and 

addresses the major management challenge of Providing Quality Taxpayer Service Operations.

Management’s complete response to the draft report is included as Appendix V. 

Copies of this report are also being sent to the IRS managers affected by the report 

recommendations. Please contact me if you have questions or Russell P. Martin, Acting 

Assistant Inspector General for Audit (Returns Processing and Account Services). 
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Table of Contents 

Background .......................................................................................................... Page 1 

Results of Review ............................................................................................... Page 5 

Case Processing Delays and Errors Increased Hardship 

for Identity Theft Victims ............................................................................. Page 5 

Recommendations 1 and 2: .............................................. Page 14 

Processes to Ensure the Accuracy of the Identity Theft 

Management Information Need to Be Developed ........................................ Page 15 

Recommendations 3 through 5: ......................................... Page 16 

Appendices 

Appendix I – Detailed Objective, Scope, and Methodology ........................ Page 17 

Appendix II – Major Contributors to This Report ........................................ Page 19 

Appendix III – Report Distribution List ....................................................... Page 20 

Appendix IV – Outcome Measure ................................................................ Page 21 

Appendix V – Management’s Response to the Draft Report ....................... Page 22 
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Abbreviations 

CY Calendar Year 

FY Fiscal Year 

IRS Internal Revenue Service 

PGLD Privacy, Governmental Liaison, and Disclosure 

SSN Social Security Number 

TAS Taxpayer Advocate Service 

TIGTA Treasury Inspector General for Tax Administration 
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Background 

The Federal Trade Commission reported that identity theft was the number one complaint in 

Calendar Year1 (CY) 2012. Government documents/benefits fraud was the most common form 

of reported identity theft: 

 Government documents/benefits fraud increased 27 percent since CY 2010. 

 Florida is the State with the highest per capita rate of reported identity theft complaints, 

followed by Georgia and California.2

Identity theft affects the Internal Revenue Service (IRS) and tax administration in two ways—the 

filing of fraudulent tax returns (refund fraud) and misreporting of income (employment-related 

fraud). Both can potentially harm taxpayers who are victims of the identity theft. Figure 1 

provides an illustrative description of both refund fraud and employment-related fraud. 

Figure 1: Description of Refund and Employment-Related Fraud

Source: Treasury Inspector General for Tax Administration (TIGTA) analysis of the identity theft process. 

 

1

 The 12-consecutive-month period ending on December 31. 2 Federal Trade Commission, Consumer Sentinel Network Data Book (Feb. 2013).

Page 1
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Refund fraud adversely affects the ability of innocent taxpayers to file their tax returns and 

timely receive their tax refunds, often imposing significant financial and emotional hardships. 

Employment-related identity theft can affect taxpayers when the IRS attempts to take

enforcement actions for allegedly unreported income. 

To mitigate hardships, the IRS developed identity theft indicators to mark and track the types of 

identity theft incidents (IRS-identified or taxpayer-initiated)3 and the actions taken by employees 

on taxpayers’ accounts. An identity theft indicator is input on affected taxpayers’ accounts after 

the IRS confirms that the taxpayer is a victim of identity theft. Another indicator is input after 

the IRS resolves the case. These indicators are also used to gather data about the number of 

identity theft incidents and affected taxpayers. Figure 2 shows the number of incidents and 

taxpayers reported by the IRS during CYs 2010 through 2013. 

Figure 2: Identity Theft Incidents and Taxpayers Affected 

During CY 2010 Through CY 2013

Calendar 

Year 

IRS-Identified 

Incidents Taxpayers 

Taxpayer-Initiated 

Incidents Taxpayers 

Total 

Incidents Taxpayers 

2010 338,753 201,376 101,828 69,142 440,581 270,518 

2011 

2012 

1,014,884

1,508,375

 553,730 

 985,843 

110,750 

277,491

87,322

 233,365

 1,125,634 

 1,785,866 

641,052 

1,219,208 

 2013* 1,688,817 1,449,602 212,288 181,009 1,901,105 1,630,611 

Source: IRS Identity Protection Incident Tracking Statistics Reports.4 

* CY 2013 figures are through June 29, 2013. 

The Privacy, Governmental Liaison, and Disclosure Office oversees IRS efforts to 

address identity theft 

The Privacy, Governmental Liaison, and Disclosure (PGLD) Office provides oversight and 

coordination of IRS efforts to address the growing identity theft epidemic. The office produces 

the monthly Refund Fraud and Identity Theft Global Report (Global Report), which is the IRS’s 

authoritative source for providing Service-wide refund fraud and identity theft statistics. The 

report is compiled from 33 systems within 20 IRS functions. 

 

3

 IRS-identified cases are ones for which the IRS proactively identified the taxpayer as a potential identity theft 

victim. Taxpayer-initiated cases are ones for which taxpayers initiated contact with the IRS to report that after filing 

their tax return they received a notice indicating that it was rejected because someone (an identity thief) had already 

filed a tax return using the same Social Security Number (SSN) and name. A taxpayer may have more than one 

incident if the identity thief uses the stolen identity to file a fraudulent tax return for multiple tax years. 4

 The Identity Protection Incident Tracking Statistics Report is a source for the Refund Fraud and Identity Theft 

Global Report. 

Page 2
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

In addition, the Director, PGLD Office, chairs a two-tiered governance structure comprised of 

the Identity Theft Executive Steering Committee and the Identity Theft Advisory Council. The 

Identity Theft Executive Steering Committee is comprised of representatives from across the 

IRS. Its purpose is to serve as the governance structure providing key guidance and oversight to 

those organizations working identity theft cases Service-wide. The Identity Theft Advisory 

Council was established as a subcommittee of the Identity Theft Executive Steering Committee 

to oversee initiatives within the IRS Identity Theft Program and apprise the Executive Steering 

Committee on new and ongoing initiatives. 

The Accounts Management function works the majority of taxpayer-initiated 

identity theft cases 

As of June 29, 2013, the majority (70 percent) of taxpayer-initiated cases originated and were 

worked in the Accounts Management function, which is in the Wage and Investment Division. 

This function places the identity theft indicators on the taxpayers’ tax accounts, inputs 

adjustments to the accounts, and provides assistance to taxpayers with tax and account inquiries 

via telephone and correspondence. In preparation for the 2013 Filing Season,5

 the Accounts 

Management function set up four identity theft specialized groups6 made up of approximately 

1,300 employees to address the complexities of the identity theft cases. These groups were 

intended to improve case tracking and enhance customer service by improving efficiency. 

Figure 3 shows the identity theft case inventory that the Accounts Management function reported 

during Fiscal Year7

 (FY) 2011 through FY 2013.8

Figure 3: Accounts Management Inventory 

From FY 2011 Through FY 2013 

Identity Theft FY 2011 FY 2012 FY 2013* 

Beginning Inventory 

Receipts 

Closures 

Ending Inventory 

36,618

184,501

121,225

99,894

 99,894 

 654,564 

 372,129 

 382,329 

382,329 

439,440 

661,925 

159,844 

Source: Accounts Management function identity theft inventory. 

* FY 2013 figures are through June 22, 2013. 

 

5

 The period from January through mid-April when most individual income tax returns are filed. 

6

 These groups are located in Fresno, California; Atlanta, Georgia; Philadelphia, Pennsylvania; and Austin, Texas. 7

 A 12-consecutive-month period ending on the last day of any month. The Federal Government’s fiscal year begins 

on October 1 and ends on September 30. 

8

 The Accounts Management function does not compile inventory figures by unique taxpayer but rather counts by 

Identity Theft Case Processing Category Codes, which can result in multiple cases for the same taxpayer in its 

inventory control system. 

Page 3
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

A prior TIGTA review identified concerns with the quality of customer service 

provided to taxpayers 

In May 2012 we reported9 that identity theft cases were not worked timely and can take more 

than a year to resolve. Our review of a judgmental sample of 17 unique taxpayer cases classified 

as identity theft and originating in five functions10 showed that case resolution averaged 

414 days, cases were open from three to 917 days, and inactivity on the cases averaged 86 days. 

The IRS structure provided limited oversight to ensure that identity theft cases were worked 

timely and effectively. Communications between the IRS and victims were limited and 

confusing, and victims were asked multiple times to substantiate their identity. Lastly, after 

instructing taxpayers to mail in a paper tax return with Form 14039, Identity Theft Affidavit, and 

attached supporting identity documents, the IRS processed these tax returns using standard 

processing procedures. 

We recommended that the IRS: 1) establish accountability for the Identity Theft Program; 

2) implement a process to ensure notices and correspondence are not sent to the address listed on 

the identity thief’s tax return; 3) conduct an analysis of the letters sent to taxpayers; 4) ensure 

that taxpayers are notified when the IRS receives their identifying documents; 5) create a 

specialized unit in the Accounts Management function to exclusively work identity theft cases; 

6) ensure that all quality review systems used by IRS functions working identity theft cases are 

revised to select a representative sample of those cases; and 7) revise procedures for the 

Correspondence Imaging System screening process. The IRS agreed with all of our 

recommendations. 

This audit is a follow-up to our May 2012 audit. The audit was performed in the PGLD Office 

and the Wage and Investment Division Customer Account Services function in Atlanta, Georgia, 

and at Submission Processing Sites11 in Atlanta, Georgia; Kansas City, Kansas; Andover, 

Massachusetts; and Philadelphia, Pennsylvania, during the period October 2012 through 

July 2013. We conducted this performance audit 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 objective. We believe the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our audit objective. Detailed 

information on our audit objective, scope, and methodology is presented in Appendix I. Major 

contributors to the report are listed in Appendix II. 

 

9

 TIGTA, Ref. No. 2012-40-050, Most Taxpayers Whose Identities Have Been Stolen to Commit Refund Fraud Do 

Not Receive Quality Customer Service (May 2012) 

10 The 17 cases originated from the Accounts Management function, Correspondence Examination function, Field 

Assistance Office, Field Examination function, and Taxpayer Advocate Service. 11 The data processing arm of the IRS. The sites process paper and electronic submissions, correct errors, and 

forward data to the Computing Centers for analysis and posting to taxpayer accounts. 

Page 4
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Results of Review 

Case Processing Delays and Errors Increased Hardship for Identity 

Theft Victims 

In response to concerns raised in our May 2012 report, the IRS is taking corrective actions to 

improve its assistance to victims of identity theft. The IRS established an oversight committee 

for the Identity Theft Program, revised letters it sends to victims in an effort to improve the 

clarity of the information provided, and established specialized groups in the Accounts 

Management function to improve customer service to victims of identity theft. These corrective 

actions were not in place during the time frame that the cases we reviewed for this audit were 

worked. 

Our review of a statistically valid sample of 100 identity theft cases closed in the Accounts 

Management function between August 1, 2011, and July 31, 2012, identified lengthy delays in 

working the cases and found that tax accounts were not always correctly resolved, which resulted 

in delayed or incorrect refunds. Management raised concerns that the cases we reviewed were 

closed prior to the case processing improvements implemented for the 2013 Filing Season. We 

agree that these cases would not reflect subsequent improvements. However, the sample we 

selected was from taxpayer cases that were closed in the Accounts Management Function during 

the 12 months prior to the start of our audit. These were the most representative closed cases to 

select a sample from when we initiated our review. Additionally, although cases were closed 

between the period August 1, 2011, and July 31, 2012, some of the cases were reopened as a 

result of tax account errors. Our assessment of taxpayer cases included the actions the IRS took 

to correct the reopened cases. Some of these taxpayers did not receive corrected tax refunds 

until 2013. 

IRS management believes that the case processing improvements implemented for the 

2013 Filing Season will improve its processing of identity theft cases. Management noted that 

procedures were implemented to expedite the processing of tax returns with an attached 

Form 14039. Paper tax returns with an attached Form 14039 or police report are being marked 

with a special processing code and expedited directly to the Accounts Management function for 

case processing. The IRS indicated that the direct routing of these tax returns will shorten case 

processing by one to two months. 

We did not evaluate these improvements because cases handled using these new processes were 

not closed when we initiated our review and selected our sample. Furthermore, to assess IRS 

case processing from the taxpayer’s perspective, we reviewed closed cases to evaluate the 

timeliness and accuracy of actions taken by IRS to resolve victims’ cases from receipt of the 

Page 5
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

lawful taxpayer’s tax return to the issuance of the refund to which they were entitled. We will 

continue to evaluate the effect that the corrective actions and new processes have on improving 

customer service to victims of identity theft as part of case reviews performed in follow-up 

audits. 

Identity theft cases were not timely resolved 

The IRS took an average 312 days to resolve the 100 cases we reviewed. Of the 100 cases, 

24 (24 percent) were in process for more than 365 days. The time period cases were open ranged 

from 33 to 1,329 days. The time to resolve the cases was calculated from the date the IRS 

received the victim’s tax return to the date the correct refund was ultimately paid. Figure 4 

shows the range of days it took the IRS to resolve the cases we reviewed. 

Figure 4: Days Taken to Resolve Identity Theft Cases 

Number 

of Cases Percent 

Range of Days 

to Resolve Cases 

15 15% Less Than 151 

9 9% 151 to 200 

17 17% 201 to 250 

18 18% 251 to 300 

17 17% 301 to 365 

9 9% 366 to 400 

4 4% 401 to 500 

11 11% Greater Than 500 

Source: TIGTA analysis of days to resolve cases in our sample. 

Page 6
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

The following timeline illustrates a composite of activity for the 100 identity theft cases we 

reviewed. 

January 

2011 

The identity thief files a fraudulent tax return using someone else’s identity and 

attempts to obtain a tax refund. 

Subsequently, the rightful owner of the identity (the taxpayer) attempts to 

electronically file his or her tax return. The taxpayer’s tax return is rejected because 

his or her SSN was previously used on a filed tax return and, therefore, cannot be 

used on another tax return. 

The taxpayer calls the IRS and explains the situation to an IRS customer service 

assistor. 

After authenticating the taxpayer,12 the customer service assistor researches the 

taxpayer’s account and determines if a tax return has already been filed using that 

name and SSN. 

The customer service assistor confirms that a tax return was already filed under that 

name and SSN and advises the taxpayer to file a paper tax return and attach 1) a 

Form 14039 or a police report and 2) a valid government-issued document such as a 

copy of a Social Security card, passport, or driver’s license to the tax return. 

March 

2011 

The IRS receives the taxpayer’s paper tax return at one of its submission processing 

sites and a tax examiner enters data from the tax return into the IRS’s computer 

system. 

The tax return is identified as a duplicate and the taxpayer’s account is updated 

accordingly. The taxpayer is identified as having a possible identity theft case. The 

case is assigned a holding number13 and is placed in a queue to be worked by an 

Accounts Management function assistor. 

April 

2011

The taxpayer calls the IRS toll-free line again and asks when he or she will receive 

the tax refund. 

The customer service assistor, after authenticating the taxpayer, researches the 

taxpayer’s account, determines that a duplicate tax return has been filed, and 

advises the taxpayer that there will be delays in processing the tax return. 

The customer service assistor updates the taxpayer’s account and informs the 

taxpayer that he or she may receive correspondence requesting additional 

information. 

 

12 To prevent unauthorized disclosure of tax information, assistors are required to authenticate who they are 

speaking to by asking the individual a series of questions to which only that taxpayer would know the answer. 

13 A holding number is used when managers are unable to immediately assign an identity theft case for review. 

These cases are held in a queue until the case can be assigned to an assistor. 

Page 7
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Page 8

July 

2011 

The taxpayer walks into an IRS Taxpayer Assistance Center and asks about the 

status of his or her identity theft case. 

The Taxpayer Assistance Center assistor, after authenticating the taxpayer, 

researches the tax account and determines that the taxpayer’s case is in process. 

The Taxpayer Assistance Center assistor tells the taxpayer that the case is being 

worked and he or she should receive correspondence from the IRS within 30 days. 

September 

2011

The taxpayer calls the IRS’s toll-free line again and asks when he or she will receive 

the tax refund. 

The customer service assistor, after authenticating the taxpayer, researches the 

taxpayer’s account and tells the taxpayer that the case is still being worked and that 

he or she should receive an interim letter confirming this. The taxpayer is advised 

that the case will be resolved within 60 days. 

October 

2011 

The taxpayer’s case is finally assigned to an Accounts Management function assistor 

for resolution; that assistor orders copies of the original filed tax returns and sends 

letters to the alleged identity thief and the taxpayer to determine the legitimate 

taxpayer (the rightful owner of the identity). 

The legitimate taxpayer responds, confirming that he or she did not electronically file 

the first tax return. 

December 

2011

The taxpayer calls the toll-free line again and asks when he or she will receive the 

tax refund. 

The customer service assistor, after authenticating the taxpayer, researches the tax 

account and tells the taxpayer that an Accounts Management assistor is working the 

case and resolution will take another 60 days. The customer service assistor also 

sends a referral to the Accounts Management assistor working the case, informing 

him or her of the contact. 

The Accounts Management assistor finally determines which individual is the 

legitimate taxpayer and requests adjustments to the taxpayer’s account. These 

adjustments include ensuring that the tax account reflects the correct information 

from the taxpayer’s tax return and that an identity theft indicator is placed on the tax 

account. 

The Accounts Management assistor sends a letter to the legitimate taxpayer advising 

him or her that he or she has been a victim of identity theft and that an indicator has 

been added to his or her tax account to alert the IRS that the taxpayer is a victim of 

identity theft. 

January 

2012 

Adjustments post to the legitimate taxpayer’s tax account and the refund is released 

and sent to the taxpayer. 

The taxpayer receives another letter advising him or her that he or she has been a 

victim of identity theft and that his or her account has been flagged as such. 
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Cases had significant periods of inactivity 

Inactivity on the 100 identity theft cases we reviewed averaged 277 days. For 16 cases, no work 

was performed for more than 365 days. Figure 5 shows the range of inactivity for the cases we 

evaluated. 

Figure 5: Analysis of Inactivity on Identity Theft Cases 

Number 

of Cases Percent 

Range of Days 

Cases Were Inactive 

19 19% Less Than 151 

16 16% 151 to 200 

19 19% 201 to 250 

14 14% 251 to 300 

16 16% 301 to 365 

3 3% 366 to 400 

4 4% 401 to 500 

9 9% Greater Than 500 

Source: TIGTA analysis of the number of days cases were inactive. 

A significant contributing factor to the inactivity on cases is that the Accounts Management 

assistors working on identity theft cases are assigned to answer taxpayer telephone calls in 

addition to resolving identity theft cases. For example, responses to our survey of 483 Accounts 

Management assistors14 conducted during the 2013 Filing Season, found that: 

 Question – During the filing season (January 1 through April 15), what percentage of 

your time do you work the toll-free telephone lines? Response – 264 (55 percent) of 

483 assistors estimated that they spend the majority of their time working the phones. 

 Question – Generally, what percentage of your time is spent working the phones rather 

than working on identity theft cases? Response – 169 (35 percent) of 483 assistors 

estimated that they spend the majority of their time working the phones. 

In addition, discussions with a management official knowledgeable about the processing of 

identity theft cases corroborated the results of our survey regarding the competing priorities for 

tax assistors working cases. This official estimated that 400 (57 percent) of about 700 assistors 

located in one site and trained to work identity theft cases were required to answer telephone 

inquiries full time during the 2013 Filing Season. These assistors continued to have an assigned 

inventory of identity theft cases while they answered the telephones. The remaining 

300 assistors were required to answer the telephones one day per week. 

 

14 The IRS provided a listing to TIGTA of assistors who worked identity theft cases as well as those who answer 

identity theft telephone inquiries. Our survey included only those IRS assistors who worked identity theft cases.

Page 9
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

IRS management stated that the results of our survey (the estimated time that assistors are 

answering phones versus working cases) differs significantly from the time frames they compute 

using management information reports. Because of the concerns raised by the survey results, 

we plan to assess the accuracy of the management information used to monitor program 

performance as part of our next follow-up audit.

Another factor contributing to the inactivity on the sample cases was that some assistors, after 

determining the rightful owner of the SSN, did not always perform tax account adjustments 

needed to resolve the case. In some cases, assistors disagreed as to who should request or 

provide internal documents needed to perform the adjustments. These cases were sometimes 

inactive for hundreds of days before adjustments were made to the tax accounts. Assistors were 

either not trained or not given the authority to adjust accounts. This same concern was raised by 

the IRS in an August 2011 assessment of the time frames to work identity theft cases. The 

assessment concluded that Accounts Management function assistors spend most of their time 

waiting for internal documents needed to work the identity theft cases or waiting for other 

assistors to perform adjustments to the tax accounts. 

Cases were frequently reassigned 

The cases we reviewed were assigned to an average of 10 different assistors prior to case 

resolution. Although we could not always determine why the cases were reassigned because the 

reasons for case reassignments were not always documented, the more a case was reassigned, the 

longer the delays in resolving the case. Cases with multiple reassignments also had on average 

eight contacts that taxpayers made with the IRS to check on the status of their case or to provide 

additional information. 

Case complexity was the primary reason for frequent reassignments. Cases often required more 

experienced and highly trained assistors to resolve the cases. For example, 20 (20 percent) of the 

100 cases reviewed required reassignment to a more highly trained assistor for resolution. Other 

reasons for reassigning cases included cases being over-aged, assistors taking vacation, and 

taxpayers needing assistance from a bilingual employee. In addition, we found that for 

33 (33 percent) of the 100 cases reviewed, the cases were reassigned to the Taxpayer Advocate 

Service15 (TAS) for resolution because the taxpayers requested intervention from the TAS after 

suffering a financial hardship. Case reassignments to the TAS increased 61 percent from 

FY2011 to FY 2012 and were the top source of work for this office in FY 2012. This trend 

continued through March 31, 2013, with receipts rising over 66 percent compared to the same 

period last year. Figure 6 provides a hypothetical example of case reassignments. 

 

15 The TAS coordinates with the Accounts Management function to ensure that cases are expedited in an effort to 

relieve taxpayer hardships. Hardship includes taxpayers needing their refund to retain housing, obtain food for self 

and family, pay bills, obtain medical treatment, or retain his or her job (will become unemployed due to lack of 

transportation).

Page 10
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Figure 6: Example of Case Reassignments 

Reassignment Date From To Purpose 

1 

2 

3 

4 

5 

3/14/2011 

3/17/2011 

3/21/2011 

6/21/2011 

9/23/2011 

Inventory 

Queue 

Assistor 

Assistor 

Team 

Leader 

Assistor 

Assistor 

Assistor 

Team Leader 

Assistor 

Assistor 

Taxpayer 

First Assignment 

No explanation in case history 

for reassignment 

Complex case; assistance 

requested from the assistor 

No explanation in case history 

for reassignment 

Complex issue case reassigned 

to specialized assistor 

Taxpayer suffering a financial 

6 1/23/2012 Assistor Advocate hardship requests TAS 

7 

8 

9 

10 

1/23/2012 

2/15/2012 

3/6/2012 

3/6/2012 

Taxpayer 

Advocate 

Service 

Assistor 

Assistor 

Assistor 

Service (TAS) 

Assistor 

Assistor 

Assistor 

Assistor 

assistance 

No explanation in case history 

for reassignment 

No explanation in case history 

for reassignment 

Adjustment error was made on 

tax account; case reopened 

No explanation in case history 

for reassignment 

Source: TIGTA analysis of identity theft case reassignments.

In addition to the significant burden that case delays and inactivity cause taxpayers, these delays 

also increase the interest amount that the IRS must pay on refunds when they are ultimately 

issued to the rightful taxpayer.16 For the cases we reviewed, the IRS paid $7,297 in total interest 

to 87 of the 100 taxpayers due to the case resolution delays. Projected over the population of 

78,477 cases closed during the period from August 1, 2011, to July 31, 2012, the IRS could 

potentially have paid interest on refunds totaling more than $5.7 million due to delays in 

processing identity theft cases. 

 

16 The IRS is required to pay interest on a taxpayer’s refund if it is not paid within 45 days after the latter of the tax 

return due date or the return received date of a processible tax return.

Page 11
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Tax accounts were not correctly resolved 

The IRS did not correctly resolve the tax accounts for 25 (25 percent) of the 100 cases reviewed. 

Errors on the tax accounts resulted in delayed refunds to all 25 taxpayers and, for 18, required 

the IRS to reopen the case to take additional actions to resolve the errors. Additionally, for these 

18 cases, the IRS issued an incorrect refund amount. For 15 of the incorrect refunds, the 

taxpayer identified the error and called the IRS to dispute the incorrect refund amount received. 

Figure 7 shows the type of errors found in the 25 cases along with the effect on the taxpayer. 

Figure 7: Identity Theft Case Errors and Their Effect on Taxpayers 

Number 

Type of Error of Cases Effect on Taxpayer 

Adjustment 

Assistor incorrectly adjusted the tax 

account. For example, the assistor 

incorrectly combined the identity thief’s 

and rightful taxpayer’s tax returns. 

18 Rightful taxpayer received an 

incorrect refund amount. 

Posting 

17 Assistor incorrectly input a freeze code

to the rightful taxpayer’s tax account or 

does not place an identity theft indicator 

on the rightful taxpayer’s tax account. 

5 

Rightful taxpayer’s refund was 

delayed and/or additional 

erroneous refunds could be 

issued to identity thieves. 

Processing ***************1************************** 

**********************1 . ** 1** ******************1************************1********* 

Source: TIGTA analysis of 25 identity theft cases for which the IRS did not correctly adjust the tax account. 

The errors in account resolutions resulted from the lack of clear procedures and training provided 

to assistors working these cases. We reported in May 2012 that the Accounts Management 

function did not have a clear or consistent method or guidance for adjusting taxpayer accounts. 

Properly adjusting an account includes ensuring that the tax account reflects the correct 

information from the rightful taxpayer’s tax return and ensuring that an identity theft indicator is 

placed on the tax account. However, procedures on how an assistor accomplishes this remain 

unclear and are not centralized in internal guidance documents. 

We surveyed 183 assistors who work identity theft cases. When asked to describe concerns with 

guidance on working cases, 133 (73 percent) of the assistors responded that the Accounts 

Management function’s identity theft procedures are confusing. The remaining 50 employees 

(27 percent) believed that the Identity Theft Program needed its own procedure section in the 

IRS’s internal guidance. In response to another survey question, 305 (74 percent) assistors 

responded that the overall process for working identity theft cases has not improved over the past 

 

17 Alpha codes applied to a taxpayer’s account that identify specific conditions and restrict normal systemic 

processing, such as stopping notices and refunds. 

Page 12
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

year. IRS officials informed us at the end of our fieldwork that revised procedures were 

scheduled to be issued on October 1, 2013. 

The complexity of identity theft cases increases the need for the IRS to ensure that assistors 

remain adequately trained. IRS officials informed us that all assistors received required training 

in Calendar Year 2012. Officials stated that on-the-job instruction was also provided to the 

assistors after the training. Nonetheless, IRS officials did acknowledge that assistors 

comprehend the training at different levels. Based on employees’ concerns, it appears that 

additional training is needed; however, the IRS does not plan to schedule any additional training 

for assistors for the remainder of FY 2013 or FY 2014. Management indicated that the training 

would not be provided because all assistors are fully trained. 

Documentation did not support the IRS’s decision to provide taxpayers with a 

case resolution time frame of 180 days 

On January 24, 2013, the IRS issued two alerts to notify assistors of a change in procedure. 

Assistors were instructed to inform taxpayers who inquire about the status of their identity theft 

case that the time frame for resolving their case would be 180 days. When we became aware of 

these alerts, we requested documentation from the IRS supporting the 180-day time frame. On 

April 2, 2013, the IRS provided documentation of its analysis of case resolution time frames 

supporting its position of the 180-day closure. This documentation included a talking paper,18 a 

slideshow, a spreadsheet, and a timeline. Our review of the documentation found that the 

information did not support the IRS position that identity theft cases were resolved in 180 days. 

In fact, the documentation showed that the actual number of days it took to resolve identity theft 

cases ranged from 228 to 298 days. 

The documentation supporting the decision to provide taxpayers with the 180-day time frame for 

case resolution was based partly on the IRS’s monitoring of taxpayers’ comments on social 

media websites. These comments showed that taxpayers affected by identity theft were venting 

their frustrations about the varying time frames provided by the IRS and the delays in refund 

processing. The IRS’s decision was intended to lessen taxpayer and employee frustration by 

establishing a consistent time frame to provide to taxpayers. 

In our opinion, providing an unrealistic case resolution time frame could lead to even greater 

taxpayer and employee frustration. At the completion of field work for this review, IRS officials 

informed us that they have other documentation that supports the 180-day time frame. However, 

because it was not provided timely, we did not have time to assess its validity for inclusion in 

this report. 

 

18 The talking paper, given to Accounts Management function and Wage and Investment Division executives to 

assist in making the decision, provided the background, research, and analysis for the 180-day time frame 

recommendation. 

Page 13
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Recommendations 

The Commissioner, Wage and Investment Division, should: 

Recommendation 1: Ensure that assistors assigned to identity theft cases work these cases 

exclusively and are provided ongoing training and the ability to perform all actions needed to 

work cases to conclusion. 

Management’s Response: IRS management agreed with this recommendation. The 

Accounts Management function within the Wage and Investment Division has assistors 

dedicated exclusively to working identity theft inventory cases and staffing identity theft 

phone lines, with the exception of heavy volume Mondays. All identity theft 

caseworkers have the capability to perform all necessary actions needed to complete the 

processing of a case. Training is provided as needed and available resources are 

identified. Specific employees are scheduled for identity theft training during Continuing 

Professional Education. Continuing Professional Education also allows the sites to 

customize training based on the skill type and needs of their employees. Continuing 

Professional Education also allows for employees to select one or two elective courses 

based on their needs. 

Training will continue to be based on individual and site needs as well as for future 

procedural changes that require specific training opportunities. The IRS will continue to 

ensure that there are sufficient resources assigned to identity theft inventory and phones. 

Recommendation 2: Develop clear and consistent processes and procedures for assistors to 

follow to ensure that taxpayer accounts are correctly updated when cases are resolved. 

Management’s Response: IRS management agreed with this recommendation and 

will continue to develop the existing processes and procedures to ensure that all 

appropriate actions are taken on identity theft victims’ accounts. The Internal Revenue 

Manual is continually revised to improve the applicable procedures and to introduce 

newly identified processes. The processes are adapted based on employee feedback 

along with yearly publishing updates, which provide each area an opportunity to 

thoroughly review the existing guidelines and identify opportunities for improvement. 

The IRS worked closely with a group of identity theft experts from several sites to clarify 

and organize the flow and the overall ease of use of the current Internal Revenue Manual, 

which is scheduled for publishing on October 1, 2013. 

Page 14
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Processes to Ensure the Accuracy of the Identity Theft Management 

Information Need to Be Developed 

Analysis of the CY 2012 Global Report identified that the Accounts Management function’s 

open case inventory was overstated by 95,429 cases. Figure 8 provides a breakdown of this 

overstatement. 

Figure 8: Overstatement of Accounts Management Function 

Identity Theft Open Cases at the End of Calendar Year 2012 

Open cases reported in the CY 2012 Global Report 424,181 

Open cases reported to TIGTA for CY 2012 328,752 

Overstatement of Open Case Inventory in the Global Report 95,429 

Source: TIGTA analysis of Accounts Management function open case inventory as of December 31, 2012. 

The Global Report is the IRS’s authoritative source for identity theft management information 

and is used to make decisions about strategies and resources needed to address the growing 

identity theft epidemic. It includes statistics from 20 IRS functions that work identity theft cases. 

The report provides key statistics on the number of identity theft open and closed cases, 

incidents, and affected taxpayers and on the amount of fraudulent refunds the IRS identified. In 

addition, the Global Report is used to provide key statistical information on identity theft cases in 

briefings to Congress. 

The inaccuracy we identified results from processes and procedures that were not developed to 

validate the data provided by the functions to the PGLD Office or the data that the PGLD Office 

includes in the Global Report. In addition, there is no requirement to retain supporting data 

provided by the functions to the PGLD Office for inclusion in the Global Report. 

The methods used by the functions to compile information for the report range from simple 

manual counting to complex computer programs. There is no consistency in the manner in 

which functions report their counts. For example, some functions report counts by unique 

taxpayer, while others such as the Accounts Management function report counts by identity theft 

category codes.19 Reporting by identity theft category code results in duplicate counts for the 

same taxpayer and requires the PGLD Office to manipulate the information in an attempt to 

remove the duplicates so that it can provide accurate counts in the Global Report. 

The PGLD Office does require functions to review a draft of the Global Report prior to monthly 

issuance and to provide verification that the information reported is accurate. However, our 

review of the March 2013 report processing identified that seven of the 20 functions providing 

 

19 The category code is a four-digit code designating the type or source of adjustment or correspondence cases. 

Page 15
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

data for input to the Global Report did not provide the required written verification to the PGLD 

Office confirming the accuracy of the information being reported. 

Recommendations 

The Deputy Commissioner for Operations Support and the Commissioner, Wage and Investment 

Division, should: 

Recommendation 3: Develop a standard format for information provided for inclusion in the 

Global Report to ensure consistency. The information reported should reflect unique taxpayers. 

Management’s Response: IRS management agreed with this recommendation. The 

IRS will develop a template for functional areas to use when reporting inventory for the 

Global Report. The template will ensure that inventory is captured consistently and will 

also improve the audit trail for submitted information. The IRS will also work with 

functional areas to report inventory at the entity (taxpayer) level as opposed to the 

module level. 

Recommendation 4: Develop validation processes and procedures to ensure the accuracy of 

information provided for inclusion in the Global Report. 

Management’s Response: IRS management agreed with this recommendation. The 

Privacy, Government Liaison, and Disclosure organization currently collects data from 

various functions throughout the IRS. After the data are compiled and entered into the 

Global Report, the IRS will use a certification process for each individual function to 

verify the data it provided. The IRS will provide additional guidance as to how each 

function should validate the data it provides. 

Recommendation 5: Develop retention requirements for the documentation supporting 

information included in the Global Report. 

Management’s Response: IRS management agreed with this recommendation. 

The IRS will ensure that each function maintains documentation in accordance with 

existing retention standards. 

Page 16
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Appendix I 

Detailed Objective, Scope, and Methodology 

Our overall objective was to determine whether the IRS improved its assistance to victims of 

identity theft. 

I. Assessed whether the IRS maintains timely and complete identity theft case workload 

data. 

A. Determined internal reporting requirements related to identity theft. 

B. Assessed the IRS’s method for ensuring the accuracy of data reported about the 

Identity Theft Program. We analyzed the data the Accounts Management function 

provides to the PGLD Office that are used in the Global Report. We determined from 

the population of 424,181 case records whether the data reported were accurate. 

II. Assessed whether the IRS timely and effectively resolves identity theft cases. 

A. Based on the 7 percent error rate of a preliminary sample, we randomly selected a 

statistically valid sample of 100 victims (taxpayers) of identity theft from a 

population of 78,477 for the period of August 1, 2011, through July 31, 2012. The 

population of identity theft taxpayers was identified from an Individual Master File1

extract where accounts showed identity theft indicators that were input by the 

Accounts Management function. We used an expected error rate of 7 percent, a 

precision rate of 5 percent, and a confidence interval of 95 percent to select the 

statistical sample 

B. For the statistically valid sample, we determined: 

1. Whether the determination of the identity thief and lawful taxpayer was made 

correctly. 

2. Whether identity theft indicators were accurately and timely input on the 

appropriate accounts and all needed adjustments were accurately made to the 

affected accounts. 

3. The average time it took to resolve the identity theft cases. 

4. The number of assistors assigned to cases. 

5. The amount of inactivity for each case. 

 

1

 The IRS database that maintains transactions or records of individual tax accounts. 

Page 17
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

6. The number of times the taxpayer contacted the IRS. 

7. Whether the taxpayer’s address was changed correctly. 

8. The amount of the tax refund paid to the identity thief and the amount of the tax 

refund and interest paid to the lawful taxpayer. 

III. Conducted a survey of all employees who work identity theft cases to determine whether 

procedures were adequate. We surveyed 2,264 employees who were designated by the 

IRS as identity theft case workers. 

Of 483 responses, 263 (54 percent) responded to the question: During the filing 

season (January 1 through April 15) what percentage of your time do you work the 

toll-free telephone lines?

There were 183 responses to the question: Please describe any issues you have with 

the Internal Revenue Manual relating to identity theft. 

IV. Followed TIGTA validation procedures to ensure that all data used during the audit were 

valid, complete, and accurate. Data used to select the statistically valid sample in 

subobjective II were validated by selecting an independent sample of the data extract to 

validate. We assessed the reliability of data extracted from the Individual Master File 

by: 1) requesting and receiving a data extract with specific criteria from the TIGTA 

Strategic Data Services Division, 2) performing preliminary tests to ensure it contained 

the data requested in a useable format, and 3) selecting a judgmental sample of five cases 

to verify that the data elements extracted matched the taxpayer account information on 

the Integrated Data Retrieval System.2

 We determined that the data were valid and

reliable.

Internal controls methodology

Internal controls relate to management’s plans, methods, and procedures used to meet their 

mission, goals, and objectives. Internal controls include the processes and procedures for 

planning, organizing, directing, and controlling program operations. They include the systems 

for measuring, reporting, and monitoring program performance. We determined the following 

internal controls were relevant to our audit objective: the IRS’s policies, procedures, and 

guidelines used by the Identity Theft Program to work and control identity theft cases. We 

evaluated these controls by reviewing cases, interviewing management, analyzing data, and 

reviewing policies and procedures. We also analyzed the data included in the Global Report. 

 

2

 IRS computer system capable of retrieving or updating stored information. It works in conjunction with a 

taxpayer’s account records. 

Page 18
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Appendix II 

Major Contributors to This Report 

Russell P. Martin, Acting Assistant Inspector General for Audit (Returns Processing and 

Account Services) 

W. Allen Gray, Director 

Lena Dietles, Audit Manager 

Tracy Harper, Lead Auditor 

Tanya Adams, Senior Auditor 

Kenneth Carlson, Senior Auditor 

Jerry Douglas, Senior Auditor 

Lynn Faulkner, Senior Auditor 

Sandra Hinton, Senior Auditor 

Patricia Jackson, Senior Auditor 

Geraldine Vaughn, Senior Auditor 

Jerome Antoine, Auditor 

Kathy Coote, Auditor 

Nelva Usher, Auditor 

Page 19
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Appendix III 

Report Distribution List 

Acting Commissioner 

Office of the Commissioner – Attn: Chief of Staff C 

Office of the Deputy Commissioner for Services and Enforcement SE 

Chief Financial Officer OS:CFO 

Chief Technology Officer OS:CTO 

Deputy Commissioner, Operations, Wage and Investment Division SE:W 

Deputy Commissioner, Support, Wage and Investment Division SE:W 

Director, Office of Program Evaluation and Risk Analysis RAS:O 

Director, Privacy, Governmental Liaison and Disclosure OS:P 

Director, Compliance, Wage and Investment Division SE:W:CP 

Director, Customer Account Services, Wage and Investment Division SE:W:CAS 

Director, Customer Assistance, Relationships and Education, Wage and Investment Division 

SE:W:CAR 

Director, Strategy and Finance, Wage and Investment Division SE:W:S 

Senior Operations Adviser, Wage and Investment Division SE:W:S 

Chief, Program Evaluation and Improvement, Wage and Investment Division SE:W:S:PEI 

Director, Accounts Management, Wage and Investment Division SE:W:CAS:AM 

Director, Joint Operation Center, Wage and Investment Division SE:W:CAS:JOC 

Director, Stakeholder Partnership, Education and Communications (SPEC), Wage and 

Investment Division SE:W:CAR:SPEC 

Director, Submission Processing, Wage and Investment Division SE:W:CAS:SP 

Chief Counsel CC 

National Taxpayer Advocate TA 

Director, Office of Legislative Affairs CL:LA 

Director, Office of Program Evaluation and Risk Analysis RAS:O 

Office of Internal Control OS:CFO:CPIC:IC 

Audit Liaison: Chief, Program Evaluation and Improvement, Wage and Investment Division 

SE:W:S:PEI 

Page 20
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Appendix IV 

Outcome Measure 

This appendix presents detailed information on the measurable impact that our recommended 

corrective actions will have on tax administration. This benefit will be incorporated into our 

Semiannual Report to Congress. 

Type and Value of Outcome Measure: 

 Reliability of Information – Potential; 95,429 taxpayer cases overstated in identity theft 

inventory for a one-year period (see page 15). 

Methodology Used to Measure the Reported Benefit: 

We analyzed the Accounts Management function’s identity theft open case inventory at the end 

of CY 2012 and determined that there were 328,752 open cases. We then compared this number 

to the Accounts Management function’s open case inventory reported in the CY 2012 Global 

Report, which was 424,181 cases. Our comparison identified that the Accounts Management 

function’s reported inventory in the Global Report was overstated by 95,429 taxpayer cases 

(424,181 – 328,752). 

Page 21
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Appendix V 

Management’s Response to the Draft Report 

Page 22
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Page 23
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Page 24
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Page 25
Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft 

Page 26
Page 27

Case Processing Delays and Tax Account Errors 

Increased Hardship for Victims of Identity Theft