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In March 2023, the Treasury Inspector General for Tax Administration (TIGTA) issued a report, Additional Actions Are Needed to Improve and Secure the Income Verification Express Service Program (No. 2023-45-014, March 8, 2023).
TIGTA found
IRS management took actions to address our concerns during this review and addressed recommendations from our prior audit. However, the IRS did not meet a key requirement of Section 2201 of the Taxpayer First Act. Specifically, the IRS did not have the capability to process business transcript requests by January 2023. Despite the Taxpayer First Act requiring the IRS create a new online system to process transcript requests, IRS management has not yet made a decision to require participants to use the new system. Until the modernized IVES system becomes mandatory to use, enhanced controls will be needed for electronically faxed transcript requests to ensure that transcripts are not issued to unauthorized individuals.
In addition, TIGTA found that insufficient information is being provided to both participants and taxpayers. For example, participants will receive limited reject information and taxpayers will not be notified of a pending transcript request that requires they log in to their online account to review and authorize the request.
TIGTA also found that no single point of contact was responsible for resolving outages of the new inventory management system, thus contributing to significant processing delays. For example, instead of processing transcript requests within the IRS’s goal of 72 hours (or three days), at its peak, transcripts took 502 hours (or over 22 days) to be processed.
Finally, the IRS continues to process transcript requests even though taxpayers have an identity theft marker on their account. TIGTA identified 7,619 tax transcripts that the IVES Program improperly issued to the participants for 6,012 taxpayers for Processing Year 2021. This occurred because the IRS’s internal guidance has not ensured that its employees were following the guidelines for rejecting these requests. As a result, there is a risk of unauthorized disclosure of taxpayer information to unscrupulous individuals.
TIGTA recommended
TIGTA made 14 recommendations to modernize and improve the IVES Program. This included alerts issued to IRS management during the review to address concerns such as ensuring the development of business transcript capability for the modernized IVES system. TIGTA also made recommendations to implement controls that will adequately authenticate all transcript requests received via electronic fax and assign responsibility for addressing and resolving future outages relating to the new inventory management system.
IRS management agreed with 11 of the 14 recommendations and partially agreed to one recommendation to provide notices to taxpayers whose transcript requests were rejected, but chose not to provide notices to participants citing an increased risk of fraud. Management disagreed with two recommendations that would enhance controls over electronically faxed transcript requests and allow taxpayers the opportunity to identify potential unauthorized access of their tax return data.