The Treasury Inspector General for Tax Administration (TIGTA) recently released its Semiannual Report to Congress for the period October 1, 2018 through March 31, 2019. During this period, TIGTA completed 20 audits and 1,068 investigations concerning taxpayer data security, identity theft and impersonation fraud, tax compliance, and IRS efficiency. Of particular concern for this report and future monitoring was the effect of the lapse of appropriations for the IRS just before the start of the first tax season to incorporate changes from the Tax Cuts and Jobs Act of 2017 (TCJA).
For instance, the TCJA introduced a new tax deduction for qualified business income, with an estimated 24 million taxpayers being eligible to claim the deduction. Although the IRS was “proactive” in issuing guidance on the new deduction, there was insufficient time to develop a related tax form to assist with evaluating these claims.
The IRS was able to continue to expand its activities to detect and prevent identity theft. In the most recent reporting year available, Processing Year (PY) 2016, an estimated $10.6 billion in fraudulent refunds were prevented from being issued. For PY 2018, as of the end of 2017, an estimated $7.2 billion in fraudulent refunds were prevented using 200 identity-theft filters in return processing.
TIGTA recommended that the IRS provide additional guidance on self-employment tax compliance for workers in the gig economy. The estimated tax gap in 2016 related to self-employment taxes was $69 billion. From tax year 2012 to 2015, the number of discrepancies between what companies report of Forms 1099-K and what those taxpayers claimed in income increased by 237 percent. However, the IRS noted that most recommendations to improve in this area of tax compliance would be costly or difficult to implement.
TIGTA also identified needs related to private collection programs and technology tools. To read the full report, click here.