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Anti-fraud filters delay refunds

National Taxpayer Advocate Nina E. Olson released her 2015 annual report to the Congress on January 6, 2016. Olson expressed her concerns that the IRS is scaling back telephone and face-to-face services to assist the nation’s individual taxpayers and business entities in complying with their tax obligations.

In addition, other key issues were addressed in the report. Of particular interest is the growing rate of false positives in a key tax fraud filter used by the IRS in processing returns. The rate of false positive in 2015 was about 36 percent, affecting nearly 180,000 taxpayers. The “Anti-Fraud Filters” are used to filter out improper refund claims.

Olson’s report states that The Pre-Refund Wage Verification Program, “income wage verification,” allows the IRS to temporarily freeze a taxpayer’s refund when possible false wages and withholding are detected. The IRS sends out notices to taxpayers whose returns were flagged by the filters and instructs them to authenticate their identities online, by phone or by mail.

Following is an actual case of a legitimate refund that is still being withheld by the IRS. The 2014 tax return of the taxpayer was electronically filed and accepted by the IRS on October 11, 2015. A notice to verify the income and withholding was received on November 1, 2015. A copy of the taxpayer’s form W-2 was sent to the IRS on November 2, 2015. By January 7, 2016, the refund still had not been received. A telephone call was placed to the IRS and found out they still had not processed the return (the taxpayer was lucky to have gotten through without being hung up on). It’s been 16 weeks since the return was accepted, still no refund. Time to call the Taxpayer Advocate.

The intention of the Anti-Fraud Filters is to protect the taxpayers. However, it is very frustrating when legitimate refunds are delayed for excess amounts of time and contacting the IRS is nearly impossible.



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