The IRS Integrity and Verification Operations IVO group is delaying a number of taxpayer refunds to screen for identity theft and refund fraud.
Taxpayers identified by the program may receive a 4464C letter from the IVO stating that their tax return is being thoroughly reviewed so that the IRS can ensure the accuracy of return information. The letter states that the IRS may contact the taxpayer or third parties for further information and that if the taxpayer does not hear from the IRS or receive his or her refund within 60 days from the date of the letter, the taxpayer may contact the IRS directly. Once the IRS has completed its review, it may send a full or partial refund or no refund. Whatever the decision, the taxpayer can appeal it.
The IRS has indicated that the letters are part of the screening program to combat stolen identity refund fraud and do not mean the taxpayer has been selected for audit. The IRS uses algorithms similar to a discriminate function system score to detect potential refund fraud.
Certain characteristics are:
- If the taxpayer is a first-time filer,
- Receiving a refund unusually larger than the one from a prior year or is receiving W-2 income unexpectedly.
Those are a couple of instances that can trigger an alert to the IVO to further investigate the taxpayer's return.
Both the IRS and the Department of Justice DOJ Tax Division have increased their efforts to combat stolen identity refund fraud. During an April hearing before Congress, IRS Acting Commissioner Steven Miller said the IRS had stopped 350,000 returns with a total $2.5 billion in fraudulent refunds. In September 2012, the DOJ issued Tax Division Directive 144, which is aimed at increasing cooperation between federal and state governments, and flexibility for U.S. attorneys' offices, to combat stolen identity refund fraud.
