IRS Notes Filing Season Successes

WASHINGTON - An early review by the Internal Revenue Service shows the success of its attempt to stop improper refund claims this year. The IRS alerted several million taxpayers to Social Security number (SSN) problems on their tax returns and halted payment of millions of dollars in questionable refunds. The IRS screened returns for missing, invalid or duplicate SSNs, delayed some refunds for extra reviews, increased its suitability checks for electronic return originators and took other steps to detect suspicious claims. "Our preliminary analysis of returns filed this year indicates that our efforts have paid off," IRS Commissioner Margaret Milner Richardson told a Congressional panel today. She reported that the IRS:

• saw a decline in the number of dependents claimed so far; for the first time in several years the number of dependents did not increase from the previous year;

• projects that Earned Income Tax Credit (EITC) claims from taxpayers with children will fall by up to 200,000;

• found over 10 million instances of SSN problems; and

• identified over 2,500 fraud schemes, stopping $62.5 million from being paid on nearly 31,000 tax returns.

The IRS believes that the drop in the numbers of dependent and child-related EITC claims resulted from taxpayers who were aware of the IRS refund protection efforts and chose not to make claims for which they did not qualify.

Based on its studies and experiences with questionable returns, the IRS will further refine its detection screens for next filing season. It expects that taxpayers who corrected SSN errors for themselves or their dependents this year should not experience delays in future years because of SSN problems.

"The key to improving our ability to detect increasingly sophisticated fraud schemes is our Tax Systems Modernization Program, " Commissioner Richardson said. "Without modern technology

• hardware and software

• applying expert systems analysis to large databases is virtually impossible."

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