Last year, the Internal Revenue Service’s anti-fraud filter, Filter X, flagged and stopped the processing of almost 1.1 million tax returns, according to Acting National Taxpayer Advocate Bridget T. Roberts. The refunds of these taxpayers were held for weeks or even months, but over half were eventually paid.
One Okeechobee family filed their tax return in January and their refund was held, with no explanation at all. When they called to ask why, the representatives told them they could not tell them anything. This couple finally received their refund on Dec. 20, still with no explanation.
These filters were put in place to prevent fraud, but Filter X had a 71% false positive rate last year. This means that for every 100 returns flagged, 71 of them were eventually found to be legitimate.
The IRS has several filters in place and they all cause some delays, but Filter X specifically selects returns where the Earned Income Tax Credit or the Additional Child Tax Credit were claimed and where there was no or only some W-2 information available. When this happens, the income and withholdings cannot be verified. Originally, the IRS expected the filter to flag about 500,000 returns each year, but there were approximately 1.1 million suspended returns last year. On average, it took about 38 days to process these returns, but some took many months.
What might have been even more frustrating to the taxpayers was the lack of information they were given when their returns were held. Prior to April 2019, IRS personnel were advised to tell taxpayers that “…no further action is required.” Because of the advocacy of the Taxpayers Advocate Service, taxpayers are now supposed to be told some returns are selected to determine if income, expenses and credits are being reported accurately. They are told to recommend the taxpayers review their returns and all income information statements (e.g., Form W-2) to ensure all income and withholding matches the information reported on the return . If they determine they have made an error, they should immediately file an amended return.
In her report to Congress, Ms. Roberts said, the mission statement of the IRS claims its job is to “provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all,” but the IRS is struggling to meet those goals. She goes on to say, “The IRS has been found to be among the lowest performing federal agencies in providing a positive customer experience.”
The report notes that in 2019, the IRS received over 100 million telephone calls but only answered about 29% of those calls. Ms. Roberts attributes the lack of customer service partially to budget limitations but also to a “culture in which the agency focuses on its own priorities without adequately factoring in the needs of taxpayers.”
The Taxpayer Advocate Service is an independent organization within the IRS, and they work to ensure all taxpayers are treated fairly. The Taxpayer Advocate Service works in two ways — helping taxpayers with individual problems, and recommending “big picture” or systemic changes at the IRS or in the tax laws. If you are having a tax problem that you haven’t been able to resolve on your own, their advocates may be able to help. You may be eligible for help if your IRS problem is causing financial difficulty or you believe an IRS procedure just isn’t working as it should. They have offices in every state, the District of Columbia and Puerto Rico. If you qualify for help, you will be assigned to one advocate who will be with you at every turn. Their advocates work with the IRS to get your problems resolved, and the services are always free. To speak to an advocate, call 877-777-4778.