The IRS was ineffective in its efforts to stop a scheme involving fraudsters calling the practitioner priority service telephone line, resulting in estimated losses of over $47 million, the Treasury Inspector General for Tax Administration (TIGTA) said in a report dated Oct. 22 (TIGTA Rep't No. 2025-IE-R001).

The fraud occurred from Aug. 12, 2023, to April 16, 2024, during which time fraudsters filed 4,828 tax returns and claimed nearly $462 million in refunds, the report said. The IRS detected 4,254 of the fraudulent claims but did not stop 574 returns, TIGTA said.

TIGTA said that because of IRS management inaction, it issued an alert on Feb. 8, 2024, to request the IRS plan to stop the fraud immediately. The IRS began using additional authentication controls on April 8, 2024, it said in the partially redacted report that did not reveal how the scheme worked.

"[The] IRS did little to stop this fraud," even after TIGTA and IRS functional areas advised the IRS of the fraud as far back as August 2021, the report said. That inaction caused TIGTA to evaluate IRS policies and procedures "to stop fraudsters from exploiting the PPS telephone line," the report said.

TIGTA recommended that the IRS:

• Provide and train assisters on the secure access digital identity dashboard.

• Establish a Service-wide process where representatives from key functional areas are responsible for expeditiously reviewing and addressing emerging or ongoing fraud schemes where advanced analytics and matching to IRS-sourced information proactively identifies a scam.

• Restrict access to all secure object repository (SOR) IDs associated with fraudulent activity; and

• Develop processes and procedures to ensure that fraudulent SOR IDs are restricted in timely fashion.

IRS management agreed with three of the four recommendations and partially agreed with the recommendation to restrict SOR IDs.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.