Treasury Inspector General for Tax Administration 2025-IE-R025 (Authenticating Callers’ Identity on Business and Practitioner Telephone Lines Needs to Be Strengthened to Combat Fraud)
Summary
Final Evaluation Report 2025-IE-R025 of the Treasury Inspector General for Tax Administration, issued August 12, 2025, finds that the IRS did not adequately verify the identity of callers to the Business Specialty Tax and the Practitioner Priority Service telephone lines. The report states that this allowed the unauthorized disclosure of tax information, the fraudulent filing of Forms 941, and the issuance of fraudulent tax refund checks. It states that an alert issued in October 2024 noted that the Office of Investigations identified over $93 million in fraudulent refund checks issued to 20 different businesses, and that the federal government incurred at least $2.7 million in losses. TIGTA recommended that the Chief, Taxpayer Services, educate representatives about the scheme and require proper caller authentication; IRS management agreed.
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TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Authenticating Callers’ Identity on Business and
Practitioner Telephone Lines Needs to Be
Strengthened to Combat Fraud
August 12, 2025
Report Number: 2025-IE-R025
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined
to be restricted from public release has been redacted from this document. 1
TIGTACommunications@tigta.treas.gov | www.tigta.gov
HIGHLIGHTS: Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Final Evaluation Report issued on August 12, 2025 Report Number 2025-IE-R025
Why TIGTA Did This Evaluation What TIGTA Found
We initiated this evaluation in The IRS does not always properly authenticate a caller’s identity to
response to a referral that TIGTA’s adequately protect against the release of tax information and
Office of Investigations made safeguard government funds. We found that the IRS did not
involving a scheme related to the adequately verify the identity of callers to the Business Specialty Tax
filing of fraudulent Forms 941, and the Practitioner Priority Service telephone lines. This allowed the
Employer’s Quarterly Federal Tax unauthorized disclosure of tax information, the fraudulent filing of
Return. Forms 941, and the issuance of fraudulent tax refund checks.
Specifically, fraudsters contact the Based on the information provided in the referral, we issued an
IRS, *******************2************* alert in October 2024. Our alert advised IRS management about a
************************* scheme involving the fraudulent filing of Forms 941. The alert noted
************************************** that the Office of Investigations identified over $93 million in
*************************************. fraudulent refund checks issued to 20 different businesses. The
Fraudsters then file a fraudulent Office of Investigations successfully stopped payment on most of
Form 941 to obtain a refund check. these refund checks. However, the federal government incurred at
least $2.7 million in losses.
For this evaluation, we assessed
policies and procedures that the IRS We used information in the referral to perform further analysis. We
has implemented to stop fraudsters identified 150 unique Employer Identification Numbers that were
from *************2************ issued approximately $55.6 million in refund checks from
************************************** January 2023 through July 2024.
to file fraudulent Forms 941
IRS management was aware of the risk of erroneous refunds being
claiming a tax refund.
issued based on fraudulent Form 941 filings, but did not take action
Impact on Tax Administration to prevent the scheme. IRS representatives in the Customer Account
Services function raised the issue in June 2024 and August 2024.
If the IRS does not properly
authenticate individuals before We found that the IRS has guidance in place to ensure that IRS
providing tax account information, representatives are aware of possible fraudulent activity on a
there is a continued risk of tax account, including a tool that alerts them when identity theft is
unscrupulous individuals taking suspected or documented. If identity theft is an issue on the
advantage of the tax system. The tax account, IRS representatives are required to conduct additional
federal government is also at risk of research, including reviewing history notes on the account.
losing funds.
Our review of the history notes showed that IRS representatives
had documented fraudsters’ initial requests for tax information.
If subsequent IRS representatives had reviewed those notes, they
may not have provided the information needed to further the fraud
scheme.
What TIGTA Recommended
In our alert, we recommended that the Chief, Taxpayer Services,
educate representatives about the fraud scheme and require them
to properly authenticate callers before providing tax account
information, including tax deposit and tax transcript information.
IRS management agreed with our recommendation and took
appropriate corrective action.
TREASURY INSPECTOR GENERAL
for Tax Administration
DATE: August 12, 2025
MEMORANDUM FOR: COMMISSIONER OF INTERNAL REVENUE
FROM: Nancy A. LaManna
Deputy Inspector General for Inspections and Evaluations
SUBJECT: Final Evaluation Report – Authenticating Callers’ Identity on Business
and Practitioner Telephone Lines Needs to Be Strengthened to Combat
Fraud (Evaluation No.: IE-24-051)
This report presents the results of our review to assess actions taken by the Internal Revenue
Service to address schemes involving the fraudulent filing of Form 941, Employer’s Quarterly
Federal Tax Return. This review is part of our Fiscal Year 2025 Annual Program Plan and
addresses the major management and performance challenge of Tax Fraud and Improper
Payments.
Management’s complete response to the draft report is included as Appendix III. If you have any
questions, please contact me or Kent Sagara, Director, Inspections and Evaluations.
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Table of Contents
Background .....................................................................................................................................Page 1
Results of Review .......................................................................................................................Page 2
Employees Did Not Follow Existing Authentication Procedures, Which
Allowed Individuals to File Fraudulent Forms 941 and Obtain Tax
Refund Checks.......................................................................................................................Page 2
Recommendation 1: ...................................................................Page 4
Appendices
Appendix I – Detailed Objective, Scope, and Methodology................................Page 5
Appendix II – Outcome Measure ...................................................................................Page 6
Appendix III – Management’s Response to the Draft Report .............................Page 7
Appendix IV – Abbreviations ...........................................................................................Page 9
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Background
Employers use Form 941, Employer’s Quarterly Federal Tax Return, to report wages and tips their
employees have earned. Form 941 is also used to report employment taxes, including federal
income, Social Security, and Medicare taxes withheld from employees. In addition, the form is
used to report employer’s contribution of Social Security and Medicare taxes. Businesses
generally are required to file a Form 941 each quarter.
If a business has tax or refund-related questions, they can contact the Internal Revenue Service’s
(IRS) Business Specialty Tax or the Practitioner Priority Service telephone lines. The Business
Specialty Tax telephone line provides service to businesses, corporations, partnerships, and
trusts that need information or assistance with business tax returns or tax accounts. The
Practitioner Priority Service telephone line is the first point of contact for tax practitioners who
need assistance regarding their client’s tax accounts.
IRS internal guidance indicates that when an individual calls the IRS, they will be asked questions
to verify the individual’s identity prior to discussing or making any changes to a tax account.
Return information should not be disclosed until an IRS representative has confirmed that an
individual making an inquiry is the taxpayer, the taxpayer’s authorized representative, or an
authorized representative of the business. When an individual requests changes via the
telephone, IRS representatives can only make changes for editorial errors involving spelling,
incomplete names, and missing or incorrect suffixes. Non-editorial changes, such as an address
change, can be made after the IRS representative verifies the previous address with the caller.
We initiated this evaluation after we received a referral from TIGTA’s Office of Investigations (OI)
about a scheme related to the filing of fraudulent Forms 941. Specifically, OI identified fraudsters
**********************************************2***********************************************
*************************************************************************************************
****************************************************************************************************
************************************************2************************************************
****************************************************************************************************
***************************************2*****************************.
Some fraudsters also ***************************************2************************************
************************************************2*************************************************
*************. Federal regulations require the IRS to send two notices when an address change is
requested. One notice is sent to the current address on file and the other to the new address.1
Fraudsters—aware of the notification requirements—**********************2****************
*****************************************************************************************************
*******************************************************2********************************************
************************************************************************************************.
An IRS representative releases the refund, and the check is sent to the new address.
1
The IRS sends ***********2********** notices to **************2*************. The ***2**** notice is mailed to the
taxpayer’s new address. The ***2**** notice is mailed to the taxpayer’s prior address.
Page 1
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Results of Review
We found that the IRS does not always properly authenticate a caller’s identity to adequately
protect against the release of tax information or safeguard government funds. The IRS did not
adequately verify the identity of callers to the Business Specialty Tax and the Practitioner Priority
Service telephone lines. This allowed the unauthorized disclosure of tax information, the
fraudulent filing of Forms 941, and the issuance of fraudulent tax refund checks.
Based on information that OI shared in its referral, we identified approximately $56 million in
possible fraudulent refund checks issued from January 2023 through July 2024. The checks were
associated with 150 Employer Identification Numbers.
Employees Did Not Follow Existing Authentication Procedures, Which Allowed
Individuals to File Fraudulent Forms 941 and Obtain Tax Refund Checks
In October 2024, we used information obtained from the OI referral to issue an alert advising IRS
management about a scheme involving the fraudulent filing of Forms 941. The alert noted that
OI identified over $93 million in fraudulent refund checks issued for 20 different businesses.
While OI worked with the Bureau of Fiscal Services to stop payment on most of these refund
checks, at least $2.7 million was paid.
IRS management responded to the alert and indicated they were aware of the risk of erroneous
refunds being issued based on fraudulent Form 941 filings. In June 2024, the Customer Account
Services function referred a case to the Identity Theft Victim Assistance function. The case
involved a business experiencing issues with ***********************2*************************
******, as well as the fraudulent filing of a Form 941. The Business Master File Identity Theft unit
reviewed the case, but the issue was not elevated until August 2024. By then, the Customer
Account Services function had referred two additional cases. All three cases had the same
individuals involved in the *************2***********, but the IRS did not take action to prevent
the continuation of the scheme.
To determine the extent of the scheme, we analyzed all Forms 941 filed from January 2023
through August 2024 that had ******************************2***************************
*********************************************************************************************
***************2************* is an indicator of possible fraud. In addition, we used common
names identified in the fraud scheme to determine whether there were other instances where
individuals had requested a *****************2*************. We then compared our results to tax
accounts that had refund checks issued from January 2023 through July 2024. We identified
150 unique Employer Identification Numbers that were issued approximately $56 million in
refund checks.
We found that fraudsters repeatedly called the IRS to ****************2******************
***********************************************2********************************************
****************************************************************************************************
***********************************************2*************************************************
*********************************************************.
Page 2
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
As previously mentioned, the IRS has a process to authenticate and properly identify individuals
calling its telephone lines. The IRS also has procedures to inform representatives about possible
fraudulent activity on a tax account. The procedures state that prior to releasing any tax account
information over the telephone, IRS representatives are required to review the Integrated
Automation Technology (IAT) Disclosure tool. This tool alerts IRS representatives to certain tax
account conditions when identity theft is suspected or documented.
If the IAT Disclosure tool indicates identity theft is an issue on the tax account, IRS
representatives are required to conduct additional research. This includes reviewing the
Integrated Data Retrieval System (IDRS) account history and conducting an Accounts
Management System (AMS) history review.2 Figure 1 outlines the steps IRS representatives are
required to take prior to releasing tax information over the telephone.
Figure 1: Requirements for Releasing Tax Information Over the Telephone
Source: IRS internal guidance.
However, the IRS does not always follow this process. For example, IRS representatives
are not always reviewing call history notes documented on the tax account before providing tax
account information to a caller. We reviewed the call history notes of tax accounts affected by
the scheme and found that IRS representatives had documented fraudsters’ initial requests for
tax account information. If subsequent IRS representatives had reviewed the call history notes,
they may not have provided the information needed to further the fraud scheme.
In October 2024, we reported another impersonation scheme that involved fraudsters calling
the Practitioner Priority Service telephone line.3 The report noted that fraudsters *****2********
***************************************************************************************************
***********************************************2**********************************************
***************************************************************************************************
***********************************************2***********************************************
******************************************************************************************************
2
The IDRS is an IRS computer system capable of retrieving or updating stored information. The IDRS works in
conjunction with taxpayer account records. The AMS allows employees to access multiple IRS systems, including
inventory management, case delivery, history narratives, and print-to-fax capabilities to send information to taxpayers.
3
TIGTA, Report No. 2025-IE-R001, Actions Were Not Taken to Timely Strengthen Practitioner Priority Service
Telephone Line Authentication Controls (October 2024).
Page 3
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
***********************************************2*************************************************
****************.
As a result of our review, IRS management implemented additional authentication controls.
IRS representatives answering calls on the Practitioner Priority Service telephone line received
access to the Secure Access Digital Identity dashboard. This dashboard provides IRS
representatives access to an additional tool to verify the identity of an authorized representative
while the person is on the telephone. This occurs before any tax return transcripts are released.
The IRS must perform proper authentication. This includes individuals calling to obtain tax return
transcripts or other key tax information, such as the dates and amounts of federal tax deposit
payments. If the IRS does not properly authenticate individuals before providing tax account
information, there is a continued risk of unscrupulous individuals taking advantage of the tax
system. The federal government is also at risk of losing funds.
Recommendation 1 (Alert): The Chief, Taxpayer Services, should educate IRS representatives
about the fraud scheme and require them to properly authenticate callers before providing tax
account information, including tax deposit and tax transcript information.
Management’s Response: IRS management agreed with our recommendation. As of
April 17, 2025, the IRS provided employees with a training course on Business Master File
Authentication and Disclosure as a mandatory topic for the Fiscal Year 2025 Critical Filing
Season Readiness Training. IRS management also issued a Service-wide Electronic
Research Program Alert to remind employees of disclosure guidelines and procedures
for address changes.
Recent executive order to digitize all federal disbursements and payments will likely help
prevent similar fraud schemes
In October 2024, we issued an alert to the IRS. We recommended that the IRS delay issuing
refund checks from the filing of a Form 941, when the filing or prior contact with the IRS
resulted in an address change. At the time, IRS management agreed with our recommendation
and planned to request a programming change to delay the refund checks. However, Executive
Order 14247, Modernizing Payments To and From America’s Bank Accounts, was issued in
March 2025 to phase out paper checks.
The executive order states that effective September 30, 2025, the Secretary of the Treasury will
stop issuing paper checks for all federal disbursements, including tax refunds. There will be
limited exceptions where electronic payment and collection methods are not feasible. We
believe that the executive order will likely help resolve this particular fraud scheme and make
our previous recommendation to the IRS obsolete. However, strengthening the authentication
process is still needed to further eliminate the fraudulent issuance of tax refunds.
Page 4
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to assess actions taken by the IRS to address schemes
involving the fraudulent filing of Form 941. To accomplish our objective, we:
· Obtained and analyzed information from TIGTA’s OI about fraudulent Forms 941 filings.
· Interviewed IRS management and determined whether the agency took any actions
after we issued our October 2024 alert.
· Determined whether proposed corrective actions were sufficient to prevent the fraud
scheme.
· Performed an analysis of Form 941 refund data and identified additional cases involving
fraudulent filings of the form.
Performance of This Review
This review was performed with information obtained from the IRS’s Accounts Management
and Submission Processing functions; the Office of Research, Applied Analytics, and Statistics;
and the Office of Cybersecurity Fraud Analytics and Monitoring during the period of
September 2024 through January 2025.
We conducted this evaluation in accordance with the Council of the Inspectors General on
Integrity and Efficiency’s Quality Standards for Federal Offices of Inspector General. Those
standards require that the work adheres to the professional standards of independence, due
professional care, quality assurance, and followed procedures to ensure accuracy of the
information presented. We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions.
Data Validation Methodology
We evaluated the data by performing tests to assess the reliability of data obtained from the
IRS’s Individual Master File system. Specifically, we evaluated the data by performing electronic
testing of required data elements. We determined that the data were sufficiently reliable for
purpose of this report.
Page 5
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Appendix II
Outcome Measure
This appendix presents detailed information on the measurable impact that our recommended
corrective actions will have on tax administration. This benefit will be incorporated into our
Semiannual Report to Congress.
Type and Value of Outcome Measure:
· Funds Put to Better Use (Revenue Protection – Potential; $55,889,446 in erroneous
refund checks were issued to individuals involved in the Form 941 fraudulent scheme
(see Recommendation 1).
Methodology Used to Measure the Reported Benefit:
We identified 34,908 Forms 941 filed from January 1, 2023, through August 15, 2024, that
requested a refund to be paid and had a transaction code **2* posted to the business tax
account, *********************2********************. We further analyzed the Forms 941 and
determined that 232 of them had ***************************2***********************************
***********************. In addition, notes in the AMS contained key words that indicated possible
fraud. We compared these cases to refund checks issued from January 1, 2023, through
July 31, 2024. We identified 150 unique Employer Identification Numbers that were potentially
issued $55,889,446 in fraudulent refund checks.
Page 6
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Appendix III
Management’s Response to the Draft Report
Page 7
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Page 8
Authenticating Callers’ Identity on Business and Practitioner
Telephone Lines Needs to Be Strengthened to Combat Fraud
Appendix IV
Abbreviations
AMS Accounts Management System
IAT Integrated Automation Technology
IDRS Integrated Data Retrieval System
IRS Internal Revenue Service
OI Office of Investigations
TIGTA Treasury Inspector General for Tax Administration
Page 9
To report fraud, waste, or abuse,
contact our hotline on the web at
https://www.tigta.gov/reportcrime-misconduct.
To make suggestions to improve IRS policies, processes, or systems
affecting taxpayers, contact us at www.tigta.gov/form/suggestions.
Information you provide is confidential, and you may remain anonymous.
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