TIGTA Report on IRS Use of Form 3949-A, Information Referral (5/30/19)

TIGTA issued this report:  Improvements Are Needed to Correct Continued Deficiencies in the Processing of Taxpayer Referrals of Suspected Tax Fraud (Ref. No. 2019-40-040 5/23/19), here.  (The Highlights are in the report but separately offered here.)

Key points are:

1.  Taxpayer referrals of suspected tax fraud are on Form Form 3949-A, Information Referral, here.  The instructions say:  "Purpose of the Form:  Use Form 3949-A to report alleged tax law violations by an individual, a business, or both."  As indicated below, the actual use of the information reported seems to be in the civil audit area.

2.  The report focuses principally on the use of the reported information to collect revenue and compares to collection of revenue from other sources (more below).  It is not clear how successful the forms are in pursuing criminal investigations and prosecutions.  (See the routing information in paragraph 5 below.) I note in this regard that, since criminal investigations usually require larger amounts, persons with evidence of tax fraud will likely pursue the whistleblower opportunities by filing Form 211 instead of Form 3949-A.

3.  In FYs 2016 - 2018, the information on Forms 3949-A resulted in over $246 million in assessed taxes.  (I'm not sure how much actual revenue was collected.)  For FYs 2015 - 2018, 290,742 Forms were received.

4. The report makes suggestions on improvements in the use of the Form.  The report notes that the instructions provide that the, for reports on individual taxpayers, the Form is to be sent to the IRS's Submission Processing Function which routes them to the appropriate functional area for further review.  The report explains the process from receipt to referral to the appropriate functional area.  IRS employees "continue to erroneously route a significant number of Forms 3949-A to the wrong IRS function for review."

5.  The routing data for 2018 from W&I and SB/SE indicate that 2,665 cases were routed to CI out of 61,164 total received.  See Figure 3, p. 3.

6.  The assessment statistics presented in Figure 4, p. 4 are: