IRS anti-fraud program plagued by delays, costing taxpayers millions

The rollout of an IRS program meant to catch fraudulent tax returns has been plagued by delays and cost overruns, according to a government watchdog – and one Republican lawmaker is demanding answers.

Citizens Against Government Waste slammed the "wasteful" and "ineffective" program in a report timed with the tax-filing deadline earlier this week.

At issue is an IRS effort to replace the Electronic Fraud Detection System (EFDS) – which dates back to 1994 -- with an update called the Return Review Program (RRP). In 2010, the IRS described the EFDS “too risky to maintain, upgrade or operate beyond 2015.”

However, despite the program being in development since 2009, the replacement is not expected to be completed until 2022.

And that time is money.

According to a 2015 Treasury Inspector General for Tax Administration (TIGTA) report, a two-year pilot program found the new program missed tens of thousands of fraudulent returns, amounting to a cost of $313 million.

The CAGW noted a 2015 Government Accountability Office report also found the program exceeded its initial budget by $86.5 million.

“This is unfortunately typical of information technology modernization projects throughout the federal government,” Tom Schatz, president of the CAGW, told Fox News. “The unfortunate result is that many of its projects are behind schedule, the technology is outdated, and they usually have large cost overruns.”

In March, Senate Finance Committee Chairman Orrin Hatch, R-Utah, wrote to IRS Commissioner John Koskinen, expressing concern about the program and demanding answers to a series of questions about the state of RRP.

“In an era where new technologies rapidly become outdated, taking 14 years to fully implement a major IT system is simply unacceptable,” Hatch wrote. “Furthermore, the IRS has paid far more than the initial $57.5 million in estimated costs to date.”

The inspector general report found that until the IRS can retire the old program, the additional operational and maintenance costs could be as high as $18.2 million a year.

The problem of combating tax fraud isn’t going away, either. According to IRS numbers, the government lost an average of $458 billion a year this way between 2008 and 2010.

The CAGW report concludes that the best way to solve the current problem would be to transfer to an existing private platform instead, as the IRS’ criminal division is already doing.

“As the IRS continues to process tax returns, it should provide a better return on its efforts to prevent the filing of fraudulent returns. The best way to accomplish that goal would be to immediately seek out and utilize existing, successful platforms in the private sector, and then say RIP to the RPP,” the report says.

The IRS has not responded to a request for comment.