IRS Gets Mixed Grades from TIGTA
By Rizzolo Group at 27 August, 2010, 12:00 am
According to a new Treasury Inspector General for Tax Administration (TIGTA) report, the Internal Revenue Service seems to have an effective process for ensuring that electronic filing provider applicants meet age requirements and have no tax compliance issues. Unfortunately, IRS doesn’t get quite the same high marks for consistency with regard to its ability to verify that new applicants are US citizens or legal aliens authorized to work in United States.
The IRS’s electronic filing (e-file) program enables taxpayers to send their returns to the IRS in an electronic format via an electronic return originator (ERO). As of June 29, 2009, there were 207,419 ERO’s who e-filed about 61 million (66%) of the approximately 92 million e-filed tax returns in 2009.
To become an e-file provider, an applicant must meet required screening and verification checks. Applicants must be US citizens or legal aliens and at least 21 years of age. An applicant who is not an attorney, CPA or enrolled agent must supply a fingerprint card which is used to conduct a criminal background check.
The report found that the IRS also needs to verify that some e-file providers claiming nonprofit status are indeed nonprofit organizations. Nonprofits are excluded from all e-file program requirements and suitability checks that for profits organizations must complete.
The IRS did not verify the nonprofit status of some e-file providers participating in the IRS’s Volunteer Program. The Volunteer Program provides no-cost federal tax preparation and e-filing services to low and moderate income taxpayers who are elderly, disabled or have limited English proficiency. TIGTA also found that the IRS does not always follow its procedures for monitoring e-file providers. These procedures include properly identifying e-file providers for site visits, conducting follow-up visits and reporting trends to the IRS’s Criminal Investigation Division to discuss issues or problems. “Inadequate screening and monitoring increases the risk to both the taxpaying public and the federal government for potential losses associated with unscrupulous e-file providers” said J. Russell George, the Treasury Inspector General for Tax Administration.
The IRS has agreed with all but one of TIGTA’s six recommendations. It disagreed with the recommendation that it verify citizenship because of concerns that pending legislation mandating e-file for most return preparers would require IRS to modify current citizenship rules. TIGTA said that the IRS should continue to ensure that all US-based e-file providers have a valid Social Security number and pass a citizenship test.
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