TREASURY INSPECTOR GENERAL FOR TAX
ADMINISTRATION
SUSPENDED E-FILE PROVIDERS WERE NOT ADEQUATELY ASSISTED WITH REINSTATEMENT OF
ELECTRONIC FILING PRIVILEGES
Issued on July 10, 2007
Highlights
Highlights of
Report Number: 2007-40-114 to the
Internal Revenue Service Commissioner for the Wage and Investment Division.
IMPACT ON TAXPAYERS
Electronic-file
(e‑file) Providers originate the electronic
submission of income tax returns to the Internal Revenue Service (IRS). In October 2006, the IRS suspended 12,588 Providers
for not submitting required forms. The
suspensions created a significant backlog of Providers, and the IRS was not
adequately prepared to assist them with the reinstatement of their electronic
filing privileges. This could have
prevented Providers from submitting electronic tax returns and required them
and/or taxpayers to file paper tax returns.
WHY TIGTA DID THE AUDIT
This audit was initiated because in January 2007 TIGTA
received a complaint regarding the timeliness of IRS assistance in reinstating e-file Providers that had been suspended
because of noncompliance with U.S. Individual Income Tax Declaration for an IRS
e-file Return (Form 8453) submission
requirements. The complainant was
concerned about how this might affect both the IRS and the Providers during the
2007 Filing Season. Our review was
conducted to determine why the IRS experienced a backlog of suspended e-file Providers prior to the start of
the 2007 Filing Season.
WHAT
TIGTA FOUND
On October 30, 2006, the IRS suspended 12,588 e‑file Providers for not
submitting the required Forms 8453. The
suspensions created a significant backlog of Providers who needed IRS
assistance to be reinstated before January 12, 2007 (the date the IRS began
accepting electronic tax returns). This
backlog resulted when Warning and Suspension Letters were issued late and the
IRS was not adequately prepared to assist Providers with reinstatement.
Once the Letters were issued and Providers were suspended,
IRS assistors were often unable to access the primary computer system (the
Employee User Portal) needed to reinstate suspended Providers because the
system was unavailable. In addition, IRS
assistors noted that a number of e-file
Providers stated they had not received the Warning or Suspension Letters, and
procedures for working undelivered Letters were not consistent. Further, the Austin, Texas, Campus was closed
for 2 business days because of weather at the beginning of the 2007 Filing
Season, when the IRS was answering inquiries and working appeals from the
suspended e-file Providers.
Issues relating to Form 8453 filing requirements (including
processing the Forms, generating Warning letters
to e-file Providers, suspending
Providers, and processing appeals) would be addressed if, as TIGTA had
recommended in a September 2006 report, the IRS mandated the use of a Personal
Identification Number. Implementation of
this recommendation would have eliminated the required use of the Form 8453.
WHAT TIGTA RECOMMENDED
TIGTA recommended the Commissioner, Wage and Investment
Division, reconsider eliminating the use of Form 8453. If the Commissioner disagrees with
eliminating the use of Form 8453, the Commissioner should ensure Warning and Suspension Letters are issued timely, continue to monitor
the availability of the Employee User Portal, and revise guidelines for
handling undeliverable Warning and Suspension Letters.
In
their response to the report, IRS officials stated they agreed with the first
recommendation because they have reconsidered their previous position on
eliminating the use of Form 8453.
Management plans to develop a comprehensive action plan to pursue
mandating the use of Personal Identification Numbers by e-file Providers for the 2008 Filing Season. Management also plans to evaluate mandating Personal
Identification Number usage by online filers in the 2009 Filing Season. Because management agreed with the first
recommendation, the additional recommendations are no longer applicable.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2007reports/200740114fr.html.
Email Address: Bonnie.Heald@tigta.treas.gov
Phone Number: 202-927-7037
Web Site:
http://www.tigta.gov