Treasury Inspector General for Tax Administration
December 29, 2011
TIGTA - 2011-90
Contact: David Barnes
WASHINGTON - While more tax return preparers are filing electronically, better controls are needed to ensure that all are complying with the new preparer regulations, according to a report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).
Every year, more than one-half of all taxpayers pay someone to prepare their Federal income tax returns. During the 2011 Filing Season, the IRS processed approximately 66.9 million individual Federal income tax returns prepared by paid tax return preparers; 90 percent of these returns were electronically filed (e-filed).
The overall objective for TIGTA's review was to evaluate the IRS's implementation of the e-file mandate for tax preparers, which is part of the sweeping new set of reforms that have changed the way many preparers do business with the IRS. This suite of reforms implements many new regulations and gives the IRS new oversight responsibilities over the regulation of tax preparers, which were previously largely unregulated.
TIGTA found that more preparers submitted tax returns electronically during the 2011 filing season, but determining their noncompliance with the e-file mandate is difficult. The continued use of multiple Preparer Identification Numbers (PTINs) has made it difficult to match all tax returns to the preparers who filed them. There are ongoing improvements to ensure there are effective controls and validations for the preparer registration process.
TIGTA also found that prisoners had registered and obtained PTINs. More than 300 prisoners received PTINs and 43 PTIN applicants are serving life sentences and received active/provisional PTINs. Current regulations do not prohibit prisoners from registering and obtaining PTINs. The IRS subsequently decided that prisoners will not be issued PTINs and those that were issued will be suspended.
"While the e-file mandate for paid preparers is helping the IRS with its goal to electronically receive 80 percent of individual tax returns by Calendar Year 2012, our review found that improvements are necessary to be sure that there is sufficient oversight over the use of PTINs and to ensure preparers' compliance with all aspects of the new e-file requirements," said J. Russell George, the Treasury Inspector General for Tax Administration.
For the first few years, the IRS plans to use a "soft" approach to enforcement that focused on educating and collaborating with preparers in implementing e-file requirements. However, improvements are underway to ensure that controls and system validations over the preparer registration process are effective.
TIGTA's report makes specific recommendations for the IRS to improve its implementation of the e-file mandate. IRS management agreed with the recommendations and stated that corrective actions to address them have been taken or are planned.
Read the report
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
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