TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Highlights

IMPROVEMENTS ARE NEEDED TO ENSURE THAT CONSISTENT SUITABILITY CHECKS ARE PERFORMED FOR PARTICIPATION IN INTERNAL REVENUE SERVICE PROGRAMS

Final Report issued on November 21, 2019

Highlights of Reference Number:† 2020-40-005 to the Commissioner of Internal Revenue.

IMPACT ON TAXPAYERS

The IRS partners with tax professionals and other entities to administer the tax system.† Before accepting these individuals, the IRS conducts suitability checks such as background and tax compliance checks to determine if the individuals applying for participation should be accepted in the programs.† Allowing unsuitable individuals into the programs would increase the risks to taxpayers.

WHY TIGTA DID THE AUDIT

This audit was initiated to assess the effectiveness of IRS processes to ensure the suitability of applicants seeking to participate in IRS programs and to follow up on IRS planned corrective actions to address prior TIGTA recommendations.

WHAT TIGTA FOUND

The IRSís suitability checks for applicants to the Acceptance Agent, Enrolled Agent, and e-File Provider Programs generally ensured that only reputable individuals were accepted in the programs during Fiscal Year 2018.† The IRSís continuous suitability checks also ensured that individuals accepted in the programs prior to the initial suitability checks had not engaged in criminal activity warranting removal from the program.

However, the initial and continuous suitability checks vary depending on the specific program to which an individual applies to participate or has been approved to participate.† This is despite the fact that an individualís participation in each of the programs poses similar risks to tax administration.† For example, a tax compliance check is performed for all new applicants for each of the programs.† However, other checks to determine if an individual has a criminal history, is incarcerated, or is a United States citizen vary depending on the program for which the applicant is applying.

TIGTA also identified that when the Federal Bureau of Investigation reports a criminal history for an applicant, the adjudication process is inconsistent depending on the program to which the individual is applying.† For example, the e‑File Provider Program denies an applicant if the Federal Bureau of Investigation reports a conviction *******************2************************************************************ *************************2****************************, whereas the Enrolled Agent and Acceptance Agent Programs allow applicants to participate ********************************2******************************.

Finally, the IRS has not taken sufficient actions to address the fraudulent submission of fingerprint cards by some applicants to pass their background investigations.† TIGTA reported this issue to the IRS in February 2018.

WHAT TIGTA RECOMMENDED

TIGTA made 10 recommendations including that the IRS 1) assess the risk to tax administration of performing inconsistent initial and continuous suitability checks on individuals seeking to participate or enrolled in the e-File Provider, Acceptance Agent, and Enrolled Agent Programs, 2) assess the risk of the e-File Provider Programís use of decision matrices to adjudicate an applicantís criminal history that are inconsistent with the matrices used by the Acceptance Agent and Enrolled Agent Programs, and 3) work with the Federal Bureau of Investigation to identify additional individuals who may have submitted fingerprint cards that match the fingerprints of another individual.

IRS management agreed with the recommendations and has taken or plans to take corrective actions.

Redaction Legend:

2 = Law Enforcement Techniques/Procedures and Guidelines for Law Enforcement Investigations or Prosecutions.

 

READ THE FULL REPORT

To view the report, including the scope, methodology, and full IRS response, go to:

https://www.treasury.gov/tigta/auditreports/2020reports/202040005fr.pdf.

 

Phone Number ††/† 202-622-6500

E-mail Address †/TIGTACommunications@tigta.treas.gov

Website†††††† ††††††/https://www.treasury.gov/tigta