TIGTA Seal graphic

Treasury Inspector General for Tax Administration

Press Release


November 20, 2017
TIGTA-2017-28
Contact: Karen Kraushaar, Director of Communications
Karen.Kraushaar@tigta.treas.gov
(202) 622-6500

Processes Do Not Always Ensure That Electronic Filing Identification Numbers Are Assigned to Qualified Applicants or Deactivated When Required

WASHINGTON — The Internal Revenue Service’s (IRS) e-file Provider Program offers taxpayers an alternative to filing a traditional paper return by allowing returns to be sent to the IRS in an electronic format via an authorized e-file Provider, who must meet required screening and verification standards before being authorized to participate in the e-file Program. For Processing Year 2016, 278,580 Electronic Filing Identification Numbers (EFINs) were used to e-file almost 132 million accepted tax returns.

However, the IRS is not always verifying that the Providers meet the required standards, including citizenship status, according to a report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).

Through the e-file Provider Program, tax returns can be sent to the IRS in an electronic format via an authorized e-file Provider, who is required to submit an application to the IRS for determining their suitability to be a Provider. Suitability criteria include providing citizenship status, a valid Social Security Number, and a home address. TIGTA initiated this audit to evaluate IRS controls to prevent the unauthorized use of EFINs, which are assigned to authorized Providers.

TIGTA found that the IRS does not verify citizenship status for all individuals on e-file applications. TIGTA’s review identified 45 approved applications that listed a Principal (a person authorized to act in legal or tax matters) or Responsible Official (a person with authority over the IRS e-file operation of a Provider) who was not a U.S. citizen or resident alien, according to Social Security Administration records. The review also identified 1,494 individuals who had approved applications, even though Social Security Administration records did not show a citizenship status for them.

TIGTA’s review of a statistical sample of 34 approved e-file Program partnership applications identified nine (26 percent) that omitted at least one partner with a five percent or greater ownership interest in the firm. Applicants must identify all partners with five percent or greater ownership interest. TIGTA estimates that 256 of the 969 partnership applications approved by the IRS from January 2015 to February 2016 omitted one or more partners.

In addition, EFINs are not timely deactivated for deceased Principals and Responsible Officials of firms that have an EFIN. Of 965 EFINs with deceased Principals and Responsible Officials, TIGTA identified 349 that were still active, and for 399, the IRS took an average of 1,080 days to deactivate the EFIN.

Lastly, referrals of 328 EFINs used to file potentially fraudulent tax returns were not consistently evaluated or forwarded to the IRS Electronic Products and Services Support organization. The IRS Return Integrity and Compliance Services organization did not evaluate the 328 EFINs for potential fraud, and only 104 were evaluated for identity theft. The Electronic Products and Services Support organization was aware of only 42 of the 328 EFINs.

“The IRS must ensure that the integrity of the e-file Program is protected,” said J. Russell George, the Treasury Inspector General for Tax Administration. “When the IRS does not implement sufficient controls over Electronic Filing Identification Numbers, or EFINs, ineligible individuals can use the EFINs to file fraudulent tax returns,” he added.

TIGTA made eight recommendations in the report. IRS management agreed with five of them and plan to take corrective action. They disagreed with two recommendations and partially agreed with one recommendation.

Read the report.

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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.