The Internal Revenue Service says it plans to beef up background checks on tax practitioners in the wake of an audit that found inconsistencies in how those checks were administered.
The audit, carried out by the Treasury Inspector General for Tax Administration (TIGTA), found that the background checks and compliance monitoring vary, depending on the program.
The audit looked at the agencies suitability checks for applicants to the Acceptance Agent, Enrolled Agent, and e-File Provider Programs during Fiscal Year 2018. Generally, the audit found that only reputable individuals were accepted in the programs, and the IRS’ continuous suitability checks guarded against an individual engaging in criminal activity after clearing the initial checks that warrants removal from the program.
What the Audit Found
Initial and continuous suitability checks vary depending on the specific program, despite the fact that an individual’s 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.
The Inspector General’s report says the inconsistencies between the Acceptance Agent, Enrolled Agent, and e-File Provider programs can allow unqualified individuals to slip through the cracks. “In addition, a review of another statistically valid sample of 170 individuals accepted into these programs prior to Fiscal Year 2018 found that none of the individuals engaged in a criminal activity that warranted removal from the program, but five individuals were not in tax compliance. The IRS identified and was addressing the tax compliance issue for four of these five individuals,” TIGTA’s report states.
Similarly, TIGTA found that the adjudication process is likewise inconsistent when the FBI reports a criminal history for an applicant. Consequences of a criminal history vary with the program involved.
Finally, TIGTA said the IRS has not taken sufficient actions to address the fraudulent submission of fingerprint cards by some applicants to pass their background investigations. TIGTA had reported this issue to the IRS in February 2018, when an analysis of the fingerprint cards was carried out with the help of the Federal Bureau of Investigation.
“Results from this analysis confirmed that some applicants are submitting fingerprint cards using their identification information, but the fingerprints on the card match the fingerprints previously submitted by another individual,” TIGTA reported. “The FBI’s analysis identified 719 instances in which an applicant submitted a fingerprint card with fingerprints that matched those of one or more previously submitted fingerprint cards. This includes three instances in which 20 individuals submitted fingerprint cards with the same matching fingerprints. Each of these instances was undetected by the IRS.”
The Inspector General makes 10 recommendations to the IRS, including that the IRS:
- 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
- Assess the risk of the e-File Provider Program’s use of decision matrices to adjudicate an applicant’s criminal history that are inconsistent with the matrices used by the Acceptance Agent and Enrolled Agent Programs
- 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 either taken corrective actions or plans to do so.
A statement from Kenneth Corbin, Commissioner of the IRS Wage and Hour Division, said in a response to the audit report that the IRS needs help from Congress to fully ensure the integrity of all tax preparers. “If future legislation grants the IRS authority to regulate all tax return preparers, we could further strengthen and align suitability checks for the remaining credentialed return preparers, which would improve taxpayer compliance and overall tax administration. We recognize and agree with the importance of consistent suitability checks for these programs,” Corbin writes.