Anonymous visits by government auditors have uncovered accuracy problems with some of the tax returns prepared by volunteers who staff the Internal Revenue Service’s Volunteer Program, according to a new report.
The report, from the Treasury Inspector General for Tax Administration, examined the no-cost federal tax return preparation and electronic filing services provided by volunteer tax preparers working with low- and moderate-income, elderly, disabled and limited-English-proficient taxpayers under the auspices of the IRS’s Volunteer Income Tax Assistance, or VITA, program and its Tax Counseling for the Elderly, or TCE, program.
For the report, TIGTA auditors conducted a review to determine whether taxpayers visiting IRS Volunteer Program sites receive quality service, including accurately prepared tax returns. This was a follow-up audit to TIGTA’s prior reviews of the program.
TIGTA found that the IRS continues to emphasize to volunteers the necessity of reviewing the intake/interview sheets with taxpayers during tax return preparation. In addition, training and resource materials were adjusted to clarify and underscore the due-diligence obligations of volunteers. However, there were still accuracy problems with some of the tax returns prepared for TIGTA auditors making anonymous visits to Volunteer Program sites.
Of the 39 tax returns prepared for auditors during the 2013 filing season, 20 of them (or 51 percent) were prepared correctly, while 19 (or 49 percent) were prepared incorrectly. That represents a two-percentage-point increase over the 49 percent accuracy rate for the same number of returns in the 2012 filing season. The 19 incorrect tax returns resulted from incorrect application of the tax law, insufficient requests for information during the intake and interview process, or lack of adherence to quality review requirements.
“Ensuring that tax returns are accurately prepared by volunteers remains a challenge for the IRS,” said TIGTA Inspector General J. Russell George in a statement. “When volunteers use established interview and quality review processes, the accuracy of the tax returns they prepare improves.”
The IRS continues to refine its anonymous shopping process to evaluate the accuracy of tax returns prepared at Volunteer Program sites, TIGTA noted. This process reported a 49 percent accuracy rate for the 43 tax returns prepared, which compares with the 51 percent accuracy rate TIGTA found. The IRS’s anonymous shopping also found the same causes that TIGTA reported for the inaccurately prepared tax returns.
In the report, TIGTA recommended that the IRS ensure that volunteer return preparers, quality reviewers, and site coordinators annually complete intake/interview and quality review training. In response to the report, the IRS agreed with TIGTA’s recommendations and plans to require that all volunteer instructors, return preparers, quality reviewers and site coordinators complete intake/interview and quality review training annually.
“Recognizing the importance of achieving and maintaining high standards of accuracy within the program, we have continued to take actions and devote resources improve the accuracy of prepared tax returns,” wrote Peggy Bogadi, commissioner of the IRS’s Wage and Investment Division, in response to the report.
She noted that a training document had been created for the use of volunteers providing guidance on the IRS’s intake, interview and quality review processes. She also pointed out that during the 2013 filing season, over 91,000 volunteers had helped more than 3.3 million individuals prepare and file their federal and state income tax returns.
In a statement emailed to Accounting Today on Tuesday by an IRS spokesman, the agency responded further to the report. “The IRS greatly appreciates the community service that volunteers provide to underserved segments of the taxpaying public and appreciates TIGTA’s acknowledgement of these contributions,” said the IRS statement. “Results from TIGTA’s audit visits were based on three pre-determined scenarios and only 39 returns prepared during these reviews, which is not statistically valid. While we are concerned with any level of error and will address the issues raised in the report, any attempt to extrapolate the findings from 39 visits of this type to the typical tax return prepared by VITA / TCE volunteers would unfairly characterize the tax assistance provided by our volunteers. By comparison, our quality review showed a 91 percent accuracy rate on the more than 3.3 million federal and state returns prepared by our nearly 91,000 volunteers. The IRS remains committed to continually improving the volunteer program, and have agreed with TIGTA’s suggestions.”