Participants in the Internal Revenue Service’s Volunteer Income Tax Assistance program prepared thousands of free tax returns for taxpayers well above the income threshold mandated by the IRS, even for taxpayers with incomes over $1 million.
J. Russell George
A new report from the Treasury Inspector General for Tax Administration on the VITA Grant Program found that the IRS needs to do more to reach low-income taxpayers in underserved and hard-to-reach communities, both urban and non-urban. In 2008, the IRS expanded the VITA program, which dates back to 1969, to create a matching grant program. Under the program, the IRS awarded grants to community groups to offer free tax preparation assistance to local taxpayers. During the 2011 filing season, nearly 3.2 million tax returns were prepared by volunteers. The grant program has become a significant component of the IRS's VITA program.
One-third of the tax returns prepared by the volunteer program are prepared by VITA Grant Program grantees. TIGTA's overall objective was to determine whether the VITA Grant Program is achieving its purpose of extending services to underserved populations in hard-to-reach areas, both urban and rural.
TIGTA inspectors looked at a sampling of tax returns for 2009 through 2011. Every year, the IRS establishes the threshold in which free tax help will be offered. Generally, free tax preparation is offered to taxpayers with incomes of $49,000 or less. For calendar year 2009, income was not to exceed $42,000. For calendar years 2010 and 2011, income was not to exceed $49,000. Nine percent of the tax returns prepared by the VITA Grant Program in calendar year 2009 and 6 percent in calendar years 2010 and 2011 were for taxpayers with incomes over the income threshold.
Fifty (98 percent) of 51 sampled grantees prepared 11,410 returns for taxpayers with adjusted gross income greater than $100,000 during calendar years 2009 through 2011.
“Although these tax returns represent less than 1 percent of the 1.9 million total tax returns prepared by the 51 grantees, preparing tax returns for taxpayers with incomes substantially greater than the established thresholds could affect thousands of low-income taxpayers,” the TIGTA report noted.
Three (6 percent) of the 51 grantees prepared six returns for taxpayers with adjusted gross incomes between $700,001 and $1 million. Tax returns were also prepared for 13 taxpayers with adjusted gross income exceeding $700,000. Two (4 percent) of the 51 grantees prepared seven returns for taxpayers with adjusted gross income exceeding $1 million. At least three of the 13 tax returns were volunteers’ personal tax returns. The volunteer program does not prohibit volunteers from preparing their own or relatives’ tax returns, however.
TIGTA determined that the VITA Grant Program has established appropriate guidelines to ensure that grant funds are distributed according to the law and regulations, the report noted. From fiscal years 2009 to 2011, the number of grantees grew 61 percent (from 111 to 179 grantees), and the number of tax returns prepared by grantees grew 38 percent (from 786,058 to 1,080,875). However, much of this growth appears to be a transition to the VITA Grant Program rather than overall growth in the volunteer program.
Analysis of the 51 grantees that received VITA Grant Program funding for fiscal years 2009 through 2011 showed that 21 (41 percent) did not reach 90 percent of their tax return preparation goals but nonetheless received increased funding in the subsequent year. In addition, taxpayers with incomes over the thresholds for free tax return preparation had tax returns prepared by the VITA Grant Program.
"While the IRS collects data to select grantees and allocate awards in the VITA program, our study found that the Service is not using those data to determine where to market the program and what underserved geographic areas need more coverage," said TIGTA Inspector General J. Russell George in a statement.
TIGTA recommended that the IRS use current data to develop measures and goals and establish a baseline against which future performance can be measured to ensure that the VITA Grant Program is meeting the legislative intent of extending services to underserved populations and hardest-to-reach areas. The data would help the IRS target its recruitment efforts to new partners assisting the underserved populations and establish performance measures for the individual grantees to determine if they are meeting the program's objectives and goals.
In response to the report, IRS officials agreed to continue analyzing the available data to ensure the VITA Grant Program is meeting legislative intent. However, the IRS did not address the establishment of a baseline for the VITA Grant Program in its response. Without a baseline, it will continue to be difficult for the IRS to determine what underserved geographic areas need more coverage, TIGTA noted.
“The report identified tax returns having been prepared for taxpayers with incomes greater than established thresholds,” wrote Peggy Bogadi, the commissioner of the IRS’s Wage and Investment Division. “There are conditions under which this can occur. Although the targeted audiences for VITA services have been generally low-to-moderate income taxpayers, some taxpayers are served without regard to income as long as they meet other qualifying guidelines or exceptions. Additionally, there is no demographic information captured as part of the return information filed with the IRS on Native Americans, persons with limited English proficiency, or persons with disabilities to assist in identifying provided service.”
She added that to assist in recruitment and retention efforts, volunteers are offered the incentive of preparing and filing their own tax returns, and those of family members, through the program. But the returns prepared under this scenario have no impact on service to low-income taxpayers as they are not generally prepared during normal site operation hours.
14 Comments
As a VITA Coordinator, I can respond to some of the questions posted by others. 1) Everyone who works on a tax return is required to pass an IRS certification exam every year for each level of tax return we prepare. The online training is provided free by the IRS and is available for anyone. Go to www.irs.gov and type Link and Learn in the search box. 2) Paid preparers are now being required to pass the same exams to improved the quality of their returns (many paid preparers have no training - not the big preparers but many of the "mom and pop" shops). 3) As a VITA Site, we have a separate ID process, but each site is uniquely identified & the IRS tracks our returns, rejections, etc. 4) The article notes that not all returns have the income limit imposed for various reasons, all of which are approved parts of the VITA purpose and intent. The overall goal is to help people file accurate tax returns in a timely manner, with consideration given for income, language, ability, and other potential barriers. 5) The VITA program includes a Quality Review process to ensure that mistakes get caught before the return is filed.
If you multiply the number of VITA sites across the nation, knowing that each preparer is permitted to have the site file returns for him/her and family members, it's easy to see that a number of over-income returns will be prepared (along with the fact that sometimes the income limit does not apply). It is often good practice for a new tax preparer to work on more difficult returns for the first time while someone more experienced oversees their process.
An analysis of the cost-effectiveness of the VITA program just a few years showed that it was greatly more cost-effective to have returns prepared at a VITA Site over telephone support or in-office support provided directly by the IRS. It was something like a $.12/return difference. That's an example of the IRS using taxpayer money effectively.
Posted by: Clamo88 | June 21, 2012 9:35 AM
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A college professor at the college I graduated from receives a grant for the VITA program every year. She makes all the participants take a two month class prior to preparing tax returns. She also has two partners from local CPA firms come in to help her review tax returns. Not a single tax return is submitted to the IRS before it is reviewed by a CPA.
She signs every single tax return, and YES, she has a PTIN.
This professor has been teaching tax courses at this college for over twenty years. She is the faculty coordinator for the Beta Alpha Psi organization and Accounting Association.
So yes, there ARE qualified people in the VITA program.
I know three more professors that participate in this program the are just as qualified. They usually pick accounting students to prepare the tax returns: giving students a chance to enhance their resume and enter the job market with some internship-type of experience.
Posted by: Akirah.boyd | June 19, 2012 8:15 AM
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So sad.
Posted by: hburstyn | June 18, 2012 12:20 AM
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WHAT TYPE OF TRAINING DOES THE GOVERNMENT GIVE THESE TAX PREPARERS AND DOES THE GOVERNMENT MAKE SURE THAT THESE PREPARES KNOW WHAT THEY ARE DOING? IF NOT HOW IS THE PUBLIC BEING PROTECTED? THE NEW PROGRAM FOR PAID PREPARERS WAS SET UP IN ORDER TO PROTECT THE PUBLIC.
Posted by: FASTTAX | June 15, 2012 6:02 PM
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ARE THESE PREPARERS REQUIRED TO GET A PTN NUMBER LIKE PAID PREPARES HAVE TO DO IN ORDER TO PROTECT THE PUBLIC? ALSO DO THEY HAVE TO TAKE 15 HOURS OF TRAINING EACH YEAR TO PROTECT THE PUBLIC? WILL THEY BE REQUIRE TO TAKE THE TEST TO INSURE THAT THEY KNOW WHAT THEY ARE DOING IN ORDER TO PROTECT THE PUBLIC?
Posted by: FASTTAX | June 15, 2012 5:32 PM
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I SAY BILL EM. DON'T PRINT OR E-FILE TILL THEY PAY. MAKE A MONEY MAKER OUT OT THE SERVICE.
Posted by: WOLFSOHN | June 15, 2012 2:02 PM
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"[T]he VITA program, which dates back to 1969," is the indictment that would better read "a failure since 1969." "No government ever voluntarily reduces itself in size. So, governments' programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth." -- President Ronald Reagan, may he rest in peace.
Posted by: EnrolledAgent | June 15, 2012 12:38 PM
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the blame should not rest with the internal revenue service. it should rest wil the third p;ary agency and volunteer preparing the returns. the parameters have been set but nmot followed by the preparers. there has to be some element of trust and compentcy. agents can only sample monitor each location. they are not at each location every minute looking over each preparers shoulder. there are not enlough agents
Posted by: donaldsenna | June 15, 2012 11:37 AM
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Regarding the comment by fac_mnewman: for someone making in the six figures to be bothered by a few hundred fee, which by the way does provide employment, is rather narrow minded, to say the least.
And the people were probably disturbed by the phoney reports of the "Welfare Queens" which got Reagan elected. I would hope they're not getting Food Stamp too.
Posted by: tego@verizon.net | June 15, 2012 11:24 AM
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But more important than the AGI is the complexity of the return. I am familar with a VITA site where a few returns exceeding the threshold have been prepared, but it was because they were very simple returns (no itemized deductions or capital gains, for example). VITA provided a service in a rural area where this was the only way to file electronically without paying a fee to one of the mass commercial preparers.
Posted by: fac_mnewman | June 15, 2012 10:26 AM
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As a VITA preparer I was shocked that the non-compiance number was so high. l
Posted by: Reolds_630 | June 15, 2012 9:21 AM
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Hmmm. Why am I not surprised? I wonder how many of the "ineligible" taxpayers held elected office?
Posted by: Tickslash | June 15, 2012 8:40 AM
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Higher income taxpayers using VITA to prepare their own tax returns suggests letting the fox into the barn to eat the chickens---folks, You get what you pay for.
Posted by: bob from elgin | June 15, 2012 8:10 AM
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Another example of goverment in ability to anything proper.
Posted by: lmaginnis | June 15, 2012 7:51 AM
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