The IRS has not been doing an adequate job of overseeing the acceptance agents who assign Individual Taxpayer Identification Numbers to foreign nationals, increasing the risk of tax fraud.

A new report from the Treasury Inspector General for Tax Administration found that the IRS does not adequately screen candidates for acceptance agent designations, nor does it monitor the ITIN applications processed by acceptance agents. 

“Without proper oversight, there is an increased risk that fraudulent tax returns are being filed using ITINs,” said Inspector General J. Russell George in a statement. “The IRS must improve its information management processes to effectively oversee this program.”

According to TIGTA’s report, the IRS’s computer system does not allow it to readily determine the number of current acceptance agents or the number of W-7 forms submitted by each agent. As a result, the ITIN Program Office is unable to monitor acceptance agents or their activities, or measure their compliance with IRS rules and regulations.

In addition, the application-screening process does not always ensure that applicants are qualified to participate in the acceptance agent program. IRS officials told TIGTA auditors that they have been focusing on processing ITIN applications, rather than ensuring that the acceptance agents who are facilitating thousands of ITIN applications on behalf of taxpayers are qualified to do so.

TIGTA recommended that the IRS develop a means to obtain regular reports on acceptance agents; develop procedures and controls over acceptance agents; ensure that resources are sufficient to make certain all validations are completed and compliance checks passed before an application is accepted; and provide sufficient staff to review documents that support the W-7 forms submitted by certifying acceptance agents. The IRS agreed with TIGTA’s recommendations and is training additional employees to process ITIN applications.

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