IRS plans tougher background checks on practitioners

The Internal Revenue Service intends to make the criminal background checks and tax compliance checks it performs on tax professionals such as enrolled agents, e-file providers and acceptance agents more consistent, with more up-to-date fingerprint information from the FBI, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, acknowledged that the IRS’s suitability checks for applicants to the acceptance agent, EA and e-file provider programs generally ensured that only reputable individuals were accepted in the programs during fiscal year 2018. The IRS also does continuous suitability checks to ensure that individuals accepted in the programs prior to the initial suitability checks haven’t engaged in criminal activity warranting removal from the program.

However, the report pointed out that the initial and continuous suitability checks vary depending on the specific program to which an individual applies to or has been approved to participate in, even though their participation in each program presents similar risks. While the IRS performs a tax compliance check on all new applicants for each program, the other checks to determine if an individual has a criminal history, is incarcerated, or is a U.S. citizen differ depending on the program for which the person is applying.

A man walks past the IRS headquarters in Washington, D.C.
The IRS headquarters in Washington, D.C.

The report also found that when the FBI discovers an applicant has a criminal history, the adjudication process is inconsistent depending on the program to which the person is applying. For example, the e‑file provider program rejects an applicant if the FBI reports a conviction, but the EA and acceptance agent programs allow them to participate.

The report also found the IRS hasn’t taken enough action to address the fraudulent submission of fingerprint cards by some applicants to pass their background investigations. TIGTA reported this issue to the IRS in February 2018, but it still hasn’t been addressed.

TIGTA made 10 recommendations in the report, including that the IRS should assess the risk to tax administration of doing inconsistent initial and continuous suitability checks on people who apply to participate or are enrolled in the e-file provider, acceptance agent and EA programs. The report also suggested the IRS should 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 EA programs. It also recommended the IRS should work with the FBI to identify more people who may have submitted fingerprint cards that match the fingerprints of another individual.

The IRS agreed with all of TIGTA’s recommendations and has taken action or plans to take action to fix the problems.

“We verify that licensed individuals have valid credentials during the application process,” wrote Kenneth Corbin, commissioner of the IRS’s Wage and Investment Division. “However, we agree that performing a criminal background check at the time of the application process will provide additional safeguards to prevent unacceptable individuals from participating in IRS programs.”

He noted that the IRS is working with the FBI to update its fingerprinting application program to take full advantage of the FBI’s records of arrests and prosecution program. It will then resubmit previously provided fingerprint cards to check for duplicate submissions by different individuals. However, Corbin also pointed out that Congress would need to give the IRS the authority to regulate uncredentialed tax preparers for it to align its suitability checks for them as well. In addition, criminal background checks are only performed on licensed individuals if it's mandated in their licensing state or if they have disclosed any convictions on their EA application.

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