Improvements Are Needed to Ensure Tax Returns Are Correctly
Prepared at Taxpayer Assistance Centers
December 2003
Reference
Number: 2004-40-025
This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.
December
10, 2003
MEMORANDUM FOR
COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Acting Deputy Inspector General
for Audit
SUBJECT: Final Audit Report - Improvements Are
Needed to Ensure Tax Returns Are Correctly Prepared at Taxpayer Assistance
Centers (Audit # 200340021)
This
report presents the results of our review of tax returns prepared at the Internal Revenue Service (IRS) Taxpayer Assistance
Centers (TAC). The overall objective of this review was to determine if tax returns prepared were correct based
on the facts provided by the taxpayers.
Our assessment also included determining whether IRS employees at the
TACs properly screened taxpayers to ensure qualifications for tax preparation
assistance were met prior to preparing the tax returns.
Taxpayers are provided with the ability to seek
assistance from the IRS in person at its TACs.
The primary emphasis of the TACs is to provide face-to-face assistance
to taxpayers in meeting their filing and payment responsibilities, including
educating taxpayers, providing self-help, interpreting tax laws and
regulations, securing forms, resolving notices, and providing need-based
complimentary tax return preparation.
Complimentary tax return preparation is provided to
those taxpayers whose returns meet certain requirements and limitations (i.e.,
the type of tax return, the type and amount of income being reported, and
deductions claimed). IRS employees
located at the TACs prepare the tax returns using an electronic tax preparation
software package. Current year tax returns are electronically filed at no cost
to the taxpayer, providing the taxpayer with a faster refund than if a paper
tax return was filed.
For Tax Year (TY) 2002, IRS employees at the TACs prepared
289,312 tax returns that involved refunds and tax liabilities totaling
approximately $330 million and $6 million, respectively. In addition, IRS employees at the TACs
prepared 3,930 tax returns on which the taxpayers had no refund or liability
(break-even).
From February through April 2003, Treasury Inspector
General for Tax Administration auditors made 34 anonymous visits to 26 TACs
nationwide in an attempt to have a tax return prepared. These visits resulted in 23 prepared tax
returns. Results show taxpayers do not
always receive proper and accurate customer service assistance during tax
return preparation. Specifically, in 21
(72 percent) of the 29 visits, IRS employees at the TACs did not inform
auditors of tax return preparation requirements prior to preparing or
scheduling an appointment to prepare the tax return. In addition, none of the IRS employees at the TACs who prepared
the 23 tax returns first advised the auditors of the specific forms they were
trained to prepare.
Further results show that tax returns
are not always correctly prepared. IRS
employees incorrectly prepared 19 (83 percent) of the 23 tax returns prepared
during our visits. If 17 of the 19 incorrectly prepared tax returns had
been filed, the IRS would have incorrectly refunded approximately $32,000. If
the remaining 2 incorrectly prepared tax returns had been filed, the IRS would
have inappropriately withheld $2,400 in tax refunds.
During the course of the
review, we communicated our concerns to IRS management. In response, IRS management immediately
initiated corrective actions, including requiring IRS employees providing tax
preparation assistance to ask questions, based on existing tax instructions and
publications, to obtain relevant facts needed to determine that the credits and
deductions claimed on a tax return are correct. However, additional actions are needed to ensure taxpayers
receive proper and accurate customer service when requesting assistance with
tax return preparation.
We recommended that the
Commissioner, Wage and Investment (W&I) Division, ensure that IRS employees
at the TACs 1) follow the existing screening procedures before providing
taxpayers with tax preparation assistance or scheduling an appointment, and 2)
use the existing tax law instructions and publications to determine taxpayer
eligibility for credits and deductions claimed on the tax return. In addition, the Commissioner, W&I
Division, should ensure that a quality review methodology for tax return
preparation assistance is in place for the upcoming filing season.
Management’s Response: IRS
management appreciated our recognition of the corrective actions they took
during the course of the review. The
IRS’ long-term approach to improving quality in the TACs is the implementation
of Embedded Quality. This approach
focuses on standardized measures, employee monitoring, and feedback at the
group level.
IRS management agreed
with our recommendations and is taking corrective action. The IRS will issue a memorandum reminding
all Field Assistance function employees to adhere to tax return preparation and
screening procedures in the Internal Revenue Manual (IRM). Until Embedded Quality is fully implemented
in all the TACs, the IRS will also develop a quality review plan to identify
actions needed to ensure TAC employees are adhering to return preparation
procedures in the IRM. This plan will
include requirements for managerial reviews of TAC employees who prepare tax
returns and steps the Quality Review staff will take to review tax return
preparation in the TACs.
Management’s complete response to the draft report is
included as Appendix VII.
Copies of this
report are also being sent to the IRS managers who are affected by the report
recommendations. Please contact me at
(202) 622-6510 if you have questions or Michael
R. Phillips, Assistant Inspector General for Audit (Wage and Investment Income
Programs), at (202) 927-0597.
Tax Returns May Be Prepared for Taxpayers That Do Not Qualify for Tax Preparation Assistance
Taxpayers May Have Tax Returns Incorrectly Prepared at Taxpayer Assistance Centers
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – States Visited for Tax Preparation Assistance February through April 2003
Appendix VI – Results of Tax Returns Incorrectly Prepared at the Taxpayer Assistance Centers
Appendix VII – Management’s Response
to the Draft Report
One of the Congress’ principal objectives in enacting the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98) was to mandate that the IRS do a better job of meeting the needs of its customers. As part of the RRA 98, the Congress directed the IRS to achieve a better balance between its post-filing enforcement efforts and pre‑filing taxpayer assistance through education and service.
In response to the Congressional mandate, the IRS reorganized its functional areas and revised its mission statement to refocus its emphasis on helping taxpayers understand and meet their tax responsibilities.
As part of the IRS’ restructuring efforts, the IRS Field Assistance (FA) function was created. Its mission is to minimize the burden to customers in satisfying their tax obligations by providing the right services at the right location at the right time. To accomplish its mission, the FA function has over 400 Taxpayer Assistance Centers (TAC) organized into 7 geographical areas located throughout the United States (U.S.).
The primary emphasis of the TACs is to provide face-to-face assistance to taxpayers in meeting their filing and payment responsibilities. This includes educating taxpayers, providing self-help, interpreting tax laws and regulations, securing forms, resolving notices, and providing complimentary need-based tax return preparation.
TACs provide certain taxpayers with free tax return
preparation assistance
The IRS provides certain taxpayers face-to-face assistance when preparing their tax returns. Complimentary tax return preparation is provided at the TACs to those taxpayers whose returns meet certain requirements based on the type of tax return they are filing along with their income.
When taxpayers visit a TAC to obtain assistance or have their tax returns prepared, IRS employees prescreen them to ensure that their tax returns meet the TAC qualifications for complimentary tax return preparation. After the prescreening, they are either provided tax preparation assistance or offered an appointment to come back to the TAC for assistance. They may also be advised of the location of a Volunteer Income Tax Assistance (VITA) site for tax preparation assistance.
IRS employees prepare the tax returns using an electronic
tax preparation software package. Each
current year tax return is electronically filed (e-filed) at no cost to
the taxpayer. This provides the taxpayer
with a faster refund than if a paper tax return was filed.
According to the IRS, the TACs served approximately 9.1 million taxpayers during Calendar Year (CY) 2002. Approximately 877,800 of these taxpayers visited a TAC to either have their returns prepared and filed or to request assistance preparing their tax returns. From January through June 2003, approximately 5.5 million taxpayers visited TACs; 526,000 visited them either to have their returns prepared and filed or to request assistance in preparing their tax returns. Figure 1 shows the number of tax returns, total refunds, and total tax liabilities for Tax Years (TY) 2001 and 2002 tax returns prepared in the TACs.
Figure
1: TYs 2001 and 2002
Tax Return Preparation Assistance at the TACs
|
Number of Tax Returns |
Total Dollars
(Millions) |
|||
Tax Year |
With Refunds |
Break-even |
With Tax Due |
Refunded |
Due |
2001 |
334,479 |
3,548 |
33,775 |
$419 |
$21 |
2002 |
277,023 |
3,930 |
12,289 |
$330 |
$6 |
Totals |
611,502 |
7,478 |
46,064 |
$749 |
$27 |
Source: IRS management information system (Return Transaction File) containing all tax returns prepared at the TACs.
Auditors played the role of
taxpayers
To evaluate the procedures followed in the TACs when preparing taxpayer tax returns, Treasury Inspector General for Tax Administration (TIGTA) auditors played the role of taxpayers and completed the steps taxpayers might take if they visit a TAC to have their tax returns prepared. From February through April 2003, TIGTA auditors performed 34 anonymous visits to 26 TACs located in 7 states (see Appendix IV for the specific states visited).
During these anonymous visits, TIGTA auditors presented scenarios and were successful in having IRS employees at the TACs prepare 23 tax returns. The tax returns involved only those tax law issues within the scope of services IRS employees at the TACs were trained to evaluate while preparing the tax returns.
Each scenario was designed to cover a wide range of tax law topics to provide an overall assessment of whether taxpayers are having correct tax returns prepared when they visit the TACs. Figure 2 provides a summary of the auditors’ attempts to have tax returns prepared during the 34 visits.
|
Tax Returns Prepared |
Service Denied |
No Tax Return Prepared |
Appointments Scheduled |
TAC Visits |
23 |
4 |
1 |
6 |
Percentages |
68% |
12% |
3% |
18% |
Source: Anonymous visits performed by TIGTA auditors.
This review was conducted in the IRS Customer Assistance, Relationships, and Education function in the Wage and Investment (W&I) Division between February and July 2003. The audit was conducted in accordance with Government Auditing Standards. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
IRS employees at the TACs do not always prescreen taxpayers to ensure that their tax returns meet the requirements and limitations, such as the type of tax return, type and amount of income being reported, and deductions claimed. In addition, IRS employees at the TACs who help prepare tax returns do not always first ensure that the tax returns qualify for complimentary tax return preparation and are within the scope of the IRS employees’ tax preparation training. Specifically:
· For 21 (72 percent) of the 29 visits, IRS employees at the TACs did not prescreen or advise auditors of tax return preparation requirements prior to preparing or scheduling appointments to prepare the tax returns.
· For all 23 of the tax returns prepared, IRS employees at the TACs did not determine if the issues on the tax returns would require forms or schedules that could not be prepared because they were outside the scope of their training.
We recognize that there may be instances where it is more appropriate to accommodate taxpayers than to deny assistance to those whose returns might not qualify. However, IRS employees at the TACs did not always follow existing procedures to ensure qualifications for tax preparation assistance were met prior to preparing the tax return. For example, a review of all tax returns prepared in the TACs showed that IRS employees at the TACs prepared 14,815 TY 2001 and 6,102 TY 2002 tax returns for taxpayers with income that exceeded the income limitations in IRS internal guidelines.
For the TY 2002 tax returns prepared for taxpayers whose income exceeded the income limitations, the limits were exceeded by an average of $158,450, from $35,002 to $219,308. See Figure 3 for the specific breakdown by income level for tax returns prepared and e‑filed by IRS employees at the TACs for taxpayers with incomes that exceeded IRS guidelines. Appendix V provides a complete breakdown by state.
Figure 3:
TYs 2001 and 2002 Tax Returns That Exceed Income Limitations Prepared at
the TACs
Income Level
|
Number of TY 2001 Tax Returns > $33,000
|
Income Level
|
Number of TY 2002 Tax Returns > $35,000
|
33,000-39,999 |
8,272 |
35,000-39,999 |
2,919 |
40,000-59,999 |
4,765 |
40,000-59,999 |
2,297 |
60,000-79,999
|
1,191 |
60,000-79,999
|
616 |
80,000-99,999 |
370 |
80,000-99,999 |
168 |
Over 100,000 |
211 |
Over 100,000 |
98 |
Over 200,000 |
6 |
Over 200,000 |
4 |
Total |
14,815 |
Total |
6,102 |
Source: IRS management information system (Return Transaction File) containing all tax returns prepared at the TACs.
IRS guidelines require IRS employees at the TACs to:
· Assist taxpayers that visit TACs for tax return preparation assistance on a first-come, first‑served basis.
· Designate an employee to control the flow of traffic and prescreen taxpayers to ensure they meet the requirements for tax preparation assistance. The number of taxpayers requesting tax return preparation assistance may, at times, exceed the number of tax returns that can be prepared during 1 workday. Therefore, if it appears that taxpayers cannot be assisted on the day of their visit, IRS employees will offer appointments within the next 5 business days.
· Limit the types of tax return preparation assistance to only those forms and schedules for which the IRS employees have received training.
· Limit assistance to only those taxpayers within the allowable income level. Income level is tied to the amount allowed to claim the Earned Income Tax Credit (EITC). The TACs may make exceptions to the tax return preparation limitations to accommodate individuals on a case-by-case basis. However, in most cases involving tax return preparation outside of the limitations, the IRS employee should refer the taxpayer to alternative sources for assistance.
Preparing tax returns for taxpayers who do not qualify can adversely affect the IRS’ ability to provide qualifying taxpayers with assistance when they are denied service because IRS employees are preparing tax returns for taxpayers with incomes that exceed limitations or income and deductions that require using forms and schedules on which they have not been trained. If guidelines are not followed, IRS employees could make errors on the tax returns, creating additional burden to the taxpayers through the misapplication of tax laws and regulations.
We recommend that the Commissioner, W&I Division:
1. Reinforce procedures and monitor the assistance provided at the TACs to ensure existing screening procedures are being followed before employees provide taxpayers with tax preparation assistance or schedule an appointment.
Management’s Response: The IRS will issue a memorandum to remind all FA function employees to adhere to return preparation screening procedures in the Internal Revenue Manual (IRM). The employee performing the screening will determine if the customer meets the return preparation limitations and has all necessary documents such as Social Security cards. If the customer meets the criteria, he or she will be scheduled for the next available return preparation appointment.
IRS employees incorrectly prepared 19 (83 percent) of the 23 tax returns based on the facts the TIGTA auditors provided them while making anonymous visits to the TACs. Thirteen of the tax returns were for TY 2001 and 10 were for TY 2002. Figure 4 provides a summary of the accuracy rates for the 23 tax returns prepared.
Figure 4: Results of 23 Tax Returns Prepared
|
Correct |
Incorrect |
Tax
Returns Prepared |
4 |
19 |
Percentage |
17% |
83% |
Source: Anonymous visits performed by TIGTA auditors.
If 17 (89 percent) of the 19 incorrectly prepared tax returns had been filed, the IRS would have incorrectly refunded approximately $32,000, including EITC totaling $15,800 and Child Tax Credit (CTC) totaling $6,164. If the remaining 2 (11 percent) incorrectly prepared tax returns had been filed, the IRS would have inappropriately withheld $2,400 in tax refunds. Appendix VI provides a breakdown by the TACs visited and the overstatement or understatement for the 19 incorrectly prepared tax returns.
After the TAC visits, we analyzed the tax returns prepared and identified the following factors that contributed to the incorrect preparation of tax returns.
IRS employees
modified the facts provided by the TIGTA auditors
For all 23 tax returns, TIGTA auditors either verbally or in writing presented scenarios to the IRS employees preparing the tax returns. All scenarios required the IRS employees to determine whether the auditors qualified for the EITC. For 6 (32 percent) of the 19 incorrectly prepared tax returns, IRS employees did not correctly use the facts presented by the auditors. These actions would have allowed the auditors to receive EITC for which they were not eligible.
For example, TIGTA auditors presented to the IRS employees how many months qualifying children had lived with them. The number of months presented did not qualify them for the EITC. However, IRS employees modified the number of months to a sufficient number needed to be eligible for the EITC.
If filed, the 6 tax returns would have resulted in EITC overclaims totaling approximately $13,500. For one correctly prepared tax return, an IRS employee tried to use the tax preparation software to allow the auditor the credit. However, the tax preparation software would not allow the credit.
We referred these cases to the TIGTA Office of Investigations for review to determine the intent behind the employees’ modifications of the facts presented by the auditors. Those investigations did not find intentional misconduct on the part of the employees. For example, some of the employees claimed inadequate training and/or a misunderstanding of the facts presented by the auditors as the reasons for their actions.
IRS employees did not use the Paid Preparer’s
EITC Checklist (Form 8867) to
ensure taxpayers met the requirements for claiming the EITC
For all 23 (100 percent) of the prepared tax returns, IRS employees did not use the Form 8867 when determining EITC eligibility. IRS operating guidelines require IRS employees to use the Form 8867 and exhibit due diligence when preparing tax returns to ensure taxpayers meet the requirements for claiming the EITC. In addition, using the Form 8867 helps to educate taxpayers on the requirements to claim the EITC.
Of the 665,044 TYs 2001 and 2002 tax returns prepared in the TACs, a total of 155,208 (24 percent) involved an EITC claim. The EITC claims associated with these tax returns totaled approximately $296 million.
Both the IRS and the Congress recognize the EITC as a highly visible and well-known source of noncompliance. By not ensuring taxpayer eligibility, IRS employees increase the risk of taxpayers receiving erroneous payments and potentially subjecting these taxpayers to EITC examinations. As part of its Examination program, the IRS has identified 8,273 TY 2001 tax returns prepared in the TACs as having questionable EITC claims. As of August 2003, 287 of these tax returns had been selected for examination.
IRS
employees did not use tax instructions and publications to determine taxpayer
eligibility to receive credits and deductions
The scenarios used by TIGTA auditors for the 23 tax returns prepared were designed to require IRS employees to make an eligibility determination for a wide range of tax law topics. Figure 5 shows the accuracy of IRS employees’ determinations in relation to these tax law topics.
|
Eligibility Assessment |
|
Tax Law Topics |
Correct |
Incorrect |
Filing Status |
9 |
14 |
Dependents |
13 |
10 |
EITC |
15 |
8 |
CTC |
13 |
10 |
Additional Child Tax Credit |
17 |
6 |
Rate Reduction Credit |
11 |
2 |
Source: Anonymous visits performed by TIGTA auditors.
During the fall of CY 2002, IRS employees were trained on the use of tax instructions and publications to assist taxpayers with tax law questions to ensure the accuracy of responses provided. This “publication method” requires IRS employees to obtain the appropriate publication, discuss specific information related to the topic, ask appropriate questions to obtain facts, and respond to the taxpayer’s issue or question. However, IRS management informed us that employees were not required to use this method when providing tax preparation assistance.
During the course of the review, we communicated the above results to IRS management. The IRS took immediate corrective actions that required all IRS employees to use existing tax instructions and publications to ensure taxpayers were eligible to receive credits and deductions allowed on the tax returns.
Each of the scenarios presented facts that required the IRS employee at the TAC to make a determination regarding the EITC and CTC. To qualify for these credits, a taxpayer must meet specific eligibility requirements, including items relating to relationship, residency, etc. If IRS employees do not use all resources available to them, they may not be able to correctly apply the applicable laws and regulations to ensure taxpayers are not receiving credits they are not entitled to receive. Figure 6 provides the volume of TYs 2001 and 2002 tax returns prepared at the TACs along with the substantial amount claimed for the EITC and CTC.
Figure 6: TYs
2001 and 2002 Tax Returns
Prepared at the TACs With the EITC and CTC
|
TY 2001 |
TY 2002 |
||
Tax Return Type |
Total Tax Returns |
Credits |
Total Tax Returns |
Credits |
EITC
|
84,988 |
$160 |
70,220 |
$136 |
CTC |
52,692 |
$31 |
36,240 |
$20 |
Source: IRS management information system (Return Transaction File) containing all tax returns prepared at the TACs.
In addition, when employees do not ensure that they correctly apply tax laws and regulations, taxpayers may be at risk of not receiving the credits to which they are entitled. For example, an analysis of all TYs 2001 and 2002 tax returns prepared at the TACs showed 30,741 tax returns and 105,746 tax returns on which the taxpayer claimed a dependent but did not receive the EITC and CTC, respectively.
In July 2003, we informed the IRS there was a risk that approximately 48,538 TY 2002 taxpayers may have been entitled to receive the $400 advanced CTC payment but may not have received it as planned. In addition, there were 36,240 taxpayers scheduled to receive approximately $14.5 million in advanced CTC payments to which they may not be entitled. This happened because IRS employees at the TACs did not properly determine taxpayer eligibility for the credit when preparing tax returns and because there was a systemic error in a tax preparation software package. Based on our results, we recommended the IRS take steps to ensure only eligible taxpayers receive the planned $400 advanced CTC payment.
IRS employees used tax preparation software that had
systemic errors to prepare returns for TYs 2001 and 2002
For 2 (11 percent) of the 19 incorrectly prepared tax returns, systemic errors in the tax preparation software used when preparing these tax returns would have prevented TIGTA auditors from receiving $2,400 in refunds to which they were entitled. The software for TYs 2001 and 2002 had the following systemic errors:
· For TY 2001, the software would not allow the EITC or CTC for taxpayers that claimed their brothers, sisters, nieces, or nephews as qualifying children or dependents, even though the taxpayers were entitled to receive these credits.
· For TY 2002, the software would not allow the CTC for taxpayers that claimed their brothers, sisters, nieces, or nephews as dependents. The software would incorrectly allow the CTC for taxpayers that claimed as dependents foster children that lived in the home less than 12 months, even though taxpayers were not entitled to receive the credit.
We could not determine how many taxpayers this might affect because of the way the IRS transcribes data. Management has been alerted to the problems we identified with the electronic tax preparation software. We are not making a specific recommendation to address this problem. We plan to conduct a separate review to evaluate the IRS’ process for ensuring tax preparation software used by employees to prepare tax returns is accurate.
The IRS FA function does not have a tax preparation
assistance quality review process
Tax returns prepared
by IRS employees at the TACs are not subjected to a quality review process to
ensure the correctness of the tax returns prepared. Instead, the IRS relies on a validation process at submission
processing sites to identify errors on tax returns prepared in the TACs. However, this process does not validate a
taxpayer’s eligibility to receive credits and deductions allowed by IRS
employees on the tax return. That type
of validation generally takes place only if the tax return is selected for
examination.
The IRS recognizes
the need to implement an effective quality review system for its TACs. However, during Fiscal Year (FY) 2003, the
FA function focused on a plan to improve the accuracy of the answers IRS
employees at the TACs provide to taxpayers’ tax law questions. The IRS informed us that in FY 2004
it plans to implement a methodology to
use Embedded Quality to measure customer service, including tax preparation
assistance, provided in the TACs. The
Embedded Quality approach focuses on standardized measurements, employee monitoring,
and employee feedback at the group level.
The IRS believes this type of quality review will allow TAC managers to
provide feedback to their employees.
We believe that one
of the major management challenges the IRS faces is to provide quality customer
service to each and every taxpayer.
Taxpayers that seek help in preparing their tax returns rely upon the
professional assistance of IRS employees.
However, without an effective tax preparation assistance quality review
process, the IRS cannot be assured that its employees are preparing correct tax
returns based on facts provided by taxpayers.
We recommend that the Commissioner, W&I Division:
2. Reinforce existing procedures that require IRS employees to use existing tax law instructions and publications when assisting taxpayers.
Management’s Response: The IRS will issue a memorandum reminding all FA function employees to adhere to return preparation procedures in the IRM which require that each TAC employee use the applicable worksheets prompted by the return preparation software and the publication method or job aids to determine eligibility for deductions and credits.
3. Ensure a quality review methodology for tax return preparation assistance is in place before the 2004 Filing Season begins in January 2004.
Management’s Response: Until Embedded Quality is fully implemented in all the TACs, the IRS will develop a quality review plan to identify actions needed to ensure TAC employees are adhering to return preparation procedures in the IRM. This plan will include requirements for managerial reviews of TAC employees who prepare tax returns and steps the Quality Review staff will take to review tax return preparation in the TACs.
Appendix I
Detailed Objective, Scope,
and Methodology
The overall objective of the review was to determine if tax returns prepared at the Internal Revenue Service (IRS) Taxpayer Assistance Centers (TAC) were correct based on the facts provided by the taxpayers. We determined if tax returns prepared in the TACs were correct by determining if IRS employees evaluated each requesting taxpayer’s eligibility to claim credits and deductions on the tax return. In addition, we assessed whether IRS employees at the TACs properly screened taxpayers to ensure qualifications for tax return preparation were met prior to the IRS employees’ preparation of the tax returns.
To achieve this objective, we performed the following tests:
I. Determined if IRS employees prepared correct tax returns based on facts provided by Treasury Inspector General for Tax Administration (TIGTA) auditors at the 26 TACs visited. Audit coverage included the TACs in states with high and low accuracy rates reported in the January through June 2002 Semiannual Walk-In report. Where possible, TIGTA auditors visited the TACs located in or around major cities located in the selected states. Auditors developed scenarios and had IRS employees prepare tax returns based on training and the scope of topics prescribed in the Fiscal Year 2003 Field Assistance function Operating Procedures.
II. Determined if IRS employees at the TACs used tax instructions and publications (i.e., the “publication method”) and asked appropriate probing questions while preparing tax returns.
III. Determined if IRS employees at the TACs properly screened taxpayers for tax preparation assistance requirements and tax law topics that were within the scope of topics prescribed in the Field Assistance function Operating Procedures.
IV. Analyzed IRS data to determine the number of taxpayers who visited the TACs and the number of taxpayers who had their tax returns prepared by IRS employees at the TACs. We did not validate the IRS data.
V.
Analyzed Tax Years 2001 and 2002 tax preparation
software used by IRS employees at the TACs to prepare tax returns to determine
if the programs prepared the tax returns correctly.
Appendix II
Major Contributors to This Report
Michael R. Phillips, Assistant Inspector
General for Audit (Wage and Investment Income Programs)
Randee Cook, Director
Russell Martin, Acting Director
Frank Jones, Audit Manger
Pam DeSimone, Senior Auditor
Lena Dietles, Senior Auditor
Kathy Henderson, Auditor
Geraldine Vaughn, Auditor
Appendix III
Commissioner C
Office of the
Commissioner – Attn: Chief of
Staff C
Deputy Commissioner
for Services and Enforcement SE
Deputy
Commissioner, Wage and Investment Division
SE:W
Chief, Customer
Liaison, Small Business/Self-Employed Division
SE:S:COM
Director, Customer Assistance, Relationships, and Education, Wage and Investment Division SE:W:CAR
Director, Strategy and Finance, Wage and Investment Division SE:W:S
Director,
Communications and Liaison, Small Business/Self-Employed Division SE:S:MS:CL
Director, Field Assistance, Wage and Investment Division SE:W:CAR:FA
Director, Stakeholder Partnerships, Education, and Communication, Wage and Investment Division SE:W:CAR:SPEC
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
RAS:O
Office of
Management Controls OS:CFO:AR:M
Audit Liaison: GAO/TIGTA Liaison, Wage and Investment Division SE:W:S:PA
Appendix IV
States Visited for Tax Preparation
Assistance
The map was removed due to its size. To see the map, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
We visited seven states: California, Florida, Illinois, Massachusetts, New Hampshire, South Carolina, and Texas.
Appendix V
Tax Years 2001 and 2002 Tax
Returns Prepared at Taxpayer Assistance Centers for Taxpayers With Income That
Exceeded Requirements
States |
Tax Returns Prepared for Taxpayers With Income > $33,000 |
Total Tax Year 2001 Tax Returns Prepared |
Tax Returns Prepared for Taxpayers With Income > $35,000 |
Total Tax Year 2002 Tax Returns Prepared |
|
|
ALABAMA |
141 |
4,850 |
58 |
4,525 |
||
ALASKA |
21 |
1,288 |
2 |
677 |
||
ARIZONA |
73 |
1,553 |
11 |
560 |
||
ARKANSAS |
73 |
1,954 |
20 |
1,433 |
||
CALIFORNIA |
1,641 |
19,715 |
687 |
11,846 |
||
COLORADO |
7 |
403 |
4 |
362 |
||
CONNECTICUT |
717 |
21,797 |
296 |
17,626 |
||
DELAWARE |
0 |
0 |
0 |
0 |
||
FLORIDA |
224 |
7,032 |
52 |
5,247 |
||
GEORGIA |
265 |
10,512 |
60 |
9,188 |
||
HAWAII |
49 |
851 |
11 |
516 |
||
IDAHO |
65 |
901 |
28 |
687 |
||
ILLINOIS |
473 |
12,457 |
293 |
14,088 |
||
INDIANA |
485 |
13,140 |
188 |
8,862 |
||
IOWA |
67 |
1,344 |
75 |
1,235 |
||
KANSAS |
345 |
4,320 |
120 |
2,531 |
||
KENTUCKY |
105 |
5,466 |
44 |
5,151 |
||
LOUISIANA |
285 |
6,561 |
60 |
4,647 |
||
MAINE |
237 |
5,814 |
96 |
4,821 |
||
MARYLAND |
1,076 |
17,337 |
530 |
12,917 |
||
MASSACHUSETTS |
178 |
5,368 |
71 |
3,925 |
||
MICHIGAN |
203 |
6,719 |
46 |
4,529 |
||
MINNESOTA |
56 |
727 |
19 |
345 |
||
MISSISSIPPI |
76 |
3,467 |
30 |
2,910 |
||
MISSOURI |
725 |
9,648 |
257 |
11,279 |
||
MONTANA |
140 |
3,978 |
52 |
2,383 |
||
NEBRASKA |
81 |
3,277 |
33 |
3,419 |
||
NEVADA |
112 |
2,055 |
21 |
1,125 |
||
NEW HAMPSHIRE |
120 |
2,055 |
46 |
1,929 |
||
NEW JERSEY |
271 |
7,585 |
121 |
7,763 |
||
NEW MEXICO |
56 |
1,529 |
14 |
584 |
||
NEW YORK |
1,155 |
35,600 |
439 |
27,499 |
||
NORTH CAROLINA |
304 |
6,700 |
141 |
7,522 |
||
NORTH DAKOTA |
27 |
890 |
68 |
1,443 |
||
OHIO |
430 |
19,186 |
154 |
17,385 |
||
OKLAHOMA |
54 |
2,669 |
41 |
2,338 |
||
OREGON |
145 |
4,685 |
63 |
3,165 |
||
PENNSYLVANIA |
481 |
12,885 |
215 |
13,166 |
||
RHODE ISLAND |
69 |
5,378 |
20 |
4,482 |
||
SOUTH CAROLINA |
86 |
2,819 |
33 |
3,246 |
||
SOUTH DEKOTA |
124 |
1,792 |
71 |
1,613 |
||
TENNESSEE |
318 |
8,512 |
140 |
6,252 |
||
TEXAS |
1,028 |
17,024 |
324 |
11,352 |
||
UTAH |
129 |
1,490 |
40 |
1,070 |
||
VERMONT |
35 |
1,225 |
7 |
1,055 |
||
VIRGINIA |
426 |
12,390 |
271 |
15,307 |
||
WASHINGTON |
547 |
10,133 |
146 |
5,723 |
||
WASHINGTON, D.C. |
68 |
2,094 |
25 |
2,050 |
||
WEST VIRGINIA |
109 |
1,631 |
67 |
4,738 |
||
WISCONSIN |
76 |
2,616 |
16 |
1,423 |
||
WYOMING |
176 |
1,776 |
43 |
1,193 |
||
NO STATE NAMED |
661 |
7,794 |
433 |
5,863 |
||
Totals |
14,815 |
342,992 |
6,102 |
284,995 |
||
Source: Internal Revenue Service management information system (Return Transaction File) containing all tax returns prepared at the Taxpayer Assistance Centers.
Appendix VI
Results of Tax Returns Incorrectly Prepared
at the Taxpayer Assistance Centers
Taxpayer Assistance
Centers Visited |
Internal Revenue Service Refund |
Correct Refund |
Refunds Understated |
Refunds |
Long
Beach, CA |
$4,241 |
$5,441 |
$1,200 |
|
Los
Angeles, CA |
$4,241 |
$5,441 |
$1,200 |
|
Santa
Ana, CA |
$3,914 |
$2,691 |
|
$1,223 |
Fort
Myers, FL |
$1,295 |
$980 |
|
$315 |
Fort
Myers, FL |
$1,227 |
$192 |
|
$1,035 |
St.
Petersburg, FL |
$2,818 |
$2,547 |
|
$271 |
St.
Petersburg, FL |
$1,518 |
$192 |
|
$1,326 |
Tampa,
FL |
$2,495 |
$980 |
|
$1,515 |
Tampa,
FL |
$627 |
$(559) |
|
$627 |
Tampa,
FL |
$4,241 |
$3,070 |
|
$1,171 |
Chicago,
IL |
$5,441 |
$2,547 |
|
$2,894 |
Ford
City, IL |
$5,441 |
$2,547 |
|
$2,894 |
Manchester,
MA |
$1,827 |
$(559) |
|
$1,827 |
Worcester,
MA |
$4,121 |
$(559) |
|
$4,121 |
Myrtle
Beach, SC |
$5,037 |
$2,180 |
|
$2,857 |
Myrtle
Beach, SC |
$3,806 |
$312 |
|
$3,494 |
Columbia,
SC |
$3,806 |
$(559) |
|
$3,806 |
Columbia,
SC |
$3,103 |
$860 |
|
$2,243 |
Desoto,
TX |
$627 |
$(559) |
|
$627 |
Totals: |
|
|
$2,400 |
$32,246 |
Source: Anonymous visits performed by Treasury Inspector General for Tax Administration (TIGTA) auditors.
Appendix VII
The response was removed due to its size. To see the response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.