IRS Tax Preparers Filed High Number Of Innacurate Returns, Says Treasury Report

by Mike Godfrey, Tax-News.com, Washington

14 January 2004

An audit conducted by the US Treasury Department into the performance of IRS Taxpayer Assistance Centers has found that advisors incorrectly prepared taxpayer returns in an alarmingly high number of instances.

The revelations are the result of a report compiled by the Treasury Inspector General for Tax Administration, and are based on 34 anonymous visits to 26 Taxpayer Assistance Centers by auditors between February and April 2003.

According to the audit, IRS employees incorrectly prepared 19 (83%) of 23 tax returns during the auditors’ visits. If 17 of these fictitious returns had been filed for real, the IRS would have incorrectly refunded some $32,000, the TIGTA report revealed. Furthermore, if the remaining two incorrectly-prepared returns had been filed, the Revenue would have wrongly withheld $2,400 in tax refunds.

The auditors placed much of the blame for these shortcomings by TAC staff on “systematic errors” in the use of tax preparation software. The report also highlighted that TAC employees frequently modified the facts provided by the undercover investigators, and failed to correctly assess taxpayer eligibility to receive deductions and credits.

Treasury figues show that Taxpayer Assistance Centers prepared a total of 289,312 returns in the 2002 tax year, involving refunds of $660 million and liabilities of $6 million.

The report has recommended that the IRS undertake a procedural review of its Taxpayer Assistance Centers ahead of the 2004 tax filing season.

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