Friday, November 8, 2013

Half of Tax Returns Prepared by IRS Volunteers in Audit Test Completed Incorrectly

    A report issued in September and released this week by the IRS's Treasury Inspector General for Tax Administration (TIGTA) found continuing problems with the agency's Volunteer Program, which provides free tax preparation and electronic filing for "low- and moderate-income, elderly, disabled, and limited-English-proficient taxpayers."  The report, with the unwieldily title "Inconsistent Adherence to Quality Requirements Continues to Affect the Accuracy of Some Tax Returns Prepared at Volunteer Sites," found errors in 19 of 39 returns prepared by volunteers.  In each case, a TIGTA staffer anonymous approached a member of the Volunteer Program for assistance with one of three test scenarios developed by TIGTA for the review.  The errors were the result of "incorrect application of the tax law, insufficient requests for information during the intake/interview process, or lack of adherence to quality review requirements."
    The Inspector General has been tracking the performance of the IRS Volunteer Program since at least 2004.  The accuracy rate steadily improved over the years, peaking at 90% in 2010, but then plummeted in 2011 and has not yet recovered, as indicated by an accuracy chart included in the report:

    The TIGTA report noted that due to the small size of the test (39 returns,) the 51% accuracy rating could not be statistically applied to the entire Volunteer Program, a fact also cited by an IRS spokesperson in response to an inquiry from Accounting Today:
“The IRS greatly appreciates the community service that volunteers provide to underserved segments of the taxpaying public and appreciates TIGTA’s acknowledgement of these contributions,” said the IRS statement. “Results from TIGTA’s audit visits were based on three pre-determined scenarios and only 39 returns prepared during these reviews, which is not statistically valid. While we are concerned with any level of error and will address the issues raised in the report, any attempt to extrapolate the findings from 39 visits of this type to the typical tax return prepared by VITA / TCE volunteers would unfairly characterize the tax assistance provided by our volunteers. By comparison, our quality review showed a 91 percent accuracy rate on the more than 3.3 million federal and state returns prepared by our nearly 91,000 volunteers. The IRS remains committed to continually improving the volunteer program, and have agreed with TIGTA’s suggestions.”
    The IRS began granting matching funds to volunteer organizations in 2009.  In 2013, a total of 206 organizations received $12.1 million dollars for electronic filing and for training.  There were a total of 13,081 Volunteer  Program sites in 2013 helping to prepare almost three million tax returns.

Note: A version of this article first appeared at The Weekly Standard.

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