Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

IRS RETURN PREPARERS BAT .173 IN AUDIT

January 23, 2004

The best-fielding shortstop in the world has no job security if he bats .173. In the majors, it means you are either a pitcher or on the cusp of new opportunities in a different line of work.

At the IRS, it means you prepare tax returns for the general public.

GETTING WHAT YOU PAY FOR, AND HOW!

The IRS offers free tax preparation service for lower-income taxpayers at walk in "Taxpayer Assistance Centers." The Treasury Inspector General for Tax Administration (TIGTA) had 23 dummy returns prepared at these walk-in centers. Four were done correctly. Not that that's a bad thing, if it's your return. Of the 19 honked-up returns, 17 had excessive refunds totalling about $32,000.

The errors indicate a surprising, if misguided, attempt by the IRS preparers to help their customers. Most of the errors allowed taxpayers excessive earned income credits, child tax credits, or dependent deductions. The preparers refused to let mere facts stand in their way:

"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"

IT'S NOT REALLY .173. IT'S WORSE.

In a way, the .173 batting average overstates the IRS preparer's performance:

"For one correctly prepared tax return, an IRS employee tried to use the tax preparation software to allow (an erroneous earned income) credit. However, the tax preparation software would not allow the credit."

The IRS preparers' proclivity for excessive refunds may explain another odd fact in the TIGTA report. Even though the walk-in centers are only supposed to prepare free returns for lower-income taxpayers, they did returns for 102 taxpayers with income over $100,000 for 2002 - including 4 returns with income over $200,000. The report doesn't say whether they got the earned income credit.

The TIGTA report is available here.

      Bookmark: del.icio.us • Digg • reddit