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Taking a closer look_woman magnifying glass big eye
The IRS plans to take closer and continuous looks at individuals who want to join its programs.

We are living in a digital world. That's why the Internal Revenue Service, which itself has been encouraging, and in some cases, forcing us to go online when it comes to our tax tasks.

Such increased cyber interactions obviously have some downsides. Chief among them is the opportunity for hackers to take over our identities, tax and otherwise.

That's why the IRS and its Security Summit partners are participating in the 4th Annual National Tax Security Awareness Week. It included an IRS-moderated #TaxSecurityChat this afternoon on Twitter.

All this attention to cyber safety, however, can have an unexpected and potentially dangerous consequence.

Folks tend to overlook the safety protocols that need to be in place when it comes to personal tax interactions.

Review of IRS' review of program participants: That was a concern raised in a recently released Treasury Inspector General for Tax Administration (TIGTA) report, "Improvements Are Needed to Ensure That Consistent Suitability Checks Are Performed for Participation in Internal Revenue Service Programs."

The tax watchdog looked at how effectively the IRS vets and continues to validate the trustworthiness of individuals who want to be a part of the agency's programs.

Specifically, TIGTA examined IRS procedures for those who wanted in fiscal year 2018 to be an acceptance agent, Enrolled Agent and/or e-file provider. Below is an overview of these IRS programs that require applicant suitability checks.

  • E-File Provider Program – This program enables authorized IRS e-file providers to send tax returns to the agency in an electronic format, aka electronic filing or e-filing.

  • Acceptance Agent Program – This program authorizes an individual or entity to help resident and nonresident alien taxpayers and other foreign persons obtain an Individual Taxpayer Identification Number (ITIN). Some acceptance agents, known as Certifying Acceptance Agents, are authorized to authenticate the ITIN applicants' foreign status and identity.

  • Enrolled Agent Program – This program allows an individual to represent taxpayers before the IRS. These individuals must either pass a three-part comprehensive IRS test covering individual and business tax returns or have gained experience as a former IRS employee. Enrolled Agents, like attorneys and certified public accountants, are unrestricted as to the taxpayers they can represent, types of tax matters they can handle and IRS offices in which they can represent clients.

What the IRS does well: The report had some good and, of course, a bit bad news.

On the positive side, TIGTA found that the IRS programs generally ensured that only reputable applicants were admitted to the programs.

It also noted that the IRS generally does a good job with its continuous suitability checks, ensuring that that individuals accepted in its programs "had not engaged in criminal activity."

And the IRS' continuous suitability checks also ensured that those admitted to the programs did not subsequently engage in criminal activity warranting expulsion from the programs.

Where the IRS needs to improve: However, TIGTA's audit did reveal some problems.

There's no agency consistency in the applicant checking process or how issues, found once a persona is accepted, are adjudicated, according the report.

The initial and continuous suitability checks vary depending on the specific program to which an individual applies to participate or has been approved to participate.

Similarly, IRS' checks into whether an applicant had a criminal history, was incarcerated or is a U.S. citizen also are different from program to program.

These differing approaches also are found in how the various programs deal with reports from the Federal Bureau of Investigation that an applicant has a criminal history. For example, TIGTA notes that the e-file provider program denies an applicant upon certain FBI findings, while the Enrolled Agent and acceptance agent programs allow such individuals to participate.

Finally, TIGTA says the IRS has not taken sufficient actions to address the fraudulent submission of fingerprint cards by some applicants to pass their background investigations. This concern was reported by TIGTA back in February 2018.

IRS to tighten controls: The good news for taxpayers and reputable tax professionals is that IRS management has agreed with the 10 recommendations that TIGTA included in its report.

It already has taken some corrective actions and pledges to follow through on the others.

Of particular note is the IRS' decision to begin performing continuous criminal background checks on new applicants seeking to join any of the three programs. This will be done as part of the FBI's Records of Arrests and Prosecutions (RAP) Back Program. 

In addition, the tax agency has agreed to evaluate those who already are part of the programs and develop procedures to enroll them in the RAP Back Program as well. When that's completed, it should provide continuous criminal background checks are conducted on all program participants.

Fingerprint card_smallThe IRS also agreed to provide the FBI with all its fingerprint cards. That will enable the FBI, via its RAP Back Program, to identify applicants whose prints match someone else's records.

The tax agency also has agreed to establish procedures to run reports every 45 days on e-file providers who are in recheck status because they had not filed or paid their taxes. This should ensure more timely actions for those IRS program participants who are in this noncompliant tax review state.

As for the inconsistencies of applicant and participant checks within the three programs, the IRS says it will complete a risk assessment to address the differences. Based on those findings, the IRS says it will revise its suitability checks within each program as needed.

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