Free Tax Prep: You Get What You Pay For

A total of 3.1 million individual income tax returns were prepared for elderly, disabled, and low-income taxpayers at Volunteer Program sites in FY 2010. IRS Volunteer Programs include  the Volunteer Income Tax Assistance and Tax Counseling for the Elderly Programs. These programs scored extremely low marks from TIGTA (Treasury Inspector General for Tax Administration)  in arecent audit.

The findings of this review are very troubling. ~ J. Russell George, TIGTA

TIGTA found that volunteers are not following guidelines, using intake forms incorrectly, and even knowingly falsifying the facts. This resulted in a sharp increase in inaccuracies during the 2010 filing season. An abysmal 39 percent of the returns picked up by TIGTA auditors were prepared correctly. However, the sample size of the audit was very small: 14 out of 36 returns were error-free.

TIGTA is also concerned that the volunteers are not being properly screened. This is especially troubling given the amount of sensitive personal information that is entrusted to the volunteers by taxpayers who are perhaps more vulnerable to identity theft and fraud than the average citizen.

So, what does TIGTA recommend the IRS do to turn things around? There were many recommendations, and the IRS agreed to implement all of them. Here are just a few:

  • Evaluate the quality review process
  • Include “secret shopper” component in audit process
  • Improve volunteer standards of conduct
  • Develop a process for keeping a closer eye on volunteers
  • Revise intake procedures

These recommendations obviously lack the specifics needed to immediately put them into practice. It will be up to the IRS to fill in the blanks and decide how it will implement these changes. It really is unfortunate that the government cannot provide competent tax prep services to those who are willing to participate in the tax system, but do not have the resources or ability to file on their own. I wonder how many of these people realize that when they sign their name on the return, the error made by the preparer becomes their own error. I also wonder how many of the mistakes made by volunteers have resulted in a tax debt when a refund was expected.

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