Tax Preparers Misusing Power of Attorney Forms

By Christina Camara

Some tax preparers are circumventing standard IRS procedures by using an electronic power of attorney form to obtain tax transcripts, thereby increasing the risk that taxpayer information is being disclosed without proper authorization, a new report asserts.
 
"Although the IRS requires tax professionals to obtain a taxpayer signature before filing the power of attorney, controls do not ensure tax professionals comply with the requirement," stated the Treasury Inspector General for Tax Administration (TIGTA) report released September 17. Tax preparers can obtain power of attorney if they intend to represent the taxpayer before the IRS, but the report suggests some tax professionals are doing so only to get documents quickly and without the taxpayer's knowledge.
 
The law states that the IRS can disclose tax information only to the taxpayer or the taxpayer's designee or representative. Tax professionals are allowed to obtain tax transcripts for their clients using online tools provided by the IRS, but the audit report states that tax preparers are working around the normal procedures by submitting Form 2848, Power of Attorney and Declaration of Representative, for the sole purpose of ordering and providing transcripts for taxpayers within minutes.
 
Since fiscal year 2004, users of the online system have submitted more than 899,000 forms 2848 to the IRS, and almost 16.9 million transcript requests, the report states. A tax account transcript provides basic information, including marital status, type of return filed, adjusted gross income, taxable income, and later adjustments, if any.
 
The IRS watchdog recommended that the IRS:
  • Conduct periodic data analysis to identify tax professionals using e-services inappropriately; 
  • Verify that tax professionals are obtaining and retaining a signed power of attorney before submitting one through e-services; 
  • Periodically review its policies for giving tax professionals e-services access; and
  • Ensure that unauthorized IRS employees do not have access to e-services and monitor transactions of employees who have authorized access.
 
While the IRS has agreed to improve its internal controls for accessing and using online tools, it did not agree that preparers are misusing the system. The IRS noted that "the instructions on the Form 2848 state that authorization of an eligible representative will allow the individual to receive and inspect confidential tax return data."
 
Read the full report on the TIGTA website.
 

You may like these other stories...

Clawback policies vary by company, industry: PwCAccording to a report issued to clients by PwC on April 17, companies have instituted a wide range of so-called clawback policies – with no two exactly alike – in...
President Obama squeezed under the bar for the highest marginal tax rate on the federal income tax return he recently filed for 2013. But the Commander in Chief, who filed a joint return, couldn't dodge the new 3.8...
IRS audits less than 1 percent of big partnershipsAccording to an April 17 report from the Government Accountability Office (GAO), the IRS audits fewer than 1 percent of large business partnerships, Stephen Ohlemacher of the...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.