Tax Preparers Misusing Power of Attorney Forms
by Terri Eyden on
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.
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