The Treasury Inspector General for Tax Administration (TIGTA) has made seven recommendations to the IRS in its recently issued report on the agency’s 2017 filing season. The IRS has agreed with the recommendations.
Here’s a snapshot of what TIGTA officials want to see:
- Revise procedures to include letters and alerts to tax preparers who file returns claiming the Child Tax Credit (CTC) but don’t provide the required Form 8867. The IRS already issues alerts for electronic returns and told TIGTA that a process for paper returns and letters was to take effect in January.
- TIGTA identified 41 preparers who filed claims for the CTC, the Additional Child Tax Credit (ACTC) and the American Opportunity Tax Credit (AOTC) without Form 8867 and weren’t notified by the IRS. The agency should notify the preparers, TIGTA said. The IRS found that 14 of the preparers had addresses outside the U.S., seven were cases involving preparer identity theft, two cases involved duplicate returns from the same taxpayer, and 18 involved adjusted returns that didn’t require notification. The agency notified the preparers with non-U.S. addresses that they need to file Form 8867 and also sent letters to all preparers, regardless of their addresses.
- The IRS needs to make sure that employees who process foreign-income exclusions or housing deductions know that taxpayers cannot also get the ACTC. The IRS says its instructors will reinforce procedures during refresher training and in the first round of training for international returns.
- TIGTA found 45 tax returns for which the IRS wrongly paid the ACTC. The agency should recover the payments.
- The IRS must review the 494 tax returns that TIGTA identified to ensure that the taxpayers get the Residential Energy Efficient Property Credit that they deserve. The IRS has corrected 484 of the returns for the entitled amounts. Seven of the remaining 10 need more research and three can’t be adjusted because of ongoing examinations.
- The IRS should establish procedures to use its “math error authority” to deny all electronically- and paper-filed AOTC claims in which the taxpayer didn’t provide the institution Employer Identification Number (EIN) for each student claimed on the return. The IRS plans to submit a work request with requirements for this tax year’s AOTC claims that lack an institution EIN. The agency also will ask for programming changes “if a systemic process is feasible,” according to TIGTA’s report. When will this happen? “Due to limited information technology resources, budget constraints and competing priorities,” the agency couldn’t provide an implementation date.
- Modify Form 2441 to ask taxpayers if they fall under one of the exceptions that allows them to file as “married filing separately” and revise computer programs to allow the credit only if the taxpayer attests to meeting the exception by checking the applicable box. The IRS said it planned to submit programming and form change requests by Jan. 31 but competing priorities and limited resources prevent the agency from setting an implementation date.
TIGTA said that as of May 5, 2017, the IRS received 138.9 million tax returns (with 88.7 percent electronically filed) and issued more than 101.6 million refunds totaling almost $282 billion.
About Terry Sheridan
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.