TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Improvements Are Needed to Ensure That the Volunteer Income Tax Assistance Grant Program Extends Tax Return Preparation to Underserved Populations

Final Report Issued on September 20, 2017

Highlights

Highlights of Reference Number:  2017-40-088 to the Internal Revenue Service Commissioner for the Wage and Investment Division.

IMPACT ON TAXPAYERS

The IRS’s first goal is to improve service to taxpayers to make voluntary compliance easier.  To help achieve this goal, the IRS Volunteer Income Tax Assistance (VITA) Program was implemented.  In December 2007, Congress appropriated funds to the IRS to establish and administer a one‑year matching grant program and has since appropriated funds for this program annually.

WHY TIGTA DID THE AUDIT

This audit was initiated to evaluate the oversight of the VITA Grant Program to determine whether program objectives are met and awarded funds are used as directed.

WHAT TIGTA FOUND

TIGTA identified that data exist which can be used to measure success in extending coverage to underserved populations.  For example, VITA grantees are required to report to the IRS on the number of tax returns prepared at their sites for underserved populations.  This information is required to be reported upon completion of the award agreement using Performance Progress Report-A.  However, the IRS has not established a process to verify the reliability of the data and analyze it to measure the success of the program.

TIGTA’s review of the almost 4.5 million tax returns prepared by grantees during Grant Years 2014 through 2016 identified that:  1) volunteers prepared 201,572 (4 percent) returns with an Adjusted Gross Income amount that exceeded the income threshold set for free tax return preparation, including 34,371 returns with an Adjusted Gross Income greater than $100,000 and 11 returns with an Adjusted Gross Income exceeding $1 million; 2) the IRS could not verify if 456,220 (10 percent) tax returns with complex tax schedules were prepared by volunteers with advanced certifications; and 3) 15,402 returns were out of scope.  Finally, some guidelines and procedures were not current or consistent.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the IRS 1) develop procedures to measure the extent to which the VITA Grant Program increases coverage to underserved populations; 2) identify and communicate with grantees preparing a high percentage of tax returns over the VITA Program income tolerance level to ensure that funds are expended in compliance with congressional intent; 3) ensure that grantees have processes and procedures to confirm that only volunteers with advanced certifications prepare complex tax returns; and 4) ensure that VITA Grant Program internal guidelines are  consistent with publications for VITA grantees.

The IRS agreed with recommendations two and four.  Although management agreed to recommendation one, their response provides no specific actions to be taken.  Since Fiscal Year 2008, Congress has annually appropriated funds with the intent of increasing coverage to underserved populations.  As TIGTA reported, the IRS has yet to develop processes and procedures to ensure that the VITA Grant program is meeting its legislative intent.

The IRS did not agree with the recommendation to ensure that only volunteers with advanced certifications prepare complex tax returns.  TIGTA is concerned that without a centralized list of volunteers who achieved advanced certification, the IRS does not have reasonable assurance that the 456,220 complex tax returns prepared by volunteers in Grant Years 2014 through 2016 were prepared by volunteers with the appropriate training and certification.

READ THE FULL REPORT

To view the report, including the scope, methodology, and full IRS response, go to:

https://www.treasury.gov/tigta/auditreports/2017reports/201740088fr.pdf.