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Tuesday, October 20, 2009

Error Rate of Tax Returns Prepared by IRS's Free Assistance Program: 41%

The Treasury Inspector General for Tax Administration today released its sixth annual review of the IRS's Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs (Ensuring the Quality Assurance Processes Are Consistently Followed Remains a Significant Challenge for the Volunteer Program (2009-40-128)):

The volunteer programs provide no-cost Federal tax return preparation and electronic filing services to low and moderate-income taxpayers, the elderly, the disabled and those who have limited English proficiency.

TIGTA auditors anonymously visited volunteer sites around the country to test the accuracy of tax returns prepared by volunteers. TIGTA found that the accuracy rate of tax returns prepared during the 2009 filing season by volunteers trained by the IRS was lower than last year's accuracy rate. While 59% of the tax returns prepared for TIGTA by volunteers were accurately prepared, 41% were prepared inaccurately.

VITA
 

http://taxprof.typepad.com/taxprof_blog/2009/10/accuracy-rate.html

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Comments

excuse me? this dire report is based on 49 returns? 49? and how much underlying documentation does anyone expect to be available to the post-reviewer?

I have volunteered with VITA, and would say (a) that the training is generally adequate to the limited scope of returns we are permitted to prepare and (b) a lot depends on the prompts and input fields in the specific return preparation software that is used.

the most valuable result of this study is that IRS will add data fields for some of the problem areas to the intake form itself. it is easy to imagine that an inexperienced volunteer would overlook the above the line deduction for state taxes for non-itemizers. put it in the training, and put prompts in the input fields, and you will largely eliminate the problem.

seems to me the critique here is actually on the software.

Posted by: r. | Oct 20, 2009 2:25:47 PM

...and computer systems/software have not been invented yet in the USA?

Posted by: Holocaust Gaza | Oct 20, 2009 2:53:25 PM

I, too, am a VITA volunteer. Last year, I was even a site coordinator, so I'm familiar with the "shopping" programs conducted by the IRS. They "shop" way more than 49 returns, so this study makes no sense.

Most of the returns that I see contain only wages, and sometimes interest income or government assistance. All of this has already been reported to the IRS by third-party payors. So why doesn't the Federal government offer a "Ready Return" product, like the one that California has been trying to launch? The biggest problem I face is lost or missing Forms W-2 and 1099. Why make it so difficult for people to comply? Send them a completed tax return and let them make any corrections for dependency, filing status, additional income, etc.

Posted by: hahaha | Oct 20, 2009 3:32:32 PM

It amazes me that the government competes with struggling paid tax preparers. Where else does the government try competing with business ??I have seen returns preped by VITA for well to do taxpayers who should never have been allowed a free lunch. So please don't say this VITA service is for the poor.

Paid tax preparers have to PAY for expensive continuing education. These Vita dudes get free training and apparently make lots of errors per your article.

If a paid preparer makes a mistake, his/her rear is on the line from client anger, IRS penalties. If these VITA dudes make an error, who's responsible ?? Not them, they are just volunteers.

It isn't a fair program ! It should be abolished in my opinion.

Posted by: JOKER | Oct 21, 2009 7:47:06 AM

I also am a paid tax preparer and I think the government should not compete with a growing and vital business such as tax preparation. They are supposed to be stimulating the economy not putting people out of business! I would also like to know who is responsible if the volunteer makes a mistake on a return. Does the IRS correct if for free and wave all penalties and interest. I doubt it very much! These free programs should be abolished immediately!

Posted by: Janet Richardson | Oct 21, 2009 8:41:19 AM

From small minds come small opinions.

We are one of the top 10% firms in the nation by volume, and I can assure you I see many VITA returns as well as other paid preparers. With Camp Pendleton in our back yard, many of those returns are prepared by VITA.

The paid preparer community needs to find a better way to market itself than to just worry about the lowest of low-income clients. If a preparer is going to go out of business because a servicemember with $20,000 per year on a W-2 is going to VITA, they should find a new career.

Why do taxpayers pay us? Four reasons, really. 1. Convenience. 2. Accuracy 3. Availability. 4. Knowledge. If you're a paid preparer and your business is struggling, you need top look at which of those four items you're not doing very well.

On the other hand, if even a volunteer can't fill out a tax return, by hand, for just a W-2 and possible Earned Income Credit, they should probably join a Neighborhood Watch program or something else for the community. All of the software companies have admitted in IRS hearings that their products have errors. Sometimes in this country, you truly get what you pay for.

Posted by: Morey Holzman | Oct 21, 2009 9:33:49 AM

Also, pay attention to the actual review. In the vast majority of errors, the taxpayer got a smaller refund than s/he was otherwise entitled to. You won't usually get an angry client out of that type of error, and you certainly don't get IRS penalties.

The only error specifically mentioned in the review was the property tax deduction. I was a VITA volunteer too and probably made that mistake for all tax returns I prepared where the taxpayer owned property. As the first poster said, this is the kind of error that could be flagged by the intake form.

Posted by: hah | Oct 21, 2009 12:17:49 PM

The government is not competing with any tax prepares. Its providing a free service. Letsnus compare the vita prepared returns with those prepared by taxpayers themselves, so call professional tax preparers and the truly professional preparer such as CPAs, EAs, Attnys.
If TIGTA wants to help let find out what is causing tghe problem. Is it more complicated tax law like the new crazy computation for standard deductiom.

Posted by: R. Seda | Oct 22, 2009 7:03:58 AM

Obviously preparing tax forms is very difficult. Just look at the problems many members of Congress and Obama's cabinet have experienced.

Posted by: Georg Felis | Oct 26, 2009 1:56:22 PM