Some tax preparers 'misuse power of attorney forms'

by Sarah Ashcroft

A number of tax preparers have been accused of circumventing standard Internal Revenue Service (IRS) procedures by utilising an electronic power of attorney form to gain tax transcripts.

A Treasury Inspector General for Tax Administration report released on Monday (September 17th) revealed this method increases the risk that taxpayer information could be disclosed without appropriate authorisation.

Current law states that the IRS is able to disclose data only to the taxpayer or their designee or representative, while professionals are allowed to obtain transcripts for their clients using online tools provided by the body.

However, the audit report revealed that preparers are flouting clear and strict procedures by submitting Form 2848 for the purpose of ordering and providing transcripts for taxpayers within a matter of minutes.

Statistics revealed that since fiscal year 2004, users of the online method have submitted in excess of 899,000 forms to the IRS and almost 16.9 million transcript requests.

A tax account transcript provides information including marital status, type of return filed, taxable income and later adjustments.

For this reason, the IRS watchdog recommended that the body carry out regular data analysis to identify tax professionals failing to use the e-services correctly, while verifying that employees are obtaining and retaining a signed power of attorney before submitting one.

In addition, the IRS has also been advised to periodically review its policies for giving tax professionals access to private documents and ensure unauthorised members of staff do not have access to e-services and monitor transactions of employees who do.

The report states: "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."

It also noted that "the instructions on the Form 2848 state that authorisation of an eligible representative will allow the individual to receive and inspect confidential tax return data".

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Published on: September 20, 2012

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