The Treasury Inspector General for Tax Administration published a review of Internal Revenue Service suitability checks: “Improvements Are Needed to Ensure that Consistent Suitability Checks Are Performed for Participation in Internal Revenue Service Programs.” While the report is mostly positive—finding that the IRS was broadly successful in its efforts to sort the wheat from the chaff—TIGTA outlines a number of recommendations that could improve the process.
If you are an Enrolled Agent, you already know that this policy is essentially a big background check. For the uninitiated, suitability checks are performed for applicants to the Acceptance Agent, Enrolled Agent, and e-File Provider programs, and the TIGTA review found they can include up to eight different components:
1. Criminal Background
2. Tax Compliance
6. Specially Designated Nationals List
7. Identity Theft Marker
8. Continuous Tax Compliance
Here’s the trick: The factors included in your suitability check differ based on the program to which you apply. That inconsistency led to several questions about the suitability check process, like “How should the discovery of a past criminal conviction affect program applications?” and “How does the IRS prevent disqualified applicants from being approved for partner programs?”
To answer those questions, TIGTA submitted 10 recommendations in their suitability check report:
1. Assess the risk to tax administration of performing inconsistent initial and continuous suitability checks on individuals seeking to participate or enrolled in the e-File Provider, Acceptance Agent, and Enrolled Agent Programs. These checks should include a criminal background check, continuous tax compliance checks, and checks to determine if the applicant is deceased, incarcerated, or on the Specially Designated Nationals list. Based on the risk assessment, update and revise the programs’ suitability checks as needed.
2. Perform criminal background checks on individuals applying to participate in the e-File Provider, Acceptance Agent, and Enrolled Agent Programs.
3. Assess the risk of the e-File Provider Program’s use of decision matrices to adjudicate an individual’s criminal history that are inconsistent with the matrices used by the Acceptance Agent and Enrolled Agent Programs. Based on the risk assessment, update and revise the EPSS function decision matrix as appropriate.
4. Review the applications of the six individuals (two incorrectly denied participation and four erroneously accepted) to determine if they should be removed from the program or allowed to participate.
5. Ensure that tax examining technicians include a request for a court disposition document in all initial denial letters sent to applicants if the disposition is not included in the criminal history provided by the FBI and the crime listed would prevent the applicant from passing if convicted.
6. Determine if revisions are needed relative to the time frame of applicant responses to initial denial letters when the applicants are required to provide certified court disposition documents.
7. The Commissioner, Wage and Investment Division, should ensure that the report identifying e-File Providers in a recheck status is timely generated on a recurring basis and that time frames are established for tax examining technicians to timely review providers in a recheck status.
8. Once participation in the FBI’s RAP Back Program is started, work with the FBI to identify additional individuals who submitted fingerprint cards subsequent to September 13, 2016, that match the fingerprints of another individual.
9. Develop processes and procedures to ensure that continuous criminal background checks are conducted on all program participants as part of the FBI RAP Back Program. These processes and procedures should include steps to evaluate continued participation in IRS programs for individuals identified with a criminal history.
10. Address the continued participation of the nine applicants who were identified by the FBI as once again submitting a fingerprint card with fingerprints associated with another individual and deactivate the applicants’ Electronic Filing Identification Numbers as appropriate.
Since the IRS agreed to implement all of TIGTA’s recommendations, future applicants to the Acceptance Agent, Enrolled Agent, and e-File Provider programs may have a different experience than those who came before them. That said, some current partners may have their status revoked if the IRS finds they submitted faked fingerprint cards or were improperly accepted into their respective programs.
If you expect to be impacted by changes to the suitability check process, take some time to review the full document from TIGTA. While you’re at it, make sure to check the GruntWorx blog for more security- and tax-related topics.
Source: TIGTA Audit Report 2020-40-005