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Sunday, June 30, 2013

National Taxpayer Advocate Comments on IRS

Source: NTA FY2014 Objectives report, page 34
The mid-year report of the IRS National Taxpayer Advocate, Nina Olson, addresses several key problem areas with special note on challenges for the IRS and a special supplement on the recent 501(c)(4) controversy.  Her observations on the IRS seem spot on to me. She states:

"Over the last few months, the Internal Revenue Service has been the center of public attention for several reasons, most notably its scrutiny of politically active social welfare organizations seeking recognition as tax-exempt entities. The public attention to these recent events has in many ways reinforced many taxpayers’ preconceived perceptions of the IRS as an agency that treats taxpayers unfairly. While all this is grievous enough and in fact calamitous for public respect for and compliance with the tax laws (because once lost, trust takes a very long time to be regained), these events are symptoms of broader problems festering at the IRS."

"There is much that is good about the IRS – indeed, the National Taxpayer Advocate (NTA) has the deepest respect for the agency and its workforce, even when she vigorously disagrees with the IRS’s actions or policies. But today, the IRS is an institution in crisis. In the NTA’s view, however, the real crisis is not the one generating headlines. The real crisis facing the IRS – and therefore taxpayers – is a radically transformed mission coupled with inadequate funding to accomplish that mission. As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done."

She suggests that one way to improve relations between the public and the IRS is to have a true taxpayer bill of rights that states general principles rather than specific items we currently have in TBOR that have been included in earlier tax laws.  The ten categories of rights she suggests are, the right:

  1. To be informed.
  2. To be assisted.
  3. To be heard.
  4. To pay no more than the correct amount of tax.
  5. Of appeal.
  6. To certainty.
  7. To privacy.
  8. To confidentiality.
  9. To representation.
  10. To a fair and just tax system.
She notes that some 501(c)(3) and (c)(4) applicants had perhaps 8 of the above 10 rights violated.

The mid-year objectives report includes a 3-step plan to get "the IRS on teh right track." These steps are:
  1. Enact an enforceable TBOR and train IRS "employees to analyze their actions (and inactions) so that IRS initiatives conform with these principles."
  2. Fund the IRS to enable it to meets its "dual mission of revenue collection and benefits administration."
  3. "Restore training and training-related travel budgets to levels that ensure IRS employees have the education and professional skills they need to administer our complex tax system and do so in a manner that respects taxpayers rights."
And there is more in this 170-page report. I encourage you to at least skim it. The 14 areas of focus are listed as follows:
  • "The IRS Harms Taxpayers by Refusing to Issue Refunds to Some Victims of Return Preparer Fraud
  • The Current Limited Oversight of Return Preparers Makes Taxpayers Vulnerable to Unscrupulous or Incompetent Preparers
  • As the IRS Adopts a Specialized Approach to Identity Theft Victim Assistance, Concerns About Complete and Timely Account Resolution Remain
  • Implementation of the IRS’s Return Review Program Is at Extreme Risk, Which Could Cause Significant Harm and Cost
  • Collection Update: The IRS’s Tepid Approach to Implementing Recent Changes in Collection Policies Has Limited Taxpayer Access to Important Collection Options
  • The TAS Collection Case Review Yielded Valuable Insights on How TAS Can Improve Advocacy in Collection Cases
  • TAS Prepares for Implementation of Health Care Provisions
  • The IRS has Revoked the Exempt Status of Thousands of Organizations in Error, Causing Significant Harm to Taxpayers
  • TAS Works to Ensure Taxpayers Know Their Rights and Obligations
  • IRS Offshore Voluntary Disclosure Programs Continue to Burden “Benign Actors” and Damage IRS Credibility
  • Shared Jurisdiction and Lack of Coordination between IRS and FinCEN Burdens Taxpayers and Undermines Compliance Efforts
  • International Taxpayer Service Initiatives Continue but Need a More Formal Structure
  • IRS ITIN Policy Changes Make Return Filing Difficult and Frustrating
  • Cuts to IRS Tax Forums Mean Lost Opportunities"
What do you think? What would you suggest for improving federal level tax administration?

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