Thursday, July 8, 2010


National Taxpayer Advocate Nina E. Olson released a report to Congress yesterday that identifies the priority issues the Taxpayer Advocate Service will address during the coming fiscal year. The report expresses concern about the adequacy of IRS taxpayer service, particularly as the IRS begins to implement health care reform, about new information reporting burdens facing small businesses and others, and about certain IRS collection practices.

Here are some pertinent quotes from the IRS press release on the TAX report (any highlight is mine):

Taxpayer Services-

* “Spending for IRS taxpayer service programs has been declining in recent years. At the same time, more taxpayers have been contacting the IRS for assistance as the IRS has been tasked with administering an increasing number of social benefit programs, including Economic Stimulus Payments, Making Work Pay credits, and First-Time Homebuyer credits. The report says that as a result of the imbalance between taxpayer demand and IRS resources, the IRS has fallen short of providing adequate taxpayer service in important areas.”

* “There appears to be an implicit assumption built into existing budget procedures and projections that raising tax compliance requires ramping up enforcement and that taxpayer service is less important – perhaps even unimportant – for compliance. We think this implicit assumption is wrong.

The report states that many noncompliant taxpayers are baffled by complex rules and states that additional taxpayer service, particularly outreach and education, could improve tax compliance

* “Second, with respect to the IRS’s ability to deliver social programs, the report expresses concern that the IRS currently is neither structured nor funded to do the job effectively. ‘I have no doubt the IRS is capable of administering social programs, including health care,’ Ms. Olson said. ‘But Congress must provide sufficient funding and the IRS itself must recognize that the skills and training required to administer social benefit programs are very different from the skills and training that employees of an enforcement agency typically possess. While some enforcement measures are required to prevent inappropriate claims, the overriding objective of agencies that administer social benefit programs is to help as many eligible persons qualify for the benefits as possible. That requires outreach and working one-on-one with potentially eligible individuals. If the IRS continues to ramp up enforcement while reducing taxpayer service programs, I would be concerned about its ability to administer the new health care credits and penalty taxes in a fair and compassionate way.’

Ms. Olson suggests that the IRS mission statement be revised to explicitly acknowledge the agency’s dual role as part tax collector and part benefits administrator. Such a revision would require the IRS to develop a strategic plan that gives sufficient attention to both roles and would underscore that the IRS requires sufficient funding to perform both functions effectively

I do not believe the IRS should have any role as a benefits administrator. The IRS should not be administering social programs, including health care, whether they are capable of doing so or not. I have said time and again that providing social benefits should not be done through the Tax Code.

New Business and Tax-Exempt Organization Reporting Requirements -

TAS has not yet reached any conclusions regarding the benefits and burdens of the requirement, but the report expresses concern that the burdens ‘may turn out to be disproportionate as compared with any resulting improvement in tax compliance.’ During FY 2011, TAS will study the impact of the new reporting requirement more closely and, depending on what its study finds, may propose administrative or legislative recommendations to modify the provision or suggest that Congress consider less burdensome tax gap proposals, including a TAS proposal to require reporting of non-interest bearing bank accounts, to replace it.”

To download the National Taxpayer Advocate’s FY 2011 Objectives Report to Congress click here.


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