FY 2018 Objectives Report To Congress
PREFACE: NATIONAL TAXPAYER ADVOCATE’S INTRODUCTORY REMARKS
Ms. Olson states that the IRS ran a generally successful filing season. But she says taxpayers who require assistance from the IRS are continuing to face significant challenges obtaining it. While taxpayer services and enforcement activities are both essential for effective tax administration, Ms. Olson says taxpayer services require more emphasis than they are currently receiving. She recommends the IRS expand its outreach and education activities and improve its telephone service and that Congress both provide the IRS with sufficient funding to provide high quality taxpayer service and conduct more oversight to ensure the IRS is spending the funding as intended.
Read The Preface
Review of the 2017 Filing Season
Overall, the IRS delivered a generally successful 2017 filing season, and the IRS deserves credit for implementing multiple new legislative requirements related to the PATH Act. Taxpayers benefited from higher service levels and reduced wait times on many key phone lines.
However, much of the IRS’s improved performance this year is attributable to reduced taxpayer demand for services. While fewer taxpayers attempted to contact the IRS on the telephone, the IRS also answered fewer calls. We also remain concerned about the IRS’s recent and continuing reductions in service for taxpayers, including declining to answer all but basic tax law questions during the filing season or any questions after the filing season, eliminating walk-in service at the TACs, and eliminating the ability of taxpayers to ask questions of the IRS online. The failure to meet the needs of taxpayers who rely on these services causes added stress for them and may reduce their willingness or ability to comply.
Read the Full Filing Season Review
Selected Areas of Focus
The Design of the IRS's Private Debt Collection (PDC) Program Will Disproportionately Burden Taxpayers in Economic Hardship and Impose Unnecessary Costs on the Public Fisc
In implementing its new private debt collection program, as of May 17, 2017, the IRS had assigned to private collection agencies the debts of approximately 9,600 taxpayers, approximately 5,900 of whom filed a recent return. The returns show:
- These taxpayers’ median annual income is $31,689;
- More than half have incomes below 250 percent of the federal poverty level; and
- More than a fifth have incomes below the federal poverty level.
The IRS’s Certification Program Related to Denial or Revocation of Passports Impairs Taxpayer Rights
In 2015, Congress passed a law requiring the Department of State to deny an individual’s passport application and allowing it to revoke or limit an individual’s passport if the IRS certifies the individual as having a seriously delinquent tax debt. The IRS has broad discretion to exclude taxpayers from passport certification. However, the IRS has chosen not to exclude taxpayers with already open TAS cases who are actively working with TAS to resolve their tax problems. The IRS is infringing on taxpayer rights by not notifying all affected taxpayers in a stand-alone notice before certifying their seriously delinquent tax debts.
The Offshore Voluntary Disclosure (OVD) Programs Still Lack Transparency, Violating the Right to Be Informed
The IRS establishes the terms of its Offshore Voluntary Disclosure Settlement Programs (OVDP) by posting frequently asked questions (FAQs) on its website. Although the IRS must disclose Chief Counsel Advice from national office attorneys, as well as most “instructions to staff” that affect the public, it generally does not disclose its interpretations of the OVDP FAQs. In addition, it withholds statistics about the OVDPs that could help stakeholders evaluate them and assure taxpayers they are not being treated unfairly. Disclosing FAQ interpretations and statistics could help reduce unnecessary calls, increase confidence in the IRS, reduce requests for advice, and reduce unnecessary requests for assistance from TAS.
The IRS Makes Needed Changes to the Individual Taxpayer Identification Number (ITIN) Program, But Barriers for ITIN Applicants Remain
The IRS has made commendable efforts to implement recent legislative provisions involving Individual Taxpayer Identification Numbers (ITINs) but falls short in making it possible for all taxpayers to timely comply with tax obligations. The IRS deactivated a significant number of ITINs at the start of 2017 but has received significantly fewer ITIN renewal applications than predicted. Taxpayers may not have known about the deactivations, as evidenced by the many returns filed with an expired ITIN. Due to limited options for applying for an ITIN, the majority of taxpayers continue to mail in original documents and face problems as a result.
The IRS’s Heavy Reliance on the Online Account Benefits Taxpayers Who Can Access the Application and Prefer Digital Interaction, But It Burdens Taxpayers Who Need or Prefer More Personalized Service
An online account application benefits taxpayers who have the ability, knowledge, and preference to navigate through complex transactions online. However, only about 30 percent of attempted account registrations satisfy crucial e-authentication requirements. In addition, about 33 million U.S. taxpayers do not have broadband access at home. Finally, taxpayers need, not just prefer, to discuss their particular facts and circumstances with the IRS at various points in their transactions to understand how the complex rules and procedures apply. During the coming year, TAS will advocate for the continued provision of telephone and face-to-face service to taxpayers and for the restriction of third-party access to the online account to only those practitioners who are subject to Circular 230 oversight.
TAS Continues to Pursue Improvements to the IRS’s Administration of the Earned Income Tax Credit, Particularly With Recent Changes to the Law
To address the Earned Income Tax Credit (EITC) improper payment rate, Congress mandated a delay of any refund that includes the EITC. Based on an analysis of IRS data from Filing Season 2017, it appears that all computer-generated freezes released, but the IRS and TAS continue to analyze the data. TAS and the IRS are also identifying ways to improve the audit process for EITC taxpayers, which has led to an expansion of acceptable documentation to substantiate EITC claims. TAS continues to advocate for the use of affidavits in EITC examinations and to study the effects of education on compliance.
More Areas Of Focus
IRS Responses and National Taxpayer Advocate's Comments Regarding Most Serious Problems Identified in 2016 Annual Report to Congress
In her 2016 Annual Report to Congress the National Taxpayer Advocate identified, analyzed, and offered recommendations to assist the IRS and Congress in addressing 20 of the most serious problems (MSPs) encountered by taxpayers. Volume 2 of this report includes the IRS formal comments on our recommendations, together with the National Taxpayer Advocate’s analysis of and responses to the comments.
Read Volume 2