FY 2020 Objectives Report To Congress
INTRODUCTION: The National Taxpayer Advocate’s Remarks on the Role of Trust and Taxpayer Advocate Service in Fostering Tax Compliance
In the National Taxpayer Advocate’s final report to Congress, she discusses subjects that the Advocate believes warrant the closest scrutiny and congressional oversight. These subjects include current very poor taxpayer service levels, and the IRS not appearing to have a taxpayer-centric strategy or budget commitment to improve them; research that demonstrates that forcing customers into self-service applications for anxiety-inducing transactions erodes trust and increases customer dissatisfaction; the recommendation to design taxpayer service around a “Taxpayer Anxiety Index” to increase taxpayer trust and improve compliance; the lack of taxpayer trust can lead to the need to control (i.e., more audits, more enforced collection); the appropriate use of an “economic hardship indicator” would reduce anxiety, minimize taxpayer harm, reduce work, and get to the right answer; and for the achievement of trust in the tax system, there is no more important entity than the Taxpayer Advocate Service. In addition, the Advocate shares about the upcoming release of The Taxpayer Roadmap 2019: An Illustration of the Modern United States Tax System which illustrates the incredibly complex steps and interactions of the tax system.
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Review of the 2019 Filing Season
The IRS faced significant challenges in the 2019 filing season, including a 35-day partial government shutdown, numerous tax reform changes, and the design of a new Form 1040. Nevertheless, it successfully processed most returns, with most taxpayers receiving a timely refund. For taxpayers who needed more help, however, the experience was challenging. The IRS reported a 67 percent level of service as its benchmark measure of telephone performance, but that performance measure is misleading. Only 23 percent of callers actually spoke to a live assistor. The IRS answered fewer calls on its compliance telephone lines (33 percent level of service), and those who got through waited an average of 41 minutes. The IRS served fewer taxpayers who sought help at Taxpayer Assistance Centers and continued its policy of answering only a limited scope of tax law questions on the phone and in person. Additionally, the IRS’s refund fraud filters continued to operate with high false positive rates, which significantly delayed refunds for hundreds of thousands of taxpayers who filed legitimate returns, harming some taxpayers and creating additional work for the IRS.
Read the Full Filing Season Review
Selected Areas of Focus
TAS Is Developing an Electronic Roadmap Tool to Assist Taxpayers As They Navigate Through the Complex Tax System
TAS is developing an online version of the roadmaps featured in the 2018 Annual Report to Congress. The digital roadmap will allow taxpayers without tax administration knowledge or expertise to navigate the complexity and detail of the tax system. For example, taxpayers will be able to determine where they are on the roadmap based on a letter or notice they received, why the notice is so important, what rights the notice provides or affects, what they must do next, and where they can get additional help.
TAS Will Urge the IRS to Reconsider Its Position on the Application of the Religious Freedom Restoration Act to the Social Security Requirement Under IRC § 24(h)(7), Which Has the Effect of Denying Child Tax Credit Benefits to the Amish and Certain Other Religious Groups
The Tax Cuts and Jobs Act of 2017 requires that taxpayers must include an SSN for every qualifying child for whom they claim the Child Tax Credit. The IRS has put in place procedures to implement this requirement that impermissibly offer an exception to the Social Security Number (SSN) requirement to an unprotected class while denying such an exception to a protected class (Amish parents who do not have an SSN for their children pursuant to their religious beliefs). This implementation substantially burdens the free exercise of religion for these religious taxpayers with deeply held religious beliefs, and violates the Sherbert Test incorporated through RFRA, which requires the law to be neutral and generally applicable.
TAS Will Continue to Advocate for the IRS to Proactively Identify, Educate, and Assist Taxpayers at Risk of Economic Hardship Throughout the Collection Process
The IRS’s unwillingness to try to identify taxpayers with incomes below the Allowable Living Expense’s not only burdens financially struggling taxpayers but wastes IRS resources and creates rework for IRS and TAS employees. It is past time for the IRS to become proactive in this area and use its data to protect vulnerable taxpayers, rather than solely to harm them.
TAS Will Continue to Advocate for Counsel to Disclose Emailed Advice
The transparency of the IRS Office of Chief Counsel is important to taxpayers. If taxpayers do not know the rules and why the IRS has adopted them, they cannot determine if they should exercise their other taxpayer rights, such as the right to challenge the IRS’s position and be heard or the right to appeal an IRS decision in an independent forum. Information about how Counsel interprets the law helps taxpayers avoid taking positions that would incur penalties or ensnare them in audits or litigation.
TAS Will Continue to Advocate for Vulnerable Taxpayers Whose Cases Are Assigned to Private Debt Collection Agencies (PCAs) and for a Reduction of Inactive PCA Inventory
The National Taxpayer Advocate has raised multiple concerns in past reports about how the IRS is administering the current Private Debt Collection program. These concerns include the impact on taxpayers who are likely experiencing economic hardship and the growth of inactive inventory in the hands of PCAs, with the risk that the PDC inventory will become a substitute for the IRS collection queue.
More Areas Of Focus
TAS Research Initiatives
The National Taxpayer Advocate is a strong proponent for the role of theoretical, cognitive, and applied research in effective tax administration. TAS Research is currently conducting a number of new and continuing research initiatives. A primary focus of these research initiatives is to better understand taxpayer compliance behavior and to evaluate IRS programs by balancing the goals of taxpayer compliance with minimizing taxpayer burden. Several research initiatives that TAS Research continues to conduct for the remainder of fiscal year (FY) 2019 and FY 2020 are included in the report.
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IRS Responses and National Taxpayer Advocate's Comments Regarding Most Serious Problems Identified in 2018 Annual Report to Congress
The National Taxpayer Advocate is required by statute to submit a year-end report to Congress that, among other things, describes at least 20 of the most serious problems facing taxpayers and makes administrative recommendations to mitigate those problems. The report released today includes a second volume containing the IRS’s general responses to each of the problems the Advocate identified in her 2018 year-end report as well as specific responses to each recommendation. In addition, it contains TAS’s analysis of the IRS’s responses and, in some cases, details TAS’s disagreement with the IRS’s position.
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EARNED INCOME TAX CREDIT
Making the EITC Work for Taxpayers and the Government
As the National Taxpayer Advocate, I have spent much of the last 18 years thinking about how to improve the administration of the EITC. How should the IRS change its approach and processes? How should the IRS and others increase the participation rate? And how can the IRS minimize noncompliance while respecting taxpayer rights and not deterring participation by eligible taxpayers? I and Taxpayer Advocate Service (TAS) employees have conducted research studies, served on Treasury and IRS task forces, conducted training sessions for IRS and TAS employees, and made scores of administrative and legislative recommendations about the EITC. It is fitting, then, in my last Report to Congress we should publish this Special Report, with its discussions, analyses, and call to action, which will serve as a reference for future work.
Read Volume 3