National Taxpayer Advocate Nina E. Olson today released a special report on the Earned Income Tax Credit (EITC), a call to action, with recommendations designed to increase the participation rate of eligible taxpayers and reduce overclaims by ineligible taxpayers. Also today, for the first time ever, the Taxpayer Advocate Service (TAS) has mapped out the modern United States tax system.
TAS Releases Detailed “Subway Map” Illustrating a Taxpayer’s Journey Through the Tax System TAS is releasing a “subway map” that visually demonstrates, at a very high level, the stages of a taxpayer’s journey through the tax system – from getting answers to tax law questions through audits, appeals, collection and litigation. The map makes clear the complexity of tax administration, with its many connections, overlaps, and repetitions between stages. Notably, it shows why the road to tax compliance isn’t always easy to navigate.
The National Taxpayer Advocate’s 2018 Annual Report to Congress included a series of “roadmaps” depicting a taxpayer’s “journey” through the tax system. The subway map expands on the earlier roadmaps by providing a visually clear depiction of the taxpayer’s journey. The subway map is now available to view online and will be available in hard copy as a print map next month. To place an order, call 800-829-3676 beginning July 12 and request Publication 5341.
“Anyone looking at this map will understand that we have an incredibly complex tax system that is almost impossible for the average taxpayer to navigate,” Olson said.
TAS will be working to develop a fully interactive version of the subway map in the coming year. When the interactive map is completed, a taxpayer or representative will be able to enter into it at any step and learn more about that step and the surrounding steps. TAS envisions that a taxpayer or representative will be able to input the number of an IRS letter or notice and generate a pop-up window that provides key relevant information, including where in the process the taxpayer is and what the next steps will be.
“This digital roadmap will be the culmination of many years of work and research by TAS into human cognition and learning, notice clarity, and taxpayer empowerment,” Olson said. “It is my firm belief that taxpayers must have knowledge about their rights within a bureaucracy as complex as the IRS. If only taxpayers who are represented by tax professionals have access to that knowledge, then we do not have a fair and just tax system. Thus, the digital roadmap will be a powerful tool to improve access to justice.”
Special Report on Earned Income Tax Credit The EITC report, Earned Income Tax Credit: Making the EITC Work for Taxpayers and the Government, presents a detailed examination of the strengths and weaknesses of the EITC as currently structured and administered, and makes legislative and administrative recommendations to improve it. The report runs more than 100 pages – roughly half text and half appendices consisting of EITC data tables (page 49) and a comprehensive literature review (page 82).
“But this report is not just a research document,” Olson wrote in her preface. “It is a call to action. As we show throughout this report, the way the EITC is structured and the way the IRS is administering it often harms the very taxpayers it is intended to serve. We have made specific, common sense recommendations to mitigate that harm and reform the administration of the EITC.”
The report makes several recommendations, including:
The IRS, which views itself primarily as a tax collection agency, should more explicitly acknowledge that it has a second mission – that of administering benefits programs like the EITC.
Congress should consider the administrability of tax provisions, especially family and child-related provisions whose eligibility criteria may be difficult if not impossible for the IRS to verify.
Congress should conduct regular oversight hearings of the IRS on a permanent basis. These hearings would provide an opportunity for the IRS to identify successes and challenges with the laws it administers.
Congress should consider redesigning the EITC to reduce fraud by separating the worker component from the family-size component of the credit and by revising the definition of a “qualifying child” to better reflect existing family relationships.
Congress should authorize the IRS to establish minimum standards for tax return preparers and software providers to protect taxpayers and improve the accuracy of EITC claims.
Congress and the IRS should take steps to ensure EITC compliance procedures are consistent with due process norms and fundamental taxpayer rights.
The subway map expands on seven roadmaps featured in the National Taxpayer Advocate’s 2018 Annual Report to Congress by providing a visually clear depiction of the taxpayer’s journey. The subway map is now available to view online and will be available in hard copy as a print map next month.