National Taxpayer Advocate Erin M. Collins releases her first Objectives Report
National Taxpayer Advocate Erin M. Collins has released her first report to Congress, identifying taxpayer challenges arising from the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the IRS’s implementation of the Taxpayer First Act as priority issues the Taxpayer Advocate Service (TAS) plans to focus on in the coming year. The report also analyzes the partial 2020 filing season, identifies other TAS systemic objectives and research objectives and includes the IRS’s responses to administrative recommendations proposed in the National Taxpayer Advocate’s 2019 Report to Congress.
Taxpayer Challenges Arising from COVID-19 Pandemic
The report praises the IRS for acting quickly to postpone over 300 filing, payment, and other time-sensitive deadlines, provide broad relief from compliance actions under its “People First Initiative,” and disburse some 160 million Economic Impact Payments (EIPs) authorized by the CARES Act enacted on March 27, 2020. However, the report says that despite the IRS’s best efforts, there have been notable adverse taxpayer impacts. These include delays in processing paper returns and correspondence, delays in obtaining refunds for taxpayers whose returns are mistakenly flagged by IRS fraud filters, and difficulty in obtaining assistance from the IRS by phone or in person.
Taxpayer Challenges Relating to the CARES Act
The report says the IRS generally did a commendable job implementing the CARES Act, but taxpayer challenges remain. Among these challenges, individuals who did not receive some or all their EIPs may have to wait until next year to receive them, employers are struggling to determine whether they qualify for the Employee Retention Credit (ERC) and in what amounts, and businesses are facing challenges when seeking to utilize the CARES Act provision that authorizes the use of net operating losses to offset taxable income in prior years (and in some cases to receive refunds).
Implementation of Taxpayer First Act
The Taxpayer First Act (TFA), enacted one year ago, constitutes the most far-reaching revisions to tax administration since the IRS Restructuring and Reform Act of 1998. The TFA included some 23 provisions recommended by the National Taxpayer Advocate. A centerpiece of the TFA is a requirement that the IRS develop comprehensive strategic plans in four areas, including a comprehensive customer service strategy. Because of disruptions caused by COVID-19, the IRS has been delayed in developing these plans, but it expects to deliver its customer service strategy to Congress by the end of the year.
2020 Filing Season Review
The Advocate’s mid-year report typically includes an assessment of the filing season that measures performance against the results of prior filing seasons. Because the IRS closed most of its operations in March and postponed many filing and payment deadlines from April 15 to July 15, this filing season cannot fairly be compared with prior years. The disruption caused by COVID-19 and the postponed due date has had – and continues to have – an enormous impact on the 2020 filing season, reflected in the number of returns received, the volume of correspondence received from taxpayers, and the reduction in toll-free telephone service.
Other TAS Areas of Focus for Fiscal Year 2021
Beyond COVID-19, the CARES Act, and TFA implementation, TAS continues to advocate on a broad range of systemic issues. Among the issues TAS plans to focus on during the upcoming fiscal year are providing taxpayers with limited English proficiency meaningful access to tax products and services; improving the clarity and content of IRS notices and correspondence; improving service to and communication with taxpayers in rural and other communities that lack high-speed internet access; and working with the IRS to refine its screening filters so fewer legitimate returns are flagged as potentially fraudulent and cause refund delays for affected taxpayers.
IRS Responses to National Taxpayer Advocate Administrative Recommendations
The National Taxpayer Advocate is required by statute to submit a year-end report to Congress that makes administrative recommendations to resolve taxpayer problems. The Acting National Taxpayer Advocate made 78 administrative recommendations in the 2019 Annual Report to Congress and then submitted them to the Commissioner for response. Of those, 59 were made in the “Most Serious Problems” section of the report. The IRS has implemented or agreed to implement 41 (or 69 percent).
The report made 19 administrative recommendations in other sections of the report. The IRS has taken the position that it is not required to respond directly to them and has provided only general narrative responses. The National Taxpayer Advocate believes the IRS is required by law to provide direct responses. “The intent of the statute is clear,” the report says. “If the National Taxpayer Advocate makes an administrative recommendation to mitigate a taxpayer problem – regardless of whether or where it has appeared in a report – the IRS should evaluate it and respond in writing so that TAS, Congress, and the taxpaying public know whether the IRS plans to implement the recommendation and, if not, why not. General narrative discussions that do not address recommendations directly fail to satisfy this objective.”