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How We've Helped

The National Taxpayer Advocate’s (NTA) Annual Report to Congress identifies key problems affecting taxpayers both individually and systemically, and works to elevate these issues to the IRS.

Below are progress updates on issues previously identified by the NTA and examples of changes the Taxpayer Advocate Service (TAS) and the NTA have worked to make within the IRS. You can also learn how your feedback has assisted TAS in elevating issues and how TAS can help you with your tax problems.

Read about the NTA’s Legislative Recommendations to Congress.

How We’ve Helped

Protecting Low Income Taxpayers from Levies

Issue

Recommendation

Progress
Through the Federal Payment Levy Program (FPLP), the IRS can take payments made by the federal government to taxpayers who owe taxes. The NTA was concerned there were inadequate protections to prevent financial difficulties when the IRS placed a levy on low income taxpayers. The IRS and TAS worked together to develop a filter to exclude low income taxpayers from the FPLP. The IRS implemented the filter in 2011.

Increasing Oversight of Return Preparers

Issue

Recommendation

Progress
Return preparers play a critical role in the tax system by preparing about 58% of individual taxpayer returns and 80% of small business returns. Yet anyone could prepare a tax return for a fee – with no training, no licensing, and no oversight required. The NTA repeatedly recommended that the IRS develop a plan to improve preparer competence, visibility and accountability. In 2010, the IRS agreed to create a new Return Preparer Program that incorporates several of the NTA’s recommendations including:

  • A unique identifying number for each preparer
  • A requirement that all preparers who are not attorneys, CPAs or enrolled agents (who already have stringent guidelines to obtain their professional credentials) pass a test of their basic return preparation knowledge

Working to Help Identity Theft Victims

Issue

Recommendation

Progress
For many perpetrators, tax return fraud may be viewed as a low-risk, high-reward venture. News reports suggest some very organized groups have chosen tax-related identity theft as the crime du jour. Identity theft has become a large-scale operation, with “boiler room” operations involving the theft of massive lists of SSNs. Apparently, there are networks of criminals who not only share stolen personal information, but even present seminars about how to use this information to file bogus returns. TAS worked closely with the IRS’s Criminal Investigation division (CI) over the last few years to make sure that where CI has identified a scheme and has lists of victims’ SSNs, this information is quickly transferred to the civil side of the IRS so the victims are notified and identity theft markers are placed on their accounts. We have coordinated with CI and the Department of Justice on certain cases to ensure victims receive notification and are informed about avenues for assistance at the IRS. Only through detection, prosecution, and victim assistance will we be able to comprehensively address the rise of tax-related identity theft.

TAS Influences the “Fresh Start” Initiative

Issue

Recommendation

Progress
Since 2004, the NTA has frequently identified the IRS collection process as a significant factor in the most serious problems facing America’s taxpayers. The NTA identified numerous aspects of the process that do not reflect the IRS’s collection principles. Identifying these problems helped generate an IRS study in 2010, which in turn produced the “Fresh Start” changes the IRS introduced in 2011 and 2012. The intent of the Fresh Start initiative is to help struggling individuals and small businesses pay their taxes. TAS has worked extensively with the IRS on the development of the Fresh Start implementation plan, and has monitored the impact of the initiative in several key areas.

Providing “Innocent Spouse” Relief

Issue

Recommendation

Progress
The IRS can remove tax liabilities in certain circumstances when it wouldn’t be fair to hold a spouse liable. This is referred to as the “innocent spouse” rule. A Treasury regulation required that the spouse must seek this relief within two years after the IRS begins collection activity. This significantly limited the amount of time for a spouse to request relief. The NTA proposed that Congress amend the Code to allow requests for relief at any time before the period of limitations on collection activity expires. After several members of Congress voiced concern that the IRS practice did not reflect congressional intent, the IRS agreed to eliminate the two-year restriction, thereby providing taxpayers a longer period to seek innocent spouse relief.

Regulate Refund Anticipation Loans (RALs)

Issue

Recommendation

Progress
Refund anticipation loans (RALs) are financial products that have developed largely in the EITC preparation market and enables low income taxpayers to accelerate receipt of their tax refund at what frequently turn out to be usurious charges taken off the top by the lender when the refund arrives. In the past, TAS has proposed regulation of RALs, 85 that have been statistically associated with noncompliance. In 2010, the Commissioner announced curtailment of RALs by not posing a “debt indicator” that shows whether a claimed tax refund will be offset due to a debt of the taxpayer.

Accelerate the Use of Third-Party Information Reports

Issue

Recommendation

Progress
Third-party information reports, such as Forms W-2 (Wage and Tax Statement), are a principal tool for IRS to verify income amounts. The IRS has identified “income reporting errors” as the type of error resulting in the third largest amount of EITC mistakes. The NTA has recommended that steps be taken to enable the IRS to receive and process information returns before it issues refunds. Former Commissioner Shulman recently embraced this vision in his annual speech at the National Press Club.

How You’ve Helped

TAS’s Systemic Management Information System (SAMS) allows taxpayers and IRS employees to submit examples of processes or procedures that have a negative impact on taxpayers or cause inefficiency. After a review of the issue, TAS works to resolve the systemic problem. Here are a few examples:

  • The IRS website for Free File Fillable Forms (FFFF) carries a tag line, “EVERYONE is Eligible to Free File!” However, FFFF has limits and eligibility requirements, confusing taxpayers who tried to use FFFF and had their returns rejected. At TAS’s urging, the IRS is adding qualifying language concerning who is eligible for FFFF. The IRS is also improving the language in notices related to FFFF to explain better why a return was rejected.
  • The IRS was inappropriately denying the Earned Income Tax Credit (EITC) to low income clergy. Because of the way clergy report their income, the IRS was double-counting income, creating situations where low income clergy were not eligible for the credit. At TAS’s insistence, the IRS updated written procedures and trained employees on how to handle these EITC claims.
  • The IRS was rejecting some electronically filed Form 1120-S, U.S. Income Tax Return for an S Corporation returns because of a coding problem. After TAS intervened, the IRS changed its programming.
  • The IRS frequently made errors related to filing requirements when granting an exemption from filing Form 990, Return of Organization Exempt From Income Tax. As a result, some government entities lost their exempt status. The IRS improved instructions to employees on the proper way to change these filing requirements. The IRS also agreed to provide refresher training to employees responsible for updating government taxpayer entity information.

Are you aware of an IRS process or procedure that may be causing problems for taxpayers? Submit your issue to TAS on IRS.gov.

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How We Can Help You

TAS employees assist taxpayers whose tax problems are causing financial difficulty, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe an IRS system or procedure is not working as it should. While all IRS personnel must consider and protect taxpayer rights, TAS employees have a special responsibility for ensuring the IRS treats all taxpayers fairly. In fiscal year 2012, TAS worked nearly 220,000 taxpayer cases.

If you’re having tax problems that you have not been able to resolve on your own, TAS may be able to help. See if you qualify to get tax help.