Full Report

The Annual Report to Congress creates a dialogue at the highest levels of government to address taxpayers’ problems, protect taxpayers’ rights, and ease taxpayers’ burden.

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Volume One

PREFACE: Introductory Remarks by the National Taxpayer Advocate

SPECIAL FOCUS: IRS Future State: The National Taxpayer Advocate's Vision for a Taxpayer-Centric 21st Century Tax Administration

TAXPAYER RIGHTS ASSESSMENT: IRS Performance Measures and Data Relating to Taxpayer Rights

Most Serious Problems Encountered by Taxpayers

Introduction

Necessary Elements of the Future State

  1. VOLUNTARY COMPLIANCE: The IRS Is Overly Focused on So-Called “Enforcement” Revenue and Productivity, and Does Not Make Sufficient Use of Behavioral Research Insights to Increase Voluntary Tax Compliance
  2. WORLDWIDE TAXPAYER SERVICE: The IRS Has Not Adopted “Best-in-Class” Taxpayer Service Despite Facing Many of the Same Challenges As Other Tax Administrations
  3. IRS STRUCTURE: The IRS’s Functional Structure Is Not Well-Suited for Identifying and Addressing What Different Types of Taxpayers Need to Comply
  4. GEOGRAPHIC FOCUS: The IRS Lacks an Adequate Local Presence in Communities, Thereby Limiting Its Ability to Meet the Needs of Specific Taxpayer Populations and Improve Voluntary Compliance
  5. TAXPAYER BILL OF RIGHTS (TBOR): The IRS Must Do More to Incorporate the TBOR Into Its Operations

Necessary Tools for Achieving the Future State

  1. ENTERPRISE CASE MANAGEMENT (ECM): The IRS’s ECM Project Lacks Strategic Planning and Has Overlooked the Largely Completed Taxpayer Advocate Service Integrated System (TASIS) As a Quick Deliverable and Building Block for the Larger ECM Project
  2. ONLINE ACCOUNTS: Research Into Taxpayer and Practitioner Needs and Preferences Is Critical As the IRS Develops an Online Taxpayer Account System
  3. EARNED INCOME TAXPAYER CREDIT (EITC): The Future State's Reliance on Online Tools Will Harm EITC Taxpayers
  4. FRAUD DETECTION: The IRS’s Failure to Establish Goals to Reduce High False Positive Rates for Its Fraud Detection Programs Increases Taxpayer Burden and Compromises Taxpayer Rights
  5. TIMING OF REFUNDS: The IRS Should Study the Costs and Benefits of Holding Refunds Until the Filing Season Closes
  6. PAYMENT CARDS: Payment Cards Are Viable Options for Refund Delivery to the Unbanked and Underbanked, But Security Concerns Must Be Addressed

Taxpayer Rights and Issue Resolution in the Future State

  1. PRIVATE DEBT COLLECTION (PDC): The IRS Is Implementing a PDC Program in a Manner That Is Arguably Inconsistent With the Law and That Unnecessarily Burdens Taxpayers, Especially Those Experiencing Economic Hardship
  2. ALLOWABLE LIVING EXPENSE (ALE) STANDARDS: The IRS’s Development and Use of ALEs Does Not Adequately Ensure Taxpayers Can Maintain a Basic Standard of Living for the Health and Welfare of Their Households While Complying With Their Tax Obligations
  3. APPEALS: The Office of Appeals’ Approach to Case Resolution Is Neither Collaborative Nor Taxpayer Friendly and Its “Future Vision” Should Incorporate Those Values
  4. ALTERNATIVE DISPUTE RESOLUTION (ADR): The IRS Is Failing to Effectively Use ADR As a Means of Achieving Mutually Beneficial Outcomes for Taxpayers and the Government
  5. FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA): The IRS’s Approach to International Tax Administration Unnecessarily Burdens Impacted Parties, Wastes Resources, and Fails to Protect Taxpayer Rights
  6. INSTALLMENT AGREEMENTS (IAs): The IRS Is Failing to Properly Evaluate Taxpayers' Living Expenses and Is Placing Taxpayers in IAs They Cannot Afford
  7. INDIVIDUAL TAXPAYER IDENTIFICATION NUMBERS (ITINs): IRS Processes for ITIN Applications, Deactivations, and Renewals Unduly Burden and Harm Taxpayers
  8. FORM 1023EZ: The IRS's Reliance on Form 1023-EZ Causes It To Erroneously Grant Internal Revenue Code (IRC) § 501(c)(3) Status
  9. AFFORDABLE CARE ACT (ACA): The IRS Has Made Progress in Implementing the Individual and Employer Provisions of the ACA But Challenges Remain

Legislative Recommendations

Introduction

National Taxpayer Advocate Legislative Recommendations With Congressional Action

  1. TAX REFORM: Simplify the Internal Revenue Code Now
  2. TAX REFORM: Restructure the Earned Income Tax Credit and Related Family Status Provisions to Improve Compliance and Minimize Taxpayer Burden
  3. OUTSIDE RESEARCH: Expand Opportunities for the IRS to Collaborate With Outside Researchers
  4. COLLECTION DUE PROCESS (CDP): Amend Internal Revenue Code § 6330 to Provide That the Standard and Scope of Tax Court Review in CDP Cases Is De Novo Whether or Not the Underlying Liability Is at Issue
  5. COLLECTION DUE PROCESS (CDP): Amend Internal Revenue Code § 6330 to Require Appeals Officers, in Considering Collection Alternatives, to Suspend CDP Hearings Pending Resolution of Challenged Non-CDP Liabilities or Precluded CDP Liabilities
  6. NOTICES OF FEDERAL TAX LIENS (NFTL): Amend the Internal Revenue Code to Require a Good Faith Effort to Make Live Contact with Taxpayers Prior To the Filing of the NFTL
  7. INTERNATIONAL DUE DATES: Amend Internal Revenue Code § 6213(b)(2)(A) to Provide Additional Time to Request Abatement of a Mathematical or Clerical Error Assessment to Taxpayers Outside the United States Equal to the Time Extension Afforded to These Taxpayers to Respond to a Notice of Deficiency
  8. INDIVIDUAL TAXPAYER IDENTIFICATION NUMBERS (ITINs): Amend the Protecting Americans from Tax Hikes (PATH) Act of 2015 to Revise the Expiration Schedule for ITINs
  9. CERTIFIED ACCEPTANCE AGENTS (CAAs): Amend the PATH Act to Authorize CAAs to Certify Individual Taxpayer Identification Number Applications for Taxpayers Residing Abroad
  10. STREAMLINE RELIGIOUS EXEMPTIONS: Streamline the Religious Exemption Process for the Individual Shared Responsibility Payment (ISRP)

Most Litigated Issues

Introduction

Significant Cases

  1. Accuracy-Related Penalty Under IRC § 6662(b)(1) and (2)
  2. Appeals from Collection Due Process Hearings Under IRC §§ 6320 and 6330
  3. Summons Enforcement under IRC §§ 7602, 7604, and 7609
  4. Gross Income Under IRC § 61 and Related Sections
  5. Trade or Business Expenses Under IRC § 162 and Related Sections
  6. Failure to File Penalty Under IRC § 6651(a)(1), Failure to Pay an Amount Shown as Tax on Return Penalty Under IRC § 6651(a)(2), and Failure to Pay Estimated Tax Penalty Under IRC § 6654
  7. Civil Actions to Enforce Federal Tax Liens or to Subject Property to Payment of Tax Under IRC § 7403
  8. Charitable Deductions Under IRC § 170
  9. Frivolous Issues Penalty Under IRC § 6673 and Related Appellate-Level Sanctions
  10. Trust Fund Recovery Penalty (TFRP) Under Internal Revenue Code (IRC) § 6672

TAS Case Advocacy

Appendices


Volume Two: TAS Research and Related Studies

  1. Taxpayers' Varying Abilities and Attitudes toward IRS Taxpayer Service: The Effect of IRS Service Delivery Choices on Different Demographic Groups
  2. Study of Subsequent Filing Behavior of Taxpayers Who Claimed Earned Income Tax Credits (EITC) Apparently in Error and Were Sent an Educational Letter from the National Taxpayer Advocate
  3. The Importance of Financial Analysis in Installment Agreements (IAs) in Minimizing Defaults and Preventing Future Payment Noncompliance
  4. IRS Should Use Its Internal Data to Determine If Taxpayers Can Afford to Pay Their Tax Delinquencies
  5. Collecting Business Debts: Issues for the IRS and Taxpayers

Volume Three: Literature Reviews

Introduction

  1. Taxpayer Service in Other Countries
  2. Incorporating Taxpayer Rights into Tax Administration
  3. Behavioral Science Lessons for Taxpayer Compliance
  4. Geographic Considerations for Tax Administration
  5. Customer Considerations for Tax Administration
  6. Options for Alternative Dispute Resolution (ADR)
  7. Reducing "False Positive" Determinations in Fraud Detection