WASHINGTON, Feb. 12, 2019 /PRNewswire/ -- National Taxpayer Advocate Nina E. Olson today released her 2018 Annual Report to Congress, describing challenges the IRS faces as a result of the recent government shutdown and recommending Congress provide the IRS with additional multi-year funding to replace its core 1960s-era information technology (IT) systems. The release of the Taxpayer Advocate's report was delayed by a month because of the shutdown.
The largest section of the report titled, "The Taxpayer's Journey," is organized sequentially to track a taxpayer's interactions with the tax system from start to finish. Among other issues, it addresses the ability of taxpayers to obtain answers to tax-law questions, return filing, audits, collection actions, and Tax Court litigation. The report also contains "road maps" – pictorial representations of the steps in the process.
"One of our goals in creating these roadmaps was to help readers understand the complexity of the taxpayer journey," Ms. Olson wrote.
IMPACT OF THE GOVERNMENT SHUTDOWN
In the preface to the report, Ms. Olson discusses the impact of the government shutdown. A major point of discussion before and during the shutdown was the permissible scope of IRS activity. Under the Anti-Deficiency Act, federal funds may not be spent in the absence of an appropriation except where otherwise provided by law. One exception provided by law is for "emergencies involving the safety of human life or the protection of property." Although not stated in the law or Justice Department guidance, the IRS Office of Chief Counsel has interpreted the "protection of property" exception to apply only to the protection of government property – not a taxpayer's property. The report says this narrow interpretation can cause severe harm to taxpayers.
The report says the shutdown has had a significant impact on IRS operations. During the week before the shutdown, 75 percent of taxpayer calls routed to a telephone assistor were answered, and the average wait time was 13 minutes. During the week after the shutdown, only 37 percent of calls were answered and wait times averaged 32 minutes.
During the shutdown, correspondence inventories ballooned. By January 24, the IRS had more than five million pieces of mail waiting to be processed; 80,000 responses to FY 2018 Earned Income Tax Credit audits that had not been addressed; and 87,000 amended returns waiting to be manually processed.
"Make no mistake about it," Ms. Olson wrote. "These numbers translate into real harm to real taxpayers."
FUNDING FOR IT MODERNIZATION
The report's #1 legislative recommendation is that Congress provide significantly more funding in a multi-year allocation for the IRS to replace its antiquated core IT systems.
In 2018, the IRS experienced a systems crash on the final day of the tax-filing season, forcing it to extend the filing season by a day. The crash prompted talk of the risk of a catastrophic systems collapse. "But there is a greater risk," the report says. "IRS performance already is significantly limited by its aging systems, and if those systems aren't replaced, the gap between what the IRS should be able to do and what the IRS is actually able to do will continue to increase in ways that don't garner headlines but increasingly harm taxpayers and impair revenue collection."
OTHER MAJOR ISSUES ADDRESSED
Federal law requires the Annual Report to Congress to identify at least 20 of the "most serious problems" encountered by taxpayers and to make administrative and legislative recommendations to mitigate those problems. This year's report identifies 20 problems, makes dozens of recommendations for administrative change, makes 10 recommendations for legislative change, analyzes the 10 tax issues most frequently litigated in the federal courts, and presents six research studies and one literature review.
Among the problems addressed is the following:
Obtaining Answers to Tax-Law Questions. In 2014, the IRS implemented a policy under which it is only answering tax-law questions during the filing season. It also narrowed the scope of questions by expanding its list of "out-of-scope" topics.
Last Spring, the IRS said it would answer tax-law questions relating to the recently passed Tax Cuts and Jobs Act of 2017 (TCJA) throughout the year. To test the customer experience, TAS developed and tested a series of questions relating to issues deemed in-scope, issues deemed out-of-scope, and issues impacted by the TCJA. TAS callers encountered inconsistent service, even when asking questions about the TCJA that the IRS had indicated it would answer.
The report recommends the IRS answer tax-law questions year-round; that it deem all questions relating to major new tax legislation as "in scope" for at least two years; and that it track calls and contacts about out-of-scope topics so it can provide additional guidance on frequently raised issues. To assist taxpayers TAS developed a Tax Reform Changes website addressing common TCJA questions.
THE NATIONAL TAXPAYER ADVOCATE PURPLE BOOK
As part of the report, the Advocate has released the "The 2019 Purple Book," which presents 58 legislative recommendations intended to strengthen taxpayer rights and improve tax administration.
Please visit www.TaxpayerAdvocate.irs.gov/2018AnnualReport for more information.
About the Taxpayer Advocate Service
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Your local advocate's number is in your local directory and at https://taxpayeradvocate.irs.gov/contact-us. You can also call TAS toll-free at 1-877-777-4778. TAS can help if you need assistance resolving an IRS problem, if your problem is causing financial difficulty, or if you believe an IRS system or procedure isn't working as it should. And our service is free. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to https://taxpayeradvocate.irs.gov. You can get updates on tax topics at facebook.com/YourVoiceAtIRS, Twitter.com/YourVoiceatIRS, and YouTube.com/TASNTA.
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