National Taxpayer Advocate Identifies Priority Areas and Challenges in Mid-Year Report to Congress
WASHINGTON — National Taxpayer Advocate Nina E. Olson has released her statutorily mandated mid-year report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year. The report emphasizes the importance of taking concrete steps to give meaning to the recently adopted Taxpayer Bill of Rights, issuing refunds to victims of return preparer fraud, continuing to make improvements in the Exempt Organizations area and expanding the recently announced voluntary return preparer certification program to include competency testing.
The report praises the IRS for implementing the Advocate’s longstanding recommendation to adopt a Taxpayer Bill of Rights. In addition, “the IRS ran a generally successful filing season (although taxpayer services were sub-optimal largely due to staffing limitations), instituted a more equitable approach to its Offshore Voluntary Disclosure initiative, and introduced a voluntary system for educating unenrolled return preparers,” Olson wrote in a preface to the report. “All this is generally good news. But as we note in the report, the good news also raises additional questions and concerns.”
Taxpayer Bill of Rights
On June 10, 2014, the IRS adopted a Taxpayer Bill of Rights (TBOR), a list of 10 rights that the National Taxpayer Advocate has long recommended to help taxpayers and IRS employees alike gain a better understanding of the dozens of discrete taxpayer rights scattered throughout the multi-million word Internal Revenue Code.
IRS Treatment of Victims of Return Preparer Fraud
At the same time that hundreds of thousands of taxpayers have become victims of tax-related identify theft, a much smaller number of taxpayers have been victimized by unscrupulous preparers who have stolen their refunds by fraudulently altering information on their returns. The IRS has been working hard to issue refunds to identity-theft victims quickly. By contrast, it has generally declined to issue refunds to victims of preparer fraud at all.
“As I discuss in the Area of Focus, Return Preparer Fraud: A Sad Story,” Olson writes, “the IRS has consistently dragged its heels, making one excuse after another, because providing relief to these victims just is not a high enough priority, or more disturbingly, because the IRS simply does not want to provide relief.”
The report states that IRS Commissioner John A. Koskinen decided on March 14 that the IRS will issue refunds to victims of preparer fraud who have filed police reports with the appropriate law enforcement agencies and met certain other substantiation requirements. To date, the IRS has not implemented the decision, saying it must first resolve certain accounting issues and declining to provide a date certain by which it will issue the refunds.
Exempt Organization Issues
The report contains a detailed discussion of several issues relating to Exempt Organizations (EOs).
In 2013, the National Taxpayer Advocate delivered her mid-year Objectives Report to Congress the month after the disclosure that the EO unit was using questionable criteria to screen applicants for tax-exempt status. The Advocate’s report contained a separate volume, Special Report: Political Activity and the Rights of Applicants for Tax-Exempt Status, that took a broad look at factors that contributed to the use of the questionable screening criteria and associated processing delays and offered 16 recommendations to address them.
The report provides a status update on those recommendations.
Minimum Standards for Tax-Return Preparers
In 2002, the National Taxpayer Advocate began recommending that Congress authorize the IRS to establish minimum standards for tax return preparers. In the absence of congressional action, the IRS in 2010 began to implement preparer standards on its own. Earlier this year, the U.S. Court of Appeals for the District of Columbia affirmed a lower court decision concluding that the IRS exceeded its rulemaking authority in acting without a statutory grant of authority. Last month, the IRS announced that lacking the authority to continue its mandatory credentialing program, it will implement a voluntary program for the upcoming 2015 filing season.
The report argues that minimum standards for return preparers are important to protect taxpayers from incompetent or unscrupulous preparers. More than 140 million individual taxpayers each year file tax returns, and well over half use return preparers. Yet there are currently no standards for hanging out a shingle and preparing returns, and there is considerable evidence that many preparers lack the knowledge and ability to prepare accurate tax returns.
Other Issues Covered in Report
The National Taxpayer Advocate’s FY 2015 Objectives Report to Congress also identifies 10 other areas of focus for the upcoming year, reviews the 2014 filing season, describes TAS’s efforts to improve its advocacy for and service to taxpayers, summarizes pending TAS research initiatives and provides an update on TAS’s efforts to implement an integrated technology system.
Volume 2 of the report contains the IRS’s responses to the administrative recommendations the National Taxpayer Advocate made in her 2013 annual report to Congress, along with additional TAS comments. Overall, the report made 113 administrative recommendations. The IRS says it has implemented, is implementing, or will implement 69 of the recommendations, although its agreement to do so is contingent on resources in some cases.
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The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget. The first report is due on June 30 of each year and must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report, due on December 31 of each year, must identify at least 20 of the most serious problems encountered by taxpayers, discuss the 10 tax issues most frequently litigated in the courts and make administrative and legislative recommendations to resolve taxpayer problems.
ABOUT THE TAXPAYER ADVOCATE SERVICE
The Taxpayer Advocate Service is an independent organization within the IRS. TAS employees help taxpayers who are experiencing financial difficulties, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving problems with the IRS; and taxpayers who believe an IRS system or procedure is not working as it should. If you believe you are eligible for TAS assistance, call 1-877–777–4778 (toll-free). For more information, go to TaxpayerAdvocate.irs.gov or irs.gov/advocate. You can get updates on tax topics at facebook.com/YourVoiceAtIRS, Twitter.com/YourVoiceatIRS, and YouTube.com/TASNTA.
- National Taxpayer Advocate’s FY 2015 Objectives Report to Congress
- Tax Toolkit: www.TaxpayerAdvocate.irs.gov
Source: Internal Revenue Service at http://www.taxpayeradvocate.irs.gov/2015-Objectives-Report