Every year, the National Taxpayer Advocate, Nina Olson, submits a report to Congress on how she rates the performance of the Internal Revenue Service from a taxpayer’s perspective. Federal law requires the annual report from the Taxpayer Advocate Service (TAS) to identity at least 20 of the most serious problems encountered by the nation’s taxpayers and to make recommendations to help solve them.
In this, our third look at the 2016 annual report, we examine some of the other issues Olson identified where more work is needed.
Room for Improvement
Taxpayer Bill of Rights – Olson’s report credits the IRS with adopting the Taxpayer Bill of Rights and conducting an extensive public outreach campaign to make Americans aware. But Olson says the IRS still hasn’t done enough to educate its employees about the TBR and to incorporate it more completely into its operations.
Fraud Detection and Refund Delays – The annual report praises the IRS for improving its fraud detection and anti-identity theft measures on submitted tax return. The downside, claims Olson, is that the IRS fraud-detection filters – the computer programs that screen incoming electronic returns for telltale signs of fraud or identity theft – can be highly inaccurate. The filters, says Olson, cause “significant headaches and refund delays for hundreds of thousands of taxpayers who file accurate returns.”
Olson says many of the filters and business rules used by the IRS during 2016 created “false positives;” that is, they indicated a fraudulent return when in fact, it wasn’t. Olson report claims these rules had error rates of over 50 percent.
Private Debt Collection – Congress has mandated that the IRS use private debt collection services to collect back taxes. Olson’s office believes the IRS Office of Chief Counsel provided questionable legal advice that may constitute “a results-oriented end-run around the statute.”
The tax code give the IRS the authorization to contracts with qualified private collection firms that allow the companies to “request full payment” from a taxpayer, or, if the taxpayer is unable to make a full payment, “offer the taxpayer an installment agreement providing for full payment … during a period not to exceed five years.”
However, Olson’s report says the Office of Chief Counsel issued an opinion that allows the private collection agencies to make calls to taxpayers, requesting partial payments. The opinion, says Olson, also effectively means installment agreements spanning more than five years can be obtained if the IRS approves the taxpayer’s request for a longer period.