The National Taxpayer Advocate submits two annual reports to the Ways and Means Committee and the Senate Finance Committee each year.

The first one, due June 30 each year, identifies the objectives of the Office of the Taxpayer Advocate for the upcoming fiscal year. The second one, due on Dec. 31 each year, identifies at least 20 of the most serious problems encountered by taxpayers, discuss the 10 tax issues most frequently litigated in the courts, and makes administrative and legislative recommendations to resolve taxpayer problems.

It’s not surprising that in a special report accompanying her first report of the year, National Taxpayer Advocate Nina Olson describes the IRS as “an institution in crisis” (see Taxpayer Advocate Says IRS ‘in Crisis’). However, she explains that the real crisis is not the one we’re familiar with from the headlines. Rather, “the real crisis facing the IRS—and therefore taxpayers—is a radically transformed mission coupled with inadequate funding to accomplish that mission. As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.”

While the other crisis—the one generating headlines—shouldn’t be diminished, the scenario she describes of an underfunded agency with a hugely burdensome new mission is disturbing enough.

This underfunding produces a “widget-based approach to tax administration,” getting work done in a way that allows as little interference as possible to the employees charged with doing the work, according to Olson. “Interference is viewed as any number of things—interactions with taxpayers, intervention by the Taxpayer Advocate Service, even proposed process improvements that require learning new steps or approaches,” she said. “Anything that can be automated to eliminate taxpayers’ interaction and move work along will be automated. The result is a tax system that gives short shrift to the legitimate needs of taxpayers and their specific circumstances.”

There is the danger of an overreaction to the IRS scandals. “Money shouldn’t be taken away from the IRS just to punish it,” said Roger Harris, president of Padgett Business Services. “They clearly need to train their people. Of course, when they put out Star Trek videos, it’s hard to make the argument as to how that helps training. The problem is the necessary part gets penalized. Clearly we want well trained and experienced personnel to deal with at the IRS. It’s not an efficient way to handle a matter when you deal with someone who has not been effectively trained or who lacks experience. Their budget may be cut because we’re mad at them, but the things you need to do to make the system work better get cut as well.”

Harris cited the registration of tax preparers as a key issue on which the NTA will focus. “Despite the lawsuit [Loving v. IRS, currently on appeal from a district court decision invalidating the IRS testing and continuing education requirements under the RTRP program] most of us think that some sort of regulation is a good thing,” he said. “At some point it will come back, either through reversal or legislation.”