IRS Responds to Taxpayer Advocate Recommendations

National Taxpayer Advocate Nina Olson has posted responses from the Internal Revenue Service to her recommendations for improving taxpayer service, along with papers delivered by presenters at an international conference her office convened last November on taxpayer rights.

Olson made 116 administrative recommendations for the IRS in her annual report to Congress last year, highlighting the most serious problems confronting taxpayers. The IRS has either implemented or agreed to implement 65 of the recommendations, or a little over half of them.

Among the main challenges facing taxpayers and the IRS, the report pointed to the “Future State” of the IRS, along with IRS user fees, the use of a streamlined application for tax-exempt status, stolen identity refund and other fraud, and taxpayer service for taxpayers living abroad. Volume 1 contains Olson’s original report to Congress, and a newly released second volume provides the IRS’s responses to the recommendations, along with the Taxpayer Advocate’s reactions to the responses, in some cases disagreeing with the IRS.

For example, on the subject of user fees, the report notes, “The IRS is actively considering user fee increases that would replace its reduced appropriation. User fees that seem reasonable to the IRS in a vacuum may seem outrageous to taxpayers when added to the costs of recordkeeping, filing and paying taxes, and paying professionals for help in navigating complicated rules and procedures that the government created. If user fees discourage taxpayers from using IRS services, they can be inconsistent with the IRS’s service oriented mission, reduce voluntary compliance, and erode taxpayer rights. However, the Internal Revenue Manual (IRM) does not require the IRS to consider these items. As a result, the IRS may increase user fees without fully considering the consequences.”

In response, the IRS wrote in part, “As part of the consideration of any user fee we look at a variety of factors, including taxpayer burden and voluntary compliance, which play a considerable role in how we set fees. This is especially true in the case of the new online payment, direct debit IA [installment agreement] product which will provide taxpayers with the most inexpensive, lowest burden means to set up an IA.”

The Taxpayer Advocate Service commended the IRS for working with it to improve the user fee instructions in the Internal Revenue Manual, but added, “However, the IRS’s continued lack of transparency in discussing potential user fee increases in public remains an area of concern. For example, the IRS has still declined to permit the National Taxpayer Advocate to release an unredacted version of her memorandum to the IRS Commissioner, which discusses her concerns about the fees being proposed.”

In addition to publishing Volume 2 of the report with the IRS responses, the National Taxpayer Advocate also released the presentations that were delivered at its first-ever international conference on taxpayer rights. They are available at https://taxpayerrightsconference.com/conference-papers.

More than 160 people from 22 countries participated as panelists or attendees at the conference in Washington, D.C. “The inaugural conference allowed taxpayer rights advocates from around the world to exchange ideas and discuss various approaches,” Olson said in a statement.

The 2nd International Conference on Taxpayer Rights will be held in Vienna, Austria on March 13-14, 2017.