NATIONAL TAXPAYER ADVOCATE SEES 2013 TAX SEASON 'AT RISK'

Washington, D.C. -- National Taxpayer Advocate Nina E. Olson has released the first of two mandatory annual reports to Congress, identifying the priority issues the Taxpayer Advocate Service will focus on during the upcoming fiscal year.

The report expresses particular concern about the taxpayer impact of expired and expiring tax provisions, the rise in tax fraud and tax-related identity theft, and attempts to limit the National Taxpayer Advocate's formal input on issues that affect taxpayer rights and taxpayer burdens via taxpayer assistance orders and taxpayer advocate directives.

"The continual enactment of significant tax law and extender provisions late in the year has led to IRS delays in hand- ling millions of taxpayers' returns and caused many taxpayers to underclaim benefits," Olson wrote. "Because of the magnitude of these challenges and the uncertainty about such a large number of important provisions, the 2013 filing season is already at risk."

Congress is likely to extend many of the expired provisions retroactive to Jan. 1, 2012, Olson indicated, but no one knows for certain what will happen.

Tax fraud and tax-related identity theft, the report noted, although distinct problems, often overlap and present similar challenges for taxpayers and the IRS. Both problems are growing. In fiscal year 2011, the IRS's Electronic Fraud Detection System identified more than 1 million returns as potentially fraudulent, a 72 percent increase from the previous year. The IRS blocked nearly 1 million additional refund claims using other means.

The report also raises concerns about the level of attention the IRS has given recently to TAOs and TADs. To ensure that the concerns of the NTA and Taxpayer Advocate Service are adequately addressed, Congress gave the advocate the authority to issue TAOs to the IRS ordering it to take an action or refrain from taking an action in taxpayer cases - but the IRS commissioner and deputy commissioner can override them, and thereport indicated that the IRS does not always abide by them.

 

IRS MAKES OIC PROGRAM MORE FLEXIBLE

Washington, D.C. -- The Internal Revenue Service is offering more flexible terms in its Offer in Compromise Program to help financially distressed taxpayers clear up their tax problems more quickly.

Under certain circumstances, taxpayers will be able to repay student loans and pay delinquent state and local taxes under the latest phase of the IRS's Fresh Start initiative. The changes mainly focus on the financial analysis used to determine which taxpayers qualify for an OIC. The IRS said in July that other changes would include revising the calculation of the taxpayer's future income and expanding the allowable living expense allowance category and amount. As a result of the changes, some taxpayers will be able to resolve their tax problems in as little as two years, compared to four or five years in the past, according to the IRS.

When the IRS calculates a taxpayer's reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted.

The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, have been revised to reflect the changes. Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income-producing assets generally will not be included in the calculation of reasonable collection potential for ongoing businesses.

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