National Taxpayer Advocate Nina E. Olson released her latest report to Congress, again stressing the need for legislators to make simplification of the tax system a reality.
"Our tax code has grown so complex that it creates opportunities for taxpayers to make inadvertent mistakes as well as to game the system," Olson writes. "As taxpayers become confused and make mistakes, or deliberately push the envelope, the Internal Revenue Service understandably responds with increased enforcement actions ... In short, complexity begets more complexity."
Olson also criticized the IRS's Questionable Refund Program, which has seen an increasing number of people seeking to help claim frozen refunds. The program is run by the IRS Criminal Investigation Office and uses computer programs to screen tax returns for indications of fraud.
In addition to outlining several specific legislative recommendations, Olson also recommended that the tax code be revised to incorporate six core principles, including:
- It should not entrap taxpayers;
- It should be simple enough so that taxpayers can prepare their own returns without professional help, liabilities can be computed on a single form, and IRS telephone assistors can fully and accurately answer taxpayers' questions;
- It should be written in a way that anticipates the largest areas of noncompliance and minimizes the opportunities for such noncompliance;
- It should provide some, but not too many, choices;
- If refundable credits are included, they should be designed in a way that is administrable; and,
- It should require a periodic review of its provisions.
By statute, the National Taxpayer Advocate is required to identify at least 20 of the most serious problems encountered by taxpayers. In this year's report, Olson identified trends in taxpayer service as the most serious problem -- chiefly that the IRS is expanding enforcement at the expense of taxpayer service.The 2005 annual report is available in its entirety at
