Joining an increasingly loud chorus, National Taxpayer Advocate Nina E. Olson released her annual report to Congress, designating the alternative minimum tax and the federal tax gap as the most serious problems facing taxpayers.Olson also reserved a healthy dose of the 80-page-report’s scorn for concerns about the Internal Revenue Service’s collection policies and the transparency of IRS information to the tax-paying public.
The National Taxpayer Advocate is required to identify at least 20 of the most serious problems encountered by taxpayers every year. Seven of the most serious problems discussed in this year’s report relate to IRS collection policies.
The report said that the lack of “early, meaningful interventions” by the IRS on delinquent tax accounts contributes to long-term financial problems for many taxpayers and costs the government billions of dollars in lost revenue. The government collects only about 15 cents on the dollar on tax debts that are two years old and virtually nothing on tax debts that are older than three years. For the 2006 year, the IRS reported more delinquent tax dollars as “currently not collectible” than it actually collected on active balance due accounts, installment agreement accounts, and offers in compromise combined.
The reports suggests the IRS make better use of collection alternatives, such as offers in compromise, but still recommends that Congress repeal the IRS’s authority to outsource tax collection. The agency started a pilot program in the fall of 2006.
Besides repealing the AMT -- a cause that has also been taken up repeatedly by the leaders of the Senate Committee on Finance -- among the report’s 15 legislative recommendations are calls to:
- Revise Congress’ budget procedures to improve IRS funding decisions;
- Make changes to improve the uniform definition of a qualifying child;
- Eliminate or simplify income “phase-outs;” and,
- Increase the annual gross receipts threshold that triggers a return-filing obligation for tax-exempt organizations from $25,000 to $50,000.
The advocate did praise the IRS for making improvements in the Questionable Refund Program, which topped the list in 2005 as the most serious problem. The program came under fire for freezing the refunds of tens of thousands of taxpayers that the IRS deemed questionable without telling people they were suspected of fraud.The report also praises the ongoing development of the “Taxpayer Assistance Blueprint” -- a project to develop a five-year strategic plan for taxpayer service -- which the IRS has been preparing in conjunction with Olson’s independent office and the IRS Oversight Board.
A second volume also describes the results of two research studies the Office of the Taxpayer Advocate has conducted -- one on taxpayer needs and preferences for taxpayer service and a second on factors that drive taxpayers into the hands of the Taxpayer Advocate Service. The latter is meant to enable the service to more accurately project its future workload, as well as identify trends and emerging problems for taxpayers.
Links to the full reports are available at www.irs.gov/advocate/article/0,,id=97404,00.html.
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