National Taxpayer Advocate Nina E. Olson released her 2014 Annual Report to Congress, which expresses concern that taxpayers this year are likely to receive the worst levels of taxpayer service since 2001 when the IRS implemented its current performance measures.
The report recommends that Congress enact a principles-based Taxpayer Bill of Rights, adopt additional safeguards to make those rights meaningful and provide sufficient IRS funding to make the “Right to Quality Service” a reality.
The report is the second of two annual reports required by the Internal Revenue Code to the House Ways and Means Committee and the Senate Finance Committee. The first report, due by June 30 of each year, must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year that begins in that calendar year.
The report says that the combination of the IRS’s increasing workload, the erosion of public trust occasioned by the IRS’s use of “Tea Party” and similar terms in screening applicants for tax-exempt status, and the sharp reduction in funding have created a “perfect storm” of trouble for tax administration and therefore for taxpayers.
“Taxpayers who need help are not getting it, and tax compliance is likely to suffer over the longer term if these problems are not quickly and decisively addressed,” Olson said.
In the preface to the report, Olson stressed four points:
“First, the budget environment of the last five years has brought about a devastating erosion of taxpayer service, harming taxpayers individually and collectively;
“Second, the lack of effective administrative and congressional oversight, in conjunction with the failure to pass taxpayer rights legislation, has eroded taxpayer protections enacted 16 or more years ago;
“Third, the combined effect of these trends is reshaping U.S. tax administration in ways that are not positive for future tax compliance or for public trust in the fairness of the tax system; and
“Fourth, this downward slide can be addressed if Congress makes an investment in the IRS and holds it accountable for how it applies that investment.”
The report praises the IRS for implementing the Advocate’s longstanding recommendation to adopt a Taxpayer Bill of Rights. In addition, she said, “the IRS ran a generally successful filing season (although taxpayer services were sub-optimal largely due to staffing limitations), instituted a more equitable approach to its Offshore Voluntary Disclosure initiative, and introduced a voluntary system for educating unenrolled return preparers.”
“All this is generally good news,” she wrote. “But as we note in the report, the good news also raises additional questions and concerns.”
The report also urges Congress to enact comprehensive tax reform, pointing out that simplification would ease burdens on taxpayers and the IRS alike.
In response to the report, National Treasury Employees Union president Colleen M. Kelley said, “The nation, along with the IRS workforce, is suffering from the $1.2 billion worth of budget cuts the IRS has endured since fiscal year 2010. It is appalling to me that only half of the callers will be able to get through to a customer service representative during this filing season, that Taxpayer Assistance Centers will be forced to turn people away and that millions of people who file paper returns will see their refunds delayed.”
Kelley said repeated budget cuts prevent the IRS from serving taxpayers and thwart the agency’s revenue-collection mission.
“When Congress adequately funded the agency, IRS employees were able to fulfill their fundamental public-service mission of helping Americans understand the tax code and pay what they owe on time. Today, the IRS is struggling to keep the lights on,” the NTEU leader said. “Not only do these cuts threaten our voluntary tax-compliance system, they also reduce the ability of the IRS to continue to collect 93 percent of our nation’s revenue.”
“IRS employees are doing their best to handle the rising demand for their services, but they will simply not be able to keep up,” Kelley said. “To absorb these cuts, the IRS has raised the possibility of a shutdown, forcing employees to serve unpaid furlough days and putting a closed’ sign out for taxpayers. Ongoing budget cuts are unsustainable. Congress must end this cycle and begin investing in the IRS.”
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