Section 7803(c)(2)(B)(ii)(III) requires the National Taxpayer Advocate to identify at least 20 of the most serious problems encountered by taxpayers. This year’s report to Congress describes 26 problem areas and provides status updates on three other issues.
One of my favorites was the adverse effect of late-year law changes on taxpayers, specifically the “extenders bill” in December 2006 and the AMT “patch” in December 2007. It is pointed out that taxpayers ultimately claimed the extended deductions about 1.4 million times less frequently in tax year 2006 than in tax year 2005, when the deductions were included in the Form 1040 instructions and built into all tax software.
An interesting one is a claim that the IRS’s Office of Professional Responsibility (OPR) hasn’t published sufficient guidance or procedures. The worry is that If there is any question about OPR's independence from the IRS, practitioners may fear OPR will serve as an extension of the IRS enforcement function and arbitrarily target practitioners who are appropriately advocating for taxpayers.
The National Taxpayer Advocate also stated the obvious: a concern about the higher standards of conduct added to Section 6694 adversely affecting the way that tax preparers dispense advice and creating conflicts of interest between preparers and their clients.
My favorite status update is the conclusion that the private debt collection initiative is failing in most respects, as it isn’t meeting revenue projections, its return on investment is dismal, and the view that the private collection agencies are no better at locating or collecting tax liabilities than the IRS itself.
Hopefully, by publicizing these concerns, Congress and IRS will act to alleviate some of them. But from what I notice as I continue to read these reports each year, in some areas there is very little change, and the same basic concerns don’t seem to disappear. For example, late year tax legislation continues to ensure many taxpayers in tax year 2007 will miss out on tax benefits to which they are entitled. There is also something much more sinister happening, as it appears that Congress and the IRS is attempting to drive a wedge between taxpayers and tax preparers. Both might explain my lack of optimism in the National Taxpayer Advocate annually restating what many interested parties have been complaining about for some time.
The 2007 report of the National Taxpayer Advocate is at irs.gov/advocate.
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