National Taxpayer Advocate Erin M. Collins today released her 2023 Annual Report to Congress, describing 2023 as a year of “extraordinary transition for the IRS and therefore for taxpayers.” The report credits the IRS with substantially improving taxpayer services and developing plans to transform the taxpayer experience in the coming years, but it identifies paper processing as an area of continuing weakness.  

Most Serious Problems

By law, the Advocate’s report is required to identify the ten most serious problems taxpayers are experiencing in their dealings with the IRS and to make administrative and legislative recommendations to address those problems. Before cataloging taxpayer challenges, however, Collins praised the IRS for taking notable strides forward. However, paper processing is an area of continuing weakness. The areas in which taxpayers continued to experience delays were primarily those that required employees to process tax returns and taxpayer correspondence, including:  

• Extraordinary delays in assisting victims of identity theft;  
• Delays in processing amended tax returns and taxpayer correspondence;  
• Challenges in receiving telephone assistance despite overall improvements; and  
• Employee Retention Credit (ERC) processing. 

Administrative Recommendations 

At the end of each of the ten most serious problem sections in the report, the National Taxpayer Advocate makes administrative recommendations to address the problems. Among her key recommendations: 

• Prioritize the improvement of online accounts for individual taxpayers, business taxpayers, and tax professionals to provide functionality comparable to that of private financial institutions; 
• Improve the IRS’s ability to attract, hire, and retain qualified employees; 
• Ensure all IRS employees – particularly customer-facing employees – are well-trained; 
• Upgrade the back end of the Document Upload Tool (DUT) to fully automate the processing of taxpayer correspondence;  
• Enable all taxpayers to e-file their federal tax returns; and  
• Extend eligibility for first-time penalty abatement to all international information return penalties. 

Legislative Recommendations: The “Purple Book” 

The National Taxpayer Advocate’s 2024 Purple Book proposes 66 legislative recommendations intended to strengthen taxpayer rights and improve tax administration. Among the recommendations: 

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The Internal Revenue Code requires the National Taxpayer Advocate to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The National Taxpayer Advocate is required to submit these reports directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, or the Office of Management and Budget. 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 beginning in that calendar year.

FY 2024 Objectives Report To Congress

PREFACE: The National Taxpayer Advocate’s Introductory Remarks

REVIEW OF THE 2023 FILING SEASON

TAS SYSTEMIC ADVOCACY OBJECTIVES
Introduction

1. Protect Taxpayer Rights as the IRS Implements Its Strategic Operating Plan
2. Protect Taxpayer Privacy and Ensure the IRS Does Not Disclose Taxpayer Information Without Consent
3. Improve Correspondence Audit Processes, Taxpayer Participation, and Agreement and Default Rates
4. Implement Systemic First Time Abatement But Allow Substitution of Reasonable Cause
5. Reduce Burden on Taxpayers Applying for an Individual Taxpayer Identification Number
6. Formalize 45-Day Response Time From All IRS Functions to Recommendations Made by the Taxpayer Advocacy Panel
7. Eliminate Systemic Assessments and Offer a First Time Abatement Waiver for International Information Return Penalties
8. Modernize IRS Paper Processing Procedures
9. Continue to Propose Simplification of the Tax Code and IRS Procedures to Reduce Taxpayer Compliance Burden
10. Improve IRS Hiring, Recruitment, and Training Strategies
11. Improve Taxpayer Access to Telephone and Face-to-Face Assistance
12. Increase Accessibility and Improve Functionality of Digital Services for Individual and Business Taxpayers and Tax Professionals
13. Improve Tax Return Processing by Eliminating Barriers to E-Filing
14. Improve IRS Transparency
15. Identify Data to Support Minimum Competency Standards for Paid Return Preparers of Federal Tax Returns
16. Improve the Staffing and Culture of the IRS Independent Office of Appeals
17. Reduce Compliance Barriers for Overseas Taxpayers

TAS CASE ADVOCACY AND OTHER BUSINESS OBJECTIVES

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As the National Taxpayer Advocate, I advocate for all taxpayers, regardless of whether they reside in the United States or abroad. Our hearts go out to the impacted people in Israel, the West Bank, and Gaza because of the terrorist attacks beginning on October 7, 2023. I applaud the IRS for quickly providing filing and some payment relief for these taxpayers.

IRS Notice 2023-71

On Friday, October 13, 2023, the IRS issued Notice 2023-71, which provides a postponement of the due dates for filing tax returns and making payments. Affected taxpayers will have until October 7, 2024, to file tax returns, make tax payments, and perform certain time-sensitive acts listed in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2018-58, 2018-50 I.R.B. 990 (December 10, 2018), that are due to be performed on or after October 7, 2023, and before October 7, 2024.

The affected taxpayers are:

• Any individual whose principal residence, and any business entity or sole proprietor whose principal place of business, is located in the State of Israel, the West Bank or Gaza (covered area);
• Any individual affiliated with a recognized government or philanthropic organization and who is assisting in the covered area, such as a relief worker;
• Any individual, business entity or sole proprietor, or estate or trust whose tax return preparer or records necessary to meet a deadline for postponed acts are located in the covered area;
• Any spouse of an affected taxpayer, solely with regard to a joint return of two married individuals; and
• Any individual visiting the covered area who was killed, injured, or taken hostage as a result of the October 7, 2023, terrorist attacks.

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