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NTA Suggests Greater Transparency – Great Ideas!



Annette Nellen - Greater Transparency For Taxpayers

The IRS National Taxpayer Advocate’s Annual Report to Congress released in February ( IR-2019-11 (2/12/19) + Report) includes the 2nd edition of the “Purple Book” with 59 legislative recommendations to improve taxpayer rights and tax administration. Two of the recommendations aim to strengthen taxpayer rights. They also improve the transparency of the tax system, which is a principle of good tax policy.

The two recommendations:

1. Codify as Section 1 of the Internal Revenue Code:
a. The Taxpayer Bill of Rights (at present, see Section 7803(a)(3)).
b. A Taxpayer Rights Training Requirement, and
c. The IRS Mission Statement

2. Require the IRS to issue all taxpayers a “receipt” that shows how their tax dollars are spent.

For details, see links and all 59 recommendations here.

These are great ideas as they bring greater attention to these important items to help taxpayers better understand the tax system and the federal budget.

I recommend they go farther:

  • Prominently display a link to the Taxpayer Bill of Rights on the IRS website (taxpayers won’t read IRC Section 1, although I suspect the training requirement means IRS must help taxpayer to know of the TBOR).
  • Create lesson plans for high schools that explain tax basics and the TBR. The IRS already has some materials on its website, although most likely don’t know it is there.
  • A taxpayer receipt should be producible on the IRS website and lawmakers should be required to include a link on their websites. Individuals should be instructed where to find their tax liability on their 1040 and W-2 forms. The website should also have a tool for helping the individual estimate how much gasoline, alcohol, tobacco, airline, and other excise taxes they paid. And why not help them understand indirect taxes by including their share of the corporate income tax.
  • The receipt should provide additional information such as:
    • Average and marginal tax rates and how they compare to other taxpayers.
    • Highlight tax breaks they received such as credits, itemized deductions such as the mortgage interest deduction, and exclusions such as employer-provided health care, etc. and the tax savings they derived from these preferences (perhaps even refer to them as subsidies).
    • Their share of the national debt (and others in their filing family).
    • Where to get more information to help them understand federal taxes and the budget.
    • Contact information for their elected officials.
    • I have more here – https://www.thetaxadviser.com/newsletters/2016/apr/transparency-for-individual-taxes.html.
  • Update Section 7523 which requires Form 1040 instruction books to include a pie chart showing broad categories of federal revenues and another one showing broad categories of federal spending to be on the IRS website and linked on the webpage of other federal agencies and every member of Congress. For more, see my 2012 article on this topic.

I hope these recommendations are enacted. Our tax system and taxpayer benefits from greater transparency as people better understand their taxes and the system as a whole. They can ask better questions of their elected officials as to why rules are written the way they are, how the national debt will be paid down (and how we’ll pay the growing interest expense on it).

what do you think? Contact Annette Nellen.

 

 

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Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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One thought on “NTA Suggests Greater Transparency – Great Ideas!

  1. Thank you Annette for bringing attention to the Tax Payer Bill of Rights. The list of Rights is in the correct direction.

    However, may I suggest to you that the list of Rights is seriously flawed in what it leaves out. Additionally the “Taxpayer Bill of Rights” is inherently deceptive as it is highly suggestive as if similar to the Bill of Rights in the Constitution. Exhibit A: The Right to Fair and Just Tax System. Anyone reading that would think that it means what it says: a fair and just tax system. However, read the small print and no it does not mean that but only the fair and just ***administration*** of the existing tax system, and has nothing to do with that tax system being fair and just in and of itself.

    Needed Adds:
    Right to a Simple and Easily Understood Tax System. This is a major failing of the 76,000+ page and growing tax system.
    Right to Reasonable Compliance Costs in Time and Money.
    Right to a Fair and Just Tax System – to mean what it says!
    It all fails spectacularly for double taxed 9 million US family members tax resident overseas. As the US does not provide resident services or protection of local property and rights, or ZERO services, then the double tax (& very complex compliance & costly compliance) is not justified.

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