Issue Number: IR-2022-11
Inside This Issue
National Taxpayer Advocate delivers Annual Report to Congress; focuses on taxpayer impact of processing and refund delays
WASHINGTON — National Taxpayer Advocate Erin M. Collins released her 2021 Annual Report to Congress, calling calendar year 2021 “the most challenging year taxpayers and tax professionals have ever experienced.” The report says tens of millions of taxpayers experienced delays in the processing of their returns, and with 77 percent of individual taxpayers receiving refunds, “processing delays translated directly into refund delays.”
The report credits the Internal Revenue Service for performing well under difficult circumstances. Since the start of the pandemic, the IRS, in addition to its traditional work, has implemented significant programs enacted by Congress. Among other things, it has issued 478 million stimulus payments (referred to as Economic Impact Payments or “EIPs”) totaling $812 billion and has sent Advance Child Tax Credit (AdvCTC) payments to over 36 million families totaling over $93 billion.
The report says “[t]he imbalance between the IRS’s workload and its resources has never been greater.” Since fiscal year (FY) 2010, the IRS’s workforce has shrunk by 17 percent, while its workload – as measured by the number of individual return filings – has increased by 19 percent. The report reiterates the National Taxpayer Advocate’s longstanding recommendation that Congress provide the IRS with sufficient funding to serve taxpayers well.
Major challenges for taxpayers
IRC § 7803(c)(2)(B)(ii)(III) requires the National Taxpayer Advocate to prepare an Annual Report to Congress that contains a summary of the ten most serious problems encountered by taxpayers each year. For 2020, the National Taxpayer Advocate has identified, analyzed, and offered recommendations to assist the IRS and Congress in resolving ten such problems.
IRS RECRUITMENT, HIRING, AND EMPLOYEE RETENTION: Quality Taxpayer Service and Protection of Taxpayer Rights Are Directly Linked to the IRS’s Need to Improve Its Recruitment, Hiring, and Retention Strategies
Since FY 2010, the IRS workforce has shrunk by approximately 20 percent, about even with the inflation-adjusted reduction in the IRS budget. Inadequate funding combined with weaknesses in hiring and retention strategies have created an insufficient and disproportionately aging workforce, with an estimated 26 percent of IRS employees eligible to retire during FY 2021. The report says insufficient experienced staffing in the IRS’s Human Capital Office and hiring restrictions outside its control have left the IRS ill-equipped to handle the agency’s hiring needs. TAS recommends the IRS hire additional human resource specialists to meet hiring needs, restructure internal hiring processes to reduce cycle times, and renegotiate the hiring process with the National Treasury Employees Union to allow for up to 50 percent of all hiring announcements to be filled externally.
In the National Taxpayer Advocate’s Fiscal Year 2021 Objectives Report to Congress, Erin M. Collins discusses starting her position in March 2020 amid a pandemic, her experience thus far, and her expectations and approach to her role as the National Taxpayer Advocate. She also discusses subjects that she thinks warrant the closest scrutiny and congressional oversight. These subjects include improving taxpayers’ experience throughout the year; protecting the rights of taxpayers impacted by COVID-19; reducing burden resulting from the implementation of the Coronavirus Aid, Relief and Economic Security (CARES) Act; implementing the Taxpayer First Act; and protecting the rights of taxpayers who receive “soft letters” requiring them provide information outside an examination.
The National Taxpayer Advocate submitted to Congress the 2019 Annual Report to Congress and the third edition of the National Taxpayer Advocate’s Purple Book, which presents legislative recommendations designed to strengthen taxpayer rights and improve tax administration for all taxpayers.
Section 7803(c)(2)(B)(ii) of the Internal Revenue Code (IRC), as amended by the Taxpayer First Act, dictates that the National Taxpayer Advocate submit a report to Congress each year describing the 10 most serious problems encountered by taxpayers and making administrative and legislative recommendations to mitigate those problems. The 2019 Report to Congress and the Purple Book do just that by identifying problems, making dozens of recommendations for administrative change, making 58 recommendations for legislative change, and analyzing the tax issues most frequently litigated in federal courts.
Volume 1, which I present to you today, includes an analysis of the 2019 Filing Season, an assessment of the impact of the recent government shutdown on the Taxpayer Advocate Service (TAS), 12 Areas of Focus, and a discussion of TAS advocacy initiatives, casework, and research studies. Volume 2, IRS Responses and National Taxpayer Advocate’s Comments Regarding Most Serious Problems Identified in 2018 Annual Report to Congress, and Volume 3, Making the EITC Work for Taxpayers and the Government: Improving Administration and Protecting Taxpayer Rights, will be published next month.
Volume 2 will contain the IRS’s general responses to each of the administrative recommendations we identified in our 2018 Annual Report to Congress. Volume 3 will contain a comprehensive assessment of the Earned Income Tax Credit (EITC) and will make recommendations designed to increase the participation rate of eligible taxpayers and reduce overclaims by ineligible taxpayers. During the spring, Professor Leslie Book of the Villanova School of Law, a leading EITC expert, served as a “professor in residence” with TAS, and Margot Crandall-Hollick, an EITC expert with the Congressional Research Service, worked with TAS on a detail. Together with TAS’s EITC experts, including former Low Income Taxpayer Clinic attorneys and researchers, they conducted a broad review of existing EITC research and drafted a comprehensive set of recommendations to assist Congress and the IRS in improving the program.
Every year, the National Taxpayer Advocate’s Annual Report to Congress identifies at least 20 of the nation’s most serious tax problems. These issues can affect taxpayers’ basic rights and the ways they pay taxes or receive refunds, even if they’re not involved in a dispute with the IRS.
As your voice at the IRS, the National Taxpayer Advocate uses the Annual Report to elevate these problems and recommend solutions to Congress and the highest levels of the IRS.
Tax Law Questions: The IRS’s Failure To Answer The Right Tax Law Questions At The Right Time Harms Taxpayers, Erodes Taxpayer Rights, And Undermines Confidence In The IRS
In 2014, the IRS implemented a policy to only answer tax law questions during the filing season, roughly from January through mid-April of any year. It justified this abrupt change in policy as a cost-savings effort in a time of budget constraints. This change does not comport with an agency charged with administering the tax law and focused on the customer experience.
Taxpayers have ever-changing tax situations year-round. People move, open a business, close a business, get married, get divorced, have children, and experience many other life changes that affect their tax obligations. Forcing taxpayers into a 3.5-month window to ask questions or making it necessary for them to seek advice from a third-party source can be frustrating and costly to the taxpayer and result in eroded trust and confidence in the IRS. Read Full Discussion
Transparency Of The Office Of Chief Counsel: Counsel Is Keeping More Of Its Analysis Secret Just When Taxpayers Need More Guidance Than Ever
Thank you for inviting me to testify at your hearing today on IRS operations. As you know, I lead the Taxpayer Advocate Service (TAS), an independent organization within the IRS that advocates for taxpayers. TAS has two main functions – “case advocacy” and “systemic advocacy.” In most years our case advocacy operations
assist more than 200,000 taxpayers in resolving account problems with the IRS.2 On the systemic side, TAS identifies problems that are harming groups of taxpayers, and we make administrative and legislative recommendations to mitigate those problems.
By statute, I am required to submit two annual reports to the congressional tax-writing committees each year, and I describe, and make recommendations to mitigate, the “most serious problems” facing taxpayers in my December 31 report.