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Tag Archive for National Taxpayer Advocate

When Evaluating The Pilot Program On The Participation Of Counsel And Compliance, IRS Appeals Should Be Transparent

Nina Olson, National Taxpayer Advocate

Over the years, I have expressed significant concern with the continuing erosion of taxpayers’ right to appeal an IRS decision in an independent forum. (IRC § 7803(a)(3)). Of late, one of the major challenges to this right and to the independence of Appeals has been Appeals’ express desire to include IRS Counsel and Compliance in conferences regardless of whether taxpayers consent to this expanded participation. I have blogged about this before and also raised the subject in my Fiscal Year 2019 Objectives Report to Congress. Nevertheless, the issue continues to exist and I believe it is important to revisit the concerns and suggest a transparent, data-driven way forward.

In October 2016, Appeals revised its Internal Revenue Manual (IRM) guidance to encourage the inclusion of Counsel and Compliance in conferences (IRM 8.6.1.4.4). Beyond my own misgivings, this emphasis generated substantial uneasiness within the tax practitioner community.

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National Taxpayer Objectives Report To Congress For 2019

Nina Olson-National Taxpayer Advocate 2019

The advocate states in the current environment, it is critical for the IRS to direct its resources where they have the greatest positive effect on achieving tax compliance, particularly voluntary tax compliance.  Over the long run, voluntary compliance is the least expensive form of compliance to maintain.  It is also the least burdensome from the taxpayer’s perspective.  Importantly, voluntary tax compliance is heavily linked to customer service and the customer experience.

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Letter To TaxConnections Begs For Help From National Taxpayer Advocate Or Tax Professionals

Tax Question - Taxpayer Needs Help From Taxpayer Advocate

TaxConnections Offline Message Left on 16 Oct 2018, 05:47 PM 

To whom it may concern,

I am sending this letter because I was not informed by the IRS about the wages on my 1040 that did not match the information reported to the IRS back in March of 2018. There was never a letter sent to me about this matter.The only thing I received was a letter stating my identity was being checked for fraud and I had to send information pertaining my identity. I did that and still never heard anything back. According to https://taxpayeradvocate.irs.gov/reports/fy-2018-objectives-report-to-congress/news-release National Taxpayer Advocate Nina E. Olson praises the IRS for running a generally successful filing season, including reducing the incidence of identity theft, implementing new accelerated Form W 2 reporting requirements, and matching Forms W 2 against tax returns claiming refunds. Ms. Olson says taxpayers who require assistance from the IRS are continuing to face significant challenges obtaining it. I am one of these people and my rights have been violated in the: #1 TAXPAYER BILL OF RIGHTS.

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The IRS Refuses To Provide Mandatory Employee Training On Taxpayer Rights

Nina Olson The IRS Refuses To Provide Mandatory Employee Training

For many years, I urged the IRS to adopt a Taxpayer Bill of Rights (TBOR) and for Congress to add the list of fundamental taxpayer rights to the Internal Revenue Code (IRC). In addition to its legal significance, a thematic, principle-based list of core taxpayer rights is an important source of foundational principles to guide IRS employees in their dealings with taxpayers, and provide information to taxpayers to assist them in their dealings with the IRS. A TBOR also serves as an organizing principle for tax administrators in establishing agency goals and performance measures. A TBOR also helps the IRS to restore trust in the tax system and ensure taxpayers know their rights and are able to avail themselves of those rights. Read more

The Systemic First Time Abatement Policy Currently Under Consideration By The IRS Would Override Reasonable Cause Relief And Jeopardize Fundamental Taxpayer Rights

Nina Olson August 30

The IRS offers a First Time Abatement (FTA) program that is intended to be, and often is, taxpayer-favorable. Nevertheless, as currently implemented, the FTA sometimes overrides the reasonable cause abatement and disadvantages taxpayers. The scope of this problem will increase dramatically if the IRS follows through with its current proposal to automatically apply the FTA. In this week’s blog, I will focus on how this systemic FTA would be implemented, how it would essentially write the reasonable cause abatement out of the law, and how a revised approach would allow taxpayers to enjoy the intended benefits of both abatements.

The First Time Abatement Provides an Important Mechanism for Penalty Relief

Occasionally, otherwise-compliant taxpayers make good faith mistakes regarding the filing of their tax return or payment of their tax obligations. Further, not all of these errors are eligible for the reasonable cause abatement provided by Internal Revenue Code (IRC) §§ 6651(a) and 6656(a). In my 2001 Annual Report to Congress, I provided the following example of this problem:

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IRS Administration Of The Section 965 Transition Tax Contravenes Congressional Intent And Imposes Unintended Burden On Taxpayers

Nina Olson, National Taxpayer Advocate On Section 965 Transition Tax

When Congress passes legislation as comprehensive and technical as the Tax Cuts and Jobs Act (TCJA), drafting and implementation glitches inevitably arise. This week, I will discuss one that largely affects corporate taxpayers, particularly shareholders of Controlled Foreign Corporations. Spoiler alert: This is a case where Congress enacted a provision with a transition rule intended to be extremely taxpayer-favorable, and the IRS is administering the provision in a way that seemingly runs contrary to congressional intent. It relates to the administration of Internal Revenue Code (IRC) § 965(h). Some of the background is a bit technical, so bear with me.

Prior to tax reform, the United States imposed a relatively high maximum federal corporate income tax rate of 35 percent. According to the House Ways and Means Committee, “many domestic companies were reluctant to reinvest foreign earnings in the United States, when doing so would subject those earnings to high rates of corporate income tax rates.” As a result, those companies “accumulated significant untaxed and undistributed foreign earnings.” In other words, they left their earnings parked overseas.

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IRS Continues To Close Taxpayer Assistance Centers, Despite Taxpayer Advocate Service And Congressional Concerns

Nina Olson, National Taxpayer Advocate

For many years I have reported on the state of service at IRS Taxpayer Assistance Centers (TACs), formerly known colloquially as walk-in sites. In my previous blog, I described my concerns about the IRS appointment system and the message the signs on the doors of TACs send to taxpayers.

I recently learned, that despite my concerns, and concerns from Congress, the IRS has closed nine additional TACs since publication of my 2017 Annual Report to Congress. In December, I reported that the IRS operated 371 TACs. Today the IRS operates only 362 TACs, a reduction of over two percent since my report.

In March, Congress passed the Consolidated Appropriations Act, 2018. In conjunction with that Act, the Senate Committee on Appropriations specifically directed the IRS to produce a report and a study relating to TACs as well as a study relating to improving service to targeted populations.

First, the Committee expressed agreement with the concerns I have expressed and generally directed the IRS to report on steps being taken to prevent TAC closures as follows:

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National Taxpayer Advocate Report: Landmark Tax Legislation

Nina Olson, Landmark Tax Legislation

Twenty years ago this week, the IRS Restructuring and Reform Act of 1998 was enacted. This landmark legislation created significant taxpayer rights – including the office of the National Taxpayer Advocate and Local Taxpayer Advocate offices, Low Income Taxpayer Clinics (more on that in next week’s blog); Collection Due Process hearings (the first time taxpayers had meaningful access to courts to challenge the appropriateness of IRS lien and levy actions), “innocent spouse” relief expansion to provide for separate liability and equitable relief; expansion of offer in compromise relief on grounds of economic hardship, equity, and public policy; protection against lifestyle and repetitive audits. Some provisions are only now being clarified, as in the Graev and Chai line of cases. Other provisions still have not been properly implemented, such as the requirement that a specific employee’s name, phone number, and unique identifying number be placed on manually-generated correspondence. Nevertheless, RRA 98 changed tax administration as we know it, and, in my opinion, moved the United States in the forefront of taxpayer protections.

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The National Taxpayer Advocate Responds To Private Debt Collectors’ Contentions

Nina Olson, IRS Use Of Debt Collectors

Last week, I returned from vacation to read a press release from a newly formed organization consisting of private debt collection (PDC) agencies working IRS accounts. “Nina Olsen [sic] has consistently made false and misleading claims about the IRS and its Private Debt Collection Program to advance her own political agenda,” the organization’s spokesperson asserted.

While I don’t often take the time to respond to ad personam attacks, this one deals with a core IRS program, so I think it deserves a response – particularly given some of the questionable claims it made.

It’s no secret that I believe the collection of taxes is a core governmental function that should not be outsourced to for-profit businesses that are paid on commission. I have written about the use of private collection agencies (PCAs) repeatedly in my annual reports to Congress and elsewhere. But it is worth taking a moment to summarize the basis of my concerns. While others have investigated the practices used by private collection agencies, my focus has been on IRS policies and IRS administration of the statutory program.

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NTA: Real Vs. Unreal Audits And Why This Distinction Matters

Nina Olson, Real Vs. Unreal Tax Audits

Around five months ago, in my 2017 Annual Report to Congress, I identified IRS audit rates and the distinction between “real” and “unreal” audits, as the fourth Most Serious Problem facing taxpayers. I had previously written about this topic in my 2011 and 2016 Annual Reports to Congress, and discussed it in a blog post six years ago.

So, what’s the deal with “real vs. “unreal” audits and why should you care?  I need to first give you a little background. Under section 7602 of the Internal Revenue Code (IRC), the IRS has the authority to examine any books, papers, records, or other data that may be relevant to ascertain the correctness of any return. I call these types of examinations, which can occur through correspondence, at the taxpayer’s home or business, or at an IRS office, “real” or traditional audits.

However, “real” audits don’t quite end the story. The IRS has several other types of compliance contacts with taxpayers that it does not consider to be “real” audits. These types of contacts, which I call “unreal” audits, include math error corrections, Automated Underreporter (AUR) (a document matching program), identity and wage verification, and Automated Substitute for Return (ASFR) (a non-filer program). Why are these types of contacts, which constitute the majority of IRS compliance contacts, important?  First of all, they require taxpayers to provide documentation or information to the IRS and may feel very much like a “real” examination to taxpayers. More importantly, “unreal” audits lack taxpayer protections typically found in “real” audits, such as the opportunity to generally seek an administrative review with the IRS Office of Appeals (Appeals) or the statutory prohibition against repeat examinations. And in case you are curious, the IRS is planning for the increased use of “unreal” audits through automated means with its “Future State” Initiative.

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National Taxpayer Advocate Nina Olson Reports On The IRS Challenges Implementing Tax Cuts And Jobs Act

Nina Olson, Report on Tax Cuts And Jobs Act

National Taxpayer Advocate (NTA) Nina E. Olson today released her mid-year report to Congress that presents a review of the 2018 Filing Season, identifies issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year, and contains IRS responses to the 100 administrative recommendations the NTA made in her 2017 Annual Report to Congress.

The most significant challenge the IRS faces in the upcoming year is implementing the Tax Cuts and Jobs Act of 2017 (TCJA). Olson expresses confidence that the IRS will implement the law successfully. “I have no doubt the IRS will deliver what it has been asked to do,” she writes.

However, she reiterates her concern that IRS funding reductions have undermined the agency’s ability to provide high-quality taxpayer service and modernize its information technology infrastructure. The report finds that IRS funding has been reduced by 20 percent since fiscal year (FY) 2010. “Because of these reductions, the IRS doesn’t have enough employees to provide basic taxpayer service.”

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The IRS Has Not Adjusted Its Private Debt Collection Initiative To Minimize Harm To Vulnerable Taxpayers

Nina Olson, National Taxpayer Advocate

Since the IRS implemented the private debt collection (PDC) initiative last year, I have been concerned that taxpayers whose debts are assigned to private collection agencies (PCAs) will make payments even when they are likely in economic hardship – that is, they are unable to pay their basic living expenses. As discussed in my 2017 Annual Report to Congress, this is exactly what has been happening. The recent returns of approximately 4,100 taxpayers who made payments to the IRS after their debts were assigned to PCAs through September 28, 2017 show:

  • 28 percent had incomes below $20,000;
  • 19 percent had incomes below the federal poverty level; and
  • 44 percent had incomes below 250 percent of the federal poverty level.

As a refresher, the IRS uses 250 percent of the federal poverty level as a proxy for economic hardship in several situations, such as in administering the Federal Payment Levy Program (FPLP). FPLP is an automated system the IRS uses to match its records against those of the government’s Bureau of the Fiscal Service to identify taxpayers with unpaid tax liabilities who receive certain payments from the federal government. IRC § 6331(h) allows the IRS to issue continuous levies for up to 15 percent of federal payments due to these taxpayers who have unpaid federal liabilities. As explained in my 2014 Annual Report to Congress, the IRS excluded Social Security recipients whose incomes were below 250 percent of the federal poverty level after a 2008 TAS research study demonstrated that the FPLP program levied on taxpayers who were experiencing economic hardship.

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