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Tag Archive for Nina Olson

NTA: IRS Free File Program Is Failing To Achieve Its Objectives And Should be Substantially Improved Or Eliminated

National Taxpayer Advocate - Nina Olson

In this week’s National Taxpayer Advocate blog, I highlight my concerns with the IRS Free File program, which I also discussed in my 2018 Annual Report to Congress and my recent testimony before the House Ways and Means Subcommittee on Oversight. I also describe my personal experience using Free Fillable Forms and make some recommendations for improving these products. This is a bit of a long post, but the topic requires some background discussion to understand how we got to where we are today.

Background

The IRS Restructuring and Reform Act of 1998 directed the IRS to set a goal of increasing the e-file rate to at least 80 percent by 2007. In 2002, the IRS entered into an agreement with a consortium of tax software companies, known as Free File, Inc. (FFI), under which the companies would provide free tax return software to a certain percentage of U.S. taxpayers, and in exchange, the IRS would not compete with these companies by providing its own software to taxpayers. The agreement has been renewed at regular intervals, and for at least the past decade, the agreement has provided that the consortium would make free tax return software available for 70 percent of taxpayers (currently, about 105 million), particularly focusing on increasing access for economically disadvantaged and underserved communities, as measured by adjusted gross income.

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NTA: Recommends Taxpayers Vote On How Tax Dollars Are Spent

Nina Olson - Vote How Tax Dollars Are Spent
Require The IRS To Provide TaxPayers With A “Receipt” Showing How Their Tax Dollars Are Spent

Present Law IRC § 7523 requires the IRS to provide taxpayers with very basic information regarding federal taxes and federal spending. Specifically, the IRS is required to include pie-shaped graphs in its instructions for Forms 1040, 1040A, and 1040EZ showing the relative sizes of major budget outlay categories and major income categories. In the 2017 Form 1040 instructions booklet, the IRS published two graphs on page 103 with data from fiscal year (FY) 2016.

Reasons For Change

IRC § 7523 was enacted for tax years beginning after 1990. The purpose of the statute—namely, to help taxpayers understand the connection between the taxes they pay and the benefits they receive—is important, and it is likely that some taxpayers who perceive that connection will be more compliant with their tax obligations. However, the National Taxpayer Advocate believes the information required by IRC § 7523 is too cursory to achieve its objective. It would be more helpful to provide each taxpayer with personalized information regarding the taxpayer’s own contributions, such as the taxpayer’s marginal tax rate, effective tax rate, and tax benefits claimed.

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IRS Fraud Detection – A Process That Is Challenging For Taxpayers To Navigate An Outdated Case Management System Resulting In Significant Delays Of Legitimate Refunds – Part 2

Nina Olson - IRS Fraud Detection - Part 2

In my last blog, I discussed issues that arose during the 2018 filing season that contributed to the delay of taxpayers’ refunds when those taxpayers’ returns were selected into the non-IDT refund fraud program, including:

  • timing issues with the matching of third-party information;
  • how the system does not consider how third-party information would affect a taxpayer’s refund, and
  • how the pre-refund wage verification program’s case management system, Electronic Fraud Detection System (EFDS), had to have third-party information uploaded manually instead of systemically.

These issues resulted in an unprecedented increase in Taxpayer Advocate Service (TAS) case receipts in 2018 as more affected taxpayers sought TAS assistance.

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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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TAS Research Shows That Education Improves EITC Compliance

Nina Olson, IRS, Taxpayer Advocate Service, EITC

Recently, the IRS provided its response to my Most Serious Problem addressing EITC issues in the 2017 Annual Report to Congress. I want to reiterate my recommendation that the IRS should provide a dedicated toll-free Extra Help telephone line for EITC taxpayers.I’ve made similar recommendations here, here, and here. The IRS has not agreed to implement my recommendation. Instead, the IRS responded to my latest recommendation by saying, in part: Read more

The IRS Might Recover EITC Using Its Newly Discovered Post-Processing Math Error Authority, But Is It Constitutional?

Nina Olson- IRS Might Recover Earned Income Tax Credit

My June Report to Congress included an Area of Focus entitled: “The IRS Has Expanded Its Math Error Authority, Reducing Due Process for Vulnerable Taxpayers, Without Legislation and Without Seeking Public Comments.”  The post-processing math error issue came up after a report by the Treasury Inspector General for Tax Administration (TIGTA) said the IRS improperly paid refundable credits, including the Earned Income Tax Credit (EITC), to those filing 2016 returns with taxpayer identification numbers (TINs) (e.g., Social Security Numbers) that were issued after the due date of the returns. TINs are long strings of numbers that can easily contain typos. The IRS committed to “evaluate this population for inclusion in the appropriate post-refund treatment program.”  Perhaps because it costs $1.50 to resolve an erroneous EITC claim using automated math error authority (MEA) compared to $278 for an audit (according to TIGTA), the Wage and Investment Division (W&I) planned to use MEA to recover these credits in 2018.

I asked Counsel about the legality of using MEA to disallow credits long after the IRS had processed the returns (i.e., post-processing) and paid them. Counsel responded on April 10, 2018, with a Program Manager Technical Advice (PMTA) that approved the practice (here). It concluded there were no due process concerns. This blog explores the due process that the government may be constitutionally required to provide before recovering EITC from those who depend on it to survive.

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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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Taxpayer Advocate Services (TAS) Cases Demonstrate The Harm Caused By IRS Policies On Passport Certification

Nina Olson- IRS Passport Certification

My last blog on passport issues discussed the IRS’s continued refusal to exclude already open TAS cases from passport certification and my efforts to advocate for these taxpayers in the form of almost 800 Taxpayer Assistance Orders (TAOs) and a Taxpayer Advocate Directive that I plan to further elevate to the Commissioner. Today, I want to provide an update on TAS cases and discuss some examples that show how the IRS’s refusal to provide a stand-alone notice prior to certification harms taxpayers.

Internal Revenue Code (IRC) § 7345 authorizes the IRS to certify a taxpayer’s seriously delinquent tax debt to the Department of State for the purposes of passport denial, limitation, or revocation. A seriously delinquent tax debt is an assessed, individual tax liability exceeding $51,000 (adjusted for inflation) for which either a notice of federal tax lien has been filed or a levy has been made. The law requires only two forms of notice to taxpayers:  language in Collection Due Process (CDP) hearing notices and a notice sent “contemporaneously” with the certification the IRS sends to the Department of State.

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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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National Taxpayer Advocate: 2019 Objectives Report To Congress

Nina Olson, 2019 Taxpayer Advocate Objective

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.

The President’s Management Agenda for 2018 states: “Federal customers . . . deserve a customer experience that compares to – or exceeds – that of leading private sector organizations, yet most Federal services lag behind the private sector.”  The Agenda identifies several Cross-Agency Priority (CAP) Goals, including CAP Goal 1: Modernize IT to Increase Productivity and Security, and CAP Goal 4: Improving Customer Experience with Federal Services.  The Agenda notes that “the 2016 American Consumer [sic] Satisfaction Index and the 2017 Forrester Federal Customer Experience Index show that, on average, Government services lag nine percentage points behind the private sector.” How do the American Customer Satisfaction Index (ACSI) and the Forrester Federal Customer Experience Index assess the IRS’s customer service relative to other federal agencies and the private sector? The American Customer Satisfaction Index ranks the Treasury Department 12 out of 13 Federal Departments and says the Treasury Department’s score is effectively an IRS score because most citizens make use of Treasury services via the [IRS] tax-filing process.

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