The National Taxpayer Advocate’s Annual Report To Congress

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ERIN COLLINS - NATIONAL TAXPAYER ADVOCATE

The National Taxpayer Advocate’s Annual Report to Congress identifies taxpayers’ problems and provides suggestions to further protect taxpayer rights and ease taxpayer burden.

National Taxpayer Advocate 2023 Purple Book: Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and Improve Tax Administration

INTRODUCTION

STRENGTHEN TAXPAYER RIGHTS AND TAXPAYER SERVICE

  1. Elevate the Importance of the Taxpayer Bill of Rights by Redesignating It as Section 1 of the Internal Revenue Code

IMPROVE THE FILING PROCESS

  1. Treat Electronically Submitted Tax Payments and Documents as Timely If Submitted Before the Applicable Deadline
  2. Authorize the IRS to Establish Minimum Competency Standards for Federal Tax Return Preparers
  3. Extend the Time for Small Businesses to Make Subchapter S Elections
  4. Adjust Individual Estimated Tax Payment Deadlines to Occur Quarterly
  5. Eliminate Duplicative Reporting Requirements Imposed by the Bank Secrecy Act and the Foreign Account Tax Compliance Act

IMPROVE ASSESSMENT AND COLLECTION PROCEDURES

  1. Require That Math Error Notices Describe the Reason(s) for the Adjustment With Specificity, Inform Taxpayers They May Request Abatement Within 60 Days, and Be Mailed by Certified Mail
  2. Continue to Limit the IRS’s Use of “Math Error Authority” to Clear-Cut Categories Specified by Statute
  3. Require Independent Managerial Review and Written Approval Before the IRS May Assert Multiyear Bans Barring Taxpayers From Receiving Certain Tax Credits and Clarify That the Tax Court Has Jurisdiction to Review the Assertion of Multiyear Bans
  4. Allow Additional Time for Taxpayers to Request Abatement of a Math Error Assessment Equal to the Additional Time Allowed to Respond to a Notice of Deficiency When the Math Error Notice Is Addressed to a Person Outside the United States
  5. Provide That Assessable Penalties Are Subject to Deficiency Procedures
  6. Direct the IRS to Implement an Automated Formula to Identify Taxpayers at Risk of Economic Hardship
  7. Provide That “an Opportunity to Dispute” an Underlying Liability Means an Opportunity to Dispute Such Liability in the U.S. Tax Court
  8. Prohibit Offset of the Earned Income Tax Credit (EITC) Portion of a Tax Refund to Past-Due Federal Tax Liabilities
  9. Require the IRS to Waive User Fees for Taxpayers Who Enter Into Low-Cost Installment Agreements or Who Have an Adjusted Gross Income Equal to or Less Than 250 Percent of the Federal Poverty Level
  10. Improve Offer in Compromise Program Accessibility by Repealing the Partial Payment Requirement and Restructuring the User Fee
  11. Modify the Requirement That the Office of Chief Counsel Review Certain Offers in Compromise
  12. Require the IRS to Refund Any Payment Collected Pursuant to a Federal Tax Lien That Exceeds the Amount of an Accepted Offer in Compromise
  13. Require the IRS to Release All Levies Upon Acceptance of an Offer in Compromise and Return to the Taxpayer Any Amount Collected Pursuant to the Levies in Excess of the Agreed Payment Amount
  14. Require the IRS to Mail Notices at Least Quarterly to Taxpayers With Delinquent Tax Liabilities
  15. Clarify When the Two-Year Period for Requesting Return of Levy Proceeds Begins
  16. Protect Retirement Funds From IRS Levies, Including So-Called “Voluntary” Levies, in the Absence of “Flagrant Conduct” by a Taxpayer
  17. Provide Taxpayer Protections Before the IRS Recommends the Filing of a Lien Foreclosure Suit on a Principal Residence
  18. Provide Collection Due Process Rights to Third Parties Holding Legal Title to Property Subject to IRS Collection Actions
  19. Extend the Time Limit for Taxpayers to Sue for Damages for Improper Collection Actions
  20. Revise the Private Debt Collection Rules to Eliminate the Taxpayers Intended to Be Excluded by the Taxpayer First Act

REFORM PENALTY AND INTEREST PROVISIONS

  1. Convert the Estimated Tax Penalty Into an Interest Provision to Properly Reflect Its Substance
  2. Apply One Interest Rate Per Estimated Tax Underpayment Period
  3. Pay Interest to Taxpayers on Excess Payments of Estimated Tax to the Same Extent Taxpayers Must Pay a Penalty on Underpayments of Estimated Tax
  4. Extend Reasonable Cause Defense for the Failure-to-File Penalty to Taxpayers Who Rely on Return Preparers to E-File Their Returns .Reduce the Federal Tax Deposit Penalty Imposed on Taxpayers Who Make Timely Tax Deposits
  5. Authorize a Penalty for Tax Return Preparers Who Engage in Fraud or Misconduct by Altering a Taxpayer’s Tax Return
  6. Clarify That Supervisory Approval Is Required Under IRC § 6751(b) Before Proposing Penalties
  7. Require an Employee to Determine and a Supervisor to Approve All Negligence Penalties Under IRC § 6662(b)(1)
  8. Modify the Definition of “Willful” for Purposes of Finding Report of Foreign Bank and Financial Accounts Violations and Reduce the Maximum Penalty Amounts

STRENGTHEN TAXPAYER RIGHTS BEFORE THE OFFICE OF APPEALS

  1. Require Taxpayers’ Consent Before Allowing IRS Counsel or Compliance Personnel to Participate in Appeals Conferences

STRENGTHEN THE OFFICE OF THE TAXPAYER ADVOCATE

  1. Clarify That the National Taxpayer Advocate May Hire Legal Counsel to Enable Her to Advocate More Effectively For Taxpayers
  2. Clarify the Authority of the National Taxpayer Advocate to Make Personnel Decisions to Protect the Independence of the Office of the Taxpayer Advocate
  3. Clarify the Taxpayer Advocate Service’s Access to Files, Meetings, and Other Information
  4. Authorize the National Taxpayer Advocate to File Amicus Briefs
  5. Require the IRS to Address the National Taxpayer Advocate’s Comments in Final Rules
  6. Authorize the Office of the Taxpayer Advocate to Assist Certain Taxpayers During a Lapse in Appropriations
  7. Repeal Statute Suspension Under IRC § 7811(d) for Taxpayers Seeking Assistance From the Taxpayer Advocate Service

STRENGTHEN TAXPAYER RIGHTS IN JUDICIAL PROCEEDINGS

  1. Expand the Tax Court’s Jurisdiction to Hear Refund Cases
  2. Authorize the Tax Court to Order Refunds or Credits in Collection Due Process Proceedings Where Liability Is at Issue
  3. Promote Consistency With the Supreme Court’s Boechler Decision by Making the Time Limits for Bringing All Tax Litigation Subject to Equitable Judicial Doctrines
  4. Extend the Deadline for Taxpayers to Bring a Refund Suit When They Have Requested Appeals Reconsideration of a Notice of Claim Disallowance But the IRS Has Not Acted Timely to Decide Their Claims
  5. Authorize the Tax Court to Sign Subpoenas for the Production of Records Held by a Third Party Prior to a Scheduled Hearing
  6. Provide That the Scope of Judicial Review of “Innocent Spouse” Determinations Under IRC § 6015 Is De Novo
  7. Clarify That Taxpayers May Raise Innocent Spouse Relief as a Defense in Collection, Bankruptcy, and Refund Cases
  8. Fix the Donut Hole in the Tax Court’s Jurisdiction to Determine Overpayments by Non-Filers With Filing Extensions

MISCELLANEOUS RECOMMENDATIONS

  1. Restructure the Earned Income Tax Credit (EITC) to Make It Simpler for Taxpayers and Reduce Improper Payments
  2. Adopt a Consistent and More Modern Definition of “Qualifying Child” Throughout the Internal Revenue Code
  3. Allow Taxpayers the Option of Using Prior Year Income to Claim the Earned Income Tax Credit (EITC) During Federally Declared Disasters
  4. Exclude Taxpayers in Specific Circumstances From the Requirement to Provide a Social Security Number for Their Children to Claim the Child Tax Credit
  5. Clarify Whether Dependents Are Required to Have Taxpayer Identification Numbers for Purposes of the Credit for Other Dependents
  6. Allow Members of Certain Religious Sects That Do Not Participate in Social Security and Medicare to Obtain Employment Tax Refunds
  7. Amend the Lookback Period for Allowing Tax Credits or Refunds to Include the Period of Any Postponement or Additional or Disregarded Time for Timely Filing a Tax Return
  8. Modify the Requirement That Written Receipts Acknowledging Charitable Contributions Must Pre-Date the Filing of a Tax Return
  9. Make Standard Mileage Rates Consistent
  10. Eliminate the Marriage Penalty for Nonresident Aliens Who Otherwise Qualify for the Premium Tax Credit
  11. Encourage and Authorize Independent Contractors and Service Recipients to Enter Into Voluntary Withholding Agreements
  12. Require the IRS to Specify the Information Needed in Third-Party Contact Notices
  13. Expand the Protection of Taxpayer Rights by Strengthening the Low Income Taxpayer Clinic Program
  14. Compensate Taxpayers for “No Change” National Research Program Audits
  15. Establish the Position of IRS Historian Within the Internal Revenue Service to Record and Publish Its History

Appendix 1: Additional Reference Materials for Legislative Recommendations in This Volume

Appendix 2: Prior National Taxpayer Advocate Legislative Recommendations Enacted Into Law

Go To National Taxpayer Advocate

National Taxpayer Advocate

The Office of the Taxpayer Advocate, also called the Taxpayer Advocate Service, is an office that is independent of the Internal Revenue Service, the United States Government’s tax collection agency, although the two bodies often work closely together.

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1 comment on “The National Taxpayer Advocate’s Annual Report To Congress”

  • Michael S Cash

    14: Prohibit Offset of Earned Income Credit to delinquent tax liabilities. Since EIC is essentially a federal welfare payment to low income taxpayers it is reasonable to use it for its intended purpose of providing financial assistance to low income taxpayers. IRS does not levy on “real” welfare payments so should not levy on EIC.
    22. Protect Retirement funds from levy. A 401(k) account is essentially a pension plan with only one participant as opposed to a traditional institutional pension plan administered by a third party–a union, private company or government plan or Social Security. Payments into traditional plans are protected from levy action. Payments into a private plan should have the same protection. On the flip side, they should be subject to the same restrictions that don’t allow you to withdraw funds until you reach retirement age or retire on disability.

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