Taxpayer Advocate

The National Taxpayer Advocate submitted its mid-year report to congress a couple of weeks ago. The report identifies priority challenges and issues for upcoming year. The entire report can be seen at this link.

The National Taxpayer Advocate has expressed concern about IRS collection practices in prior reports and has, in particular, made recommendations to reduce the harm that unproductive liens can inflict on taxpayers. The report expresses continuing concern about the IRS’s practice of automatically filing tax liens based on a dollar threshold instead of basing lien-filing decisions on an analysis of the taxpayer’s financial situation. In cases where the IRS has determined a taxpayer is suffering an economic hardship or possesses no significant assets, the filing of a lien is unlikely to further tax collection but will further damage a taxpayer’s credit rating, thus harming the taxpayer, increasing the taxpayer’s cost of living, and reducing the chance the taxpayer will be able to obtain a job and pay off the tax debt. Consequently, TAS will work with the IRS to evaluate the results of its limited changes to the lien-filing process.

The Taxpayer Advocate Service is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. If you believe you are eligible for TAS assistance, you can reach TAS by calling the TAS toll-free number at 1–877–777–4778 or TTY/TDD 1-800-829-4059.

Here’s what the Report contains:

II. AREAS OF FOCUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 A. T axpayers May Not Be Adequately Protected During a Lapse in Appropriations . . . . . . . . . 1 B. TA S Will Continue to Focus on the IRS’s Ability to Collect Taxes and Meet Taxpayer Needs as Its Responsibilities Have Expanded and Its Funding Has Been Reduced . . . . . . . 2 C. TA S Will Focus on Its Own Ability to Meet Sharply Increasing Taxpayer Needs . . . . . . . . . 4 D. TA S Will Engage Taxpayers in a Dialogue About Tax Complexity and Tax Reform . . . . . . . . 6 E. TA S’s Continued Advocacy Efforts to Improve the Earned Income Tax Credit Program . . . . . 7 1. C ertain EITC Proposals Do Not Address Underlying Causes of Noncompliance and Could Result in Incorrect Disallowance . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2. TA S Is Conducting Research to Better Understand the Causes of EITC Noncompliance . . 9 a. E ffectiveness of Affidavits During EITC Audits . . . . . . . . . . . . . . . . . . . . . . . . 9 b. EITC Examination Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 F. T he IRS Needs To Do More to Alleviate the Harm Its Lien Filing Practices Can Create For Many Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 G. T he IRS Needs to Improve Its Identity Theft Victim Assistance Strategy . . . . . . . . . . . . . 14 H. TA S Continues to Advocate for Changes in the Two-Year Equitable Relief Deadline and for Victims of Domestic Violence and Abuse . . . . . . . . . . . . . . . . . . . . 18 I. TA S Maintains a Close Eye on the IRS’s Health Care Implementation Efforts . . . . . . . . . . 20 1. Small Business Health Care Tax Credit Calculator . . . . . . . . . . . . . . . . . . . . . . . . 21 2. R esearch Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3. C ommunication Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 J. E xempt Organization Reinstatement Applications May Cause Significant Delays in Processing Exempt Organization Applications . . . . . . . . . . . . . . . . . . . . . . . . . . 22 K. IR S’s Inconsistency and Failure to Follow Its Published Guidance Damaged Its Credibility With Practitioners Involved in the Offshore Voluntary Disclosure Program . . . 23 L. TA S Will Work with the IRS on Taxpayer Communication and Correspondence Issues . . . . . 25 III. FILING SEASON REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 A. IR S Administration of the First-Time Homebuyer Credit Became a Debacle . . . . . . . . . . . 28 1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2. P roblems Before and During the Filing Season . . . . . . . . . . . . . . . . . . . . . . . . . 28 3. TA S Actions in FY 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 B. L egislation Passed Late in 2010 Impacted the 2011 Filing Season . . . . . . . . . . . . . . . . . 32 Table of Contents ii Table of Contents C. IR S Implements a Revised Procedure for Processing Unsigned Returns that Results in a Loss of Valuable Taxpayer Data . . . . . . . . . . . . . . . . . . . . . . . . . . 32 1. TA S Actions in FY 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 D. IR S Measures of Filing Season Success Are Limited . . . . . . . . . . . . . . . . . . . . . . . . . 34 E. TA S Is Concerned that IRS Implementation of the Adoption Credit May Unduly Burden Eligible Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2. TA S Actions in FY 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 IV. CASE ADVOCACY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 A. TA S Analyzes Economic and Systemic Burden Case Receipts for Process Improvements . . . . 37 B. TA S Identifies Problems and Trends Which Negatively Impact Taxpayers and Advocates to Resolve These Issues . . . . . . . . . . . . . . . . . . . . . . . . . 41 C. I mprovements in Advocacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 1. I mportance of the Taxpayer Assistance Order . . . . . . . . . . . . . . . . . . . . . . . . . . 43 D. I mproving Advocacy in TA S Earned Income Tax Credit Cases . . . . . . . . . . . . . . . . . . . 44 E. TA S Access to IRS Systems and Other Automated Technologies . . . . . . . . . . . . . . . . . . 46 F. I mproving Case Advocacy Business Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 1. New Quality Standards Emphasize TA S Advocacy Mission . . . . . . . . . . . . . . . . . . 48 2. TA S Seeks to Improve Customer Satisfaction in FY 2012 and Beyond . . . . . . . . . . . . 49 V. SYSTEMIC ADVOCACY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 A. Systemic Advocacy is Everyone’s Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 B. E nhanced Evaluation and Review of Potential Systemic Issues . . . . . . . . . . . . . . . . . . . 51 C. P roactive Solicitation of Potential Systemic Issues . . . . . . . . . . . . . . . . . . . . . . . . . . 53 D. C ollaborative Approach to Resolving Systemic Issues . . . . . . . . . . . . . . . . . . . . . . . . 54 1. Working Advocacy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 2. R esolving Advocacy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 E. A dvocating through the National Taxpayer Advocate’s Annual Report to Congress . . . . . . . 57 F. TA S Is Implementing Significant Changes to Systemic Advocacy Quality Measures . . . . . . . 58 VI. TAS RESEARCH INITIATIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 A. E stimating the Impact of Liens on Taxpayer Compliance Behavior . . . . . . . . . . . . . . . . . 60 B. E valuating the Limited English Proficiency (LEP) Populations Served by the Low Income Taxpayer Clinics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Table of Contents Table of Contents Table of Contents iii C. Factors Impacting Taxpayer Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 D. I dentification of Excessive Collection Statute Expiration Dates (CSEDs) . . . . . . . . . . . . . . 62 E. TA S Efficiency Measure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 F. TA S Workload Distribution Case Weighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 VII. HUMAN CAPITAL AND STAFFING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 A. With Budgetary Challenges, TA S Looks to Alternative Methods for Providing the Annual All-Employee Training Symposium . . . . . . . . . . . . . . . . . . . 67 VIII. INTEGRATED TAS TECHNOLOGY: TASIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 A. TA SIS Will Enhance Online Document Collaboration and Storage . . . . . . . . . . . . . . . . . 70 B. TA SIS Will Improve Submission, Acceptance, and Assignment of Work . . . . . . . . . . . . . 70 C. TA SIS Will Enhance Case Advocacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 D. TA SIS Will Provide New Case Resolution Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 E. TA SIS Will Enhance TA S’s Technical Assistance Process . . . . . . . . . . . . . . . . . . . . . . 72 F. TA SIS Will Support Systemic Advocacy Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 G. TA SIS Will Use Key Words to Facilitate Accurate Electronic Research . . . . . . . . . . . . . . . 73 IX. LOW INCOME TAXPAYER CLINIC GRANT PROGRAM . . . . . . . . . . . . . . . . . . . . . . . 74 X. TAXPAYER ADVOCACY PANEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1 Appendix I: E volution of the Office of the Taxpayer Advocate . . . . . . . . . . . . . . . . . . . I-1 Appendix II: T axpayer Advocate Service Case Acceptance Criteria . . . . . . . . . . . . . . . . . II-1 Appendix III: C ollaborative Efforts Between TA S and IRS . . . . . . . . . . . . . . . . . . . . . . III-1 Appendix IV: L ist of Low Income Taxpayer Clinics . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1 Appendix V: FY 2012 TA S Operational Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1 Appendix VI: TA S Performance Measures and Indicators . . . . . . . . . . . . . . . . . . . . . . VI-1 Appendix VII: L ist of Advocacy Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-1 Appendix VIII: E arned Income Tax Credit Case Review Team Report . . . . . . . . . . . . . . . . . VIII-1 Appendix IX: Systemic Advocacy Measures Memorandum . . . . . . . . . . . . . . . . . . . . . . IX-1