Few people are aware of her, but Nina Olson is our national taxpayer advocate, charged with regularly making recommendations to improve the U.S. tax system. She has recently sounded some alarms, saying, "The real crisis facing the IRS -- and therefore taxpayers -- is a radically transformed mission coupled with inadequate funding to accomplish that mission. As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done."
Every year, Olson urges Congress to make some much-needed changes to the tax system, and whether or not the lawmakers listen to her, we certainly can, and we can then urge our representatives to heed her calls.
For example, in the wake of the recent Tea-Party-related tax kerfuffle, Olson issued a special report on IRS criteria used to determine which entities receive tax-exempt status. She noted:
To promote voluntary compliance with the tax laws, the IRS must be impartial both in fact and in appearance. The revelation that the IRS used 'tea party' and similar labels to select tax-exemption applicants for further review, even if intended solely as a workload management tool, has created the appearance that the IRS was not impartial. It is imperative the IRS move quickly to regain the public's trust and take steps to prevent this kind of incident from happening again.
In her analysis, the existing criteria that IRS employees must apply are rather vague.
- She cites the scope of tax-preparer fraud, and while calling for "adequate oversight" of tax-return preparers, she laments that victims are not always issued replacement refunds. A taxpayer's refund check is generally reissued if the scammer stole a paper check, but not if the offender used a fraudulent direct-deposit account. (Cases of identity theft also result in replacement refunds for taxpayers.)
- In discussing how the IRS does not have sufficient funding to fulfill all obligations, she offered some eye-popping numbers: In fiscal year 2012, the IRS collected $2.52 trillion in taxes on a budget of $11.8 billion. In other words, for every dollar allocated to the IRS, it delivered $214 in tax revenue. Given that kind of return, it certainly seems sensible to give the IRS more funding to help it collect more of what is due.
- Olson also pointed out that taxpayers are receiving worse service than they did almost a decade ago. In 2004, she noted, the average wait time for a call to the IRS was three minutes. In 2012, that had ballooned to 17 minutes. Not all calls even get answered -- 87% were answered in 2004, while that number fell to just 68% in 2012.
These kinds of alarming details indeed point to an agency in crisis, though solutions exist and have been detailed.
Taxpayer Bill of Rights
Finally, know that Olson has proposed a Taxpayer Bill of Rights with 10 categories that could be used as a framework by which various IRS policies and actions could be measured:
- The right to be informed.
- The right to be assisted.
- The right to be heard.
- The right to pay no more than the correct amount of tax.
- The right of appeal.
- The right to certainty.
- The right to privacy.
- The right to confidentiality.
- The right to representation.
- The right to a fair and just tax system.
Stay tuned for more from Olson and her team. At the end of every year, she is required to submit a report that identifies at least 20 of the most serious problems encountered by taxpayers, discusses the 10 tax issues that are most frequently litigated, and offers administrative and legislative recommendations to resolve taxpayer problems.
If you feel strongly about any of the issues she addresses, contact your representatives in Washington and let them know!