The Taxpayer Advocate Service is an independent organization within the Internal Revenue Service challenged with ensuring that taxpayers are treated fairly; it functions to recommend big picture changes at the IRS.

The head of the TAS, Nina Olson, released her annual report on Jan. 10 to members of Congress detailing the 21 “most serious problems” affecting taxpayers, and made 50 Legislative recommendations. Knowing that a PGA Tour event was starting in four hours, I passed over the 578-page Volume 1 of the report and jumped right to the 71-page executive summary.

As Ms. Olson points out, most of the recommendations in the report have been made in the past, and apparently no one was listening. However, thanks to her seemingly relentless pursuit of taxpayer fairness and the assistance of pretty purple highlights, she delivers compelling guidance to IRS reform.

Without boring you with the details of the lengthy executive summary, I will focus on three of the most serious problems that surprised this CPA with over 30 years of tax experience.

MSP 1 – The Private Debt Collection process, authorized by Congress in 2015, collected $6.7 million of payments and cost the IRS $20 million. As appalling, 44 percent of these collections came from individuals with income below 250 percent of the federal poverty level, ($30,150 for 2017). By law, people under this threshold should be recognized as not noncollectable due to financial hardship.

MSP 5 – Form 1023-EZ, sometimes used to gain tax exempt status under section 501(c)(3) is creating a new risk to tax exempt organizations. A detailed review of approved applications showed that 46 percent of those filed in 2015 and 2016 did not meet the organizational test for qualification under the Code. Presumably, if audited, their tax exempt status would be revoked.

MSP 20 – The IRS uses fraud detection systems that have greatly reduced fraudulent refunds. However, during 2017, of the returns identified as potentially fraudulent, 66 percent (or roughly 60,000 returns), were improperly selected and some 24,000 returns were delayed 31 weeks before a notice of disallowance was issued. Inexcusably, 5,800 refunds were held and the taxpayers were never notified.

The Taxpayer Advocate Service highlighted solutions to each of the 21 most serious problems. Some would require significant outlays to update antiquated phone systems and hire additional staff. Others are as simple as making modifications to policy, code, behavior or even the way that notifications are worded.

As an astonishing example; the TAS study suggests that in regards to people who inadvertently filed for the earned income credit, $97 million dollars could have been saved by sending an informative letter or including an extra help number in the correspondence.

Congress lately has been tied up in heated partisan politics with seemingly little time dedicated to actually getting things done. Nina Olson has provided repeated guidance with well thought out suggestions on how to make the IRS a better organization for the average taxpayer to deal with. I do hope that Congress can stop fighting long enough to listen.

Jamie Boulette, CPA has 30 years of tax experience and is managing director of Perry, Fitts, Boulette & Fitton CPAs with offices in Bath and Oakland. He can be reached at:
[email protected] or 371-8002.

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