The long-lasting effects of the new economic reality have reached the government. According to the National Taxpayer Advocate’s Annual Report to Congress and Special Report to Congress, the IRS is currently underfunded and unable to meet the service needs of taxpayers trying to complete returns and understand tax law changes. National Taxpayer Advocate Tina Olson describes today’s IRS as “an institution in crisis.” Because of an eight percent cut in its budget and an increasing workload, the IRS can only answer about 61 percent of taxpayer calls, which leaves callers on hold more than 15 minutes and has drastically reduced the number of questions answered at walk-in sites.
Reductions in Service
Taxpayers with questions about current tax laws and filing procedures can expect long phone call hold times, unanswered correspondence and fewer walk-in locations for in-person service. In the two years between 2010 and 2012, hold times increased from 12 minutes to almost 17 minutes and just over 30 percent of calls went unanswered. The IRS responds to under half of over eight million pieces of written correspondence it receives from taxpayers. In addition, they have eliminated tax preparation service for low-income, disabled and elderly taxpayers. The NTA expresses concern about reductions in service affecting taxpayer rights and increases the burden on taxpayers to understand compliance requirements.
Complexity Prevents Compliance
A substantial increase in tax law complexity is a big part of the problem. Olson claims that tax law complexity makes compliance difficult and leaves the revenue system subject to fraud, undermining trust. With almost 5,000 changes to the tax code since 2001 and a Tax Code that’s nearly four million words, reducing the IRS budget puts it in peril of uncollected funds that keep the government running, causing an increase in the federal deficit. The resultant taxpayer identity theft, higher rates of targeted audits and tax return preparer fraud create a growing problem that Nina Olson says needs immediate reforms.
In order to maximize tax compliance and protect taxpayer rights, the NTA recommends that congressional committees develop new procedures to adequately fund the IRS and align with taxpayers’ service needs. Recommended changes include simplified requirements for qualifying children, a rule that duplicate notices be sent to credible alternate addresses and a requirement that taxpayer protections be provided prior to lien foreclosure suits on principal residences. The most litigated issues that the NTA reported needing tax reform on are gross income, summons enforcement and frivolous issues penalties. The NTA believes that the IRS’ shrinking service needs to be improved to deliver higher quality service in telephone and correspondence services, free return preparation and electronic filing for individual taxpayers, increased online services, service-wide strategy for face-to-face taxpayer services and direct taxpayer education and outreach.
IRS Problems Harm Taxpayers
The NTA Annual Report also outlines how the IRS service problems harm taxpayers, especially vulnerable taxpayers and victims of identity theft. It reports that the IRS doesn’t help victims of identity theft in a proper or timely manner and fails to resolve accounts of victims of return preparer misconduct. These failures result in payroll tax noncompliance and unreasonably delay valid refund claims that trigger systemic filters. Lack of service also jeopardizes legitimate tax collection and taxpayer trust.
The NTA claims that underfunding IRS initiatives undermines taxpayers’ statutory rights, jeopardizing taxpayers and the service providers who assist them, including payroll services, tax preparers and financial planners.
While PAYDAY has noticed increased hold times and that written responses are taking longer, we have several avenues in which to reach an IRS agent and are diligent and proactive in answering any questions or concerns for our clients. Let us help you, too.