Taxpayer Advocate Mid-Year ReportJuly 11, 2018
On June 27, National Taxpayer Advocate Nina E. Olson released her annual Objectives Report to Congress for fiscal year 2019. The report identifies the top issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year, discusses previous TAS recommendations from her 2017 year-end report, and outlines additional concerns and suggestions she has for the Internal Revenue Service (IRS) in the near future— particularly how the new tax overhaul will be implemented.
According to Ms. Olson, the most significant challenge currently facing the IRS is the implementation of the Tax Cuts and Jobs Act (TCJA) of 2017. Implementation requires the programming of an estimated 140 systems, writing or revising nearly 450 forms and publications, and issuing guidance on dozens of TCJA provisions—nearly twice what the IRS expects in a typical year. Ms. Olson expects the IRS to fulfill its obligations, but describes implementation as a “herculean task” and a “very heavy lift.”
She specifically notes that the IRS needs to provide more guidance and service to help taxpayers comply with and understand the TCJA, in addition to documenting precisely how the IRS is falling short of expectations. The combination of what the report cites as under-funding, inadequate training, misguided goals, old IT systems, and the administrative changes associated with tax reform, are interfering with even basic IRS guidance and service. Ms. Olson describes how the IRS is stretched so thin “that it cannot contemplate doing another thing, even if it would save it resources downstream, reduce rework for its employees, or reduce burden for taxpayers or enhance taxpayer protections.”
TAS’ prior reports have consistently advocated for increased IRS funding to adequately address the concerns of taxpayers. Yet, she notes that IRS funding has been reduced by 20 percent since fiscal year 2010 on an inflation-adjusted basis. These significant budget cuts have forced the agency to hold and cut back on the modernization of their IT systems, hindered the ability of the organization to adapt to and administer new tax law changes—GAO found that the IRS has the two oldest databases in the federal government. “Because of these reductions, the IRS doesn’t have enough employees to answer the phones, to conduct outreach and education, or to provide basic taxpayer service,” Olson said.
For example, the report cites that the IRS telephone assistors answered only 29 percent of received calls, while fourteen states do not have stakeholder liaison employees whose job entails conducting education and outreach to small business and self-employed taxpayers.
In conjunction with the TCJA, the Taxpayer Advocate Service has opened a new website, Tax Reform Changes, which lists key tax return items under current law (2017), shows which ones have been affected by the new law, and shows how the changes will be reflected on tax year 2018 returns filed in 2019. Taxpayers can navigate the site by checking out key tax return topics or seeing them illustrated on a 2017 Form 1040. The line-by-line explanations enable taxpayers to view how the new law could change their tax filings and to consider how to plan for these changes. The website will incorporate updated information as it becomes available.
Of the 100 administrative recommendations in Ms. Olson’s 2017 year-end report, the IRS has only implemented or agreed to implement 35 of them. Thus, in her objectives and recommendations for the coming year, Ms. Olson described TAS’ focus on only 12 priority issues. The top five include implementation of the TCJA, the effectiveness of IRS service channels in meeting taxpayer needs, the development of an integrated case management system within the IRS, the impact of high false-positive fraud rates on legitimate taxpayers, and the protection of taxpayers facing financial hardship from IRS and private debt collection activities.
According to NSBA’s 2018 Taxation Survey two-thirds of small-business owners believe the complexity associated with doing their taxes will remain the same or increase for the coming fiscal year. The work of the National Taxpayer Advocate is essential in providing advice and counsel to the IRS, taxpayers, and small businesses on complex tax issues.
The full report can be found here.