Witnesses want simpler code and better taxpayer rights.

The National Commission on Restructuring the Internal Revenue Service, which wrapped up its public hearings in April, heard a lot of complaints that the tax code was so complex it interfered with the fair and efficient administration of the law. "Witnesses told us the code was too difficult for many taxpayers to comply with and more safeguards were needed to ensure the IRS interacted with taxpayers fairly," said Anita L. Horn, deputy chief of staff of the restructuring commission.

In testimony before the commission last February, Congressman Richard K. Armey (R-Texas) urged the commission to recommend a simpler tax code. He said he supported proposals to provide additional taxpayer protection and safeguards against IRS abuse but that "taxpayers could expect profound changes in the nature of their relationship with the IRS only if Congress dramatically simplified the tax system."

Other testimony at the February hearings focused on the many compliance problems inherent in an overly complex tax code. Michael E. Mares, chairman of the American Institute of CPAs tax executive committee, recommended to the commission a number of ways to improve the IRS's administration of the tax laws, including improvements to the examinations, collections and penalty and interest procedures. Mares told the commission the IRS needed to be more consistent when it implemented new policies designed to assist taxpayers, and he recommended that revenue agents be required to prove there was a "realistic possibility of success" before proposing adjustments against taxpayers.

The commission also heard from Janet Spragens, a law professor at American University, Washington, D.C., who testified about the needs of low-income taxpayers. Spragens said there was a common misconception in Congress that low-income taxpayers had few compliance problems. "Tens of thousands of low-income taxpayer returns are audited each year," said Spragens. She said the topics at the center of the compliance problems were the earned income tax credit, dependency exemptions, tip income and employee vs. independent contractor issues. Spragens called for more funding for taxpayer education and low-income taxpayer assistance programs. "Provisions in the tax code intended to help low-income taxpayers lose their significance when the population for whom they were intended is faced with an administrative and judicial system they cannot deal with," said Spragens.

Problems inside the IRS

John J. Monaco, Price Waterhouse national director--tax strategies and a former IRS assistant commissioner (examinations), told the commission that the quality of examinations would suffer if the IRS did not improve its systems for hiring, training, equipping, evaluating, promoting and terminating its examinations employees. He said the IRS was not hiring the "best-qualified" people to fill new positions. "Changes have to be made to the standards for job qualifications for various occupations in examinations," said Monaco.

He also said congressionally mandated budget constraints were forcing the IRS to cut important continuing education programs for its agents. "Most of the continuing education in the international tax area was canceled in 1996," said Monaco. "How, then, in this most complex area of tax is the quality of the end work product to reach the point of excellence that everyone expects?"

Horn said the commission would recommend to Congress methods by which the tax code could be simplified. "We have heard that the quality of contact between taxpayers and the IRS needs to be improved," said Horn. "We want to recommend ways to make the IRS more efficient, accountable and taxpayer-friendly." The commission will present its report to Congress on July 1.