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The National Taxpayer Advocate annual report to congress (FY 2001).

Congress mandates that The National Taxpayer Advocate Office of the IRS provide a full and subtantative analysis of its activities for the year, including a summary of significant taxpayer problems and recommendations to solve those problems. This table--The Most Serious Problems Encountered by Taxpayers--keeps the order of the rankings given by National Taxpayer Advocate Nina Olson. We have taken the liberty of adding the NSA point of view on the issues. A second table, Legislative Recommendations, will appear in the June NPA.
The Most Serious Problems Encountered by Taxpayers

Taxpayer Problems IRS Response

(1) Inability to reach IRS Making improvements is a top
 through toll-free lines. priority.


(2) Multiple definations of We are following the law, which
 "Qualifying Child." is complex.

(3) Determining EITC We are following the law, which
 eligibility. is complex.



(4) Insuring correct answers on Providing accurate answers
 the toll-free line. continues to be a high priority.




(5) Documenting EITC Proper documentation is
 eligibility. needed to determine eligibility.




(6) Refunds inquiries. The IRS has taken steps to
 remedy this situation.



(7) EITC examinations. The IRS is making improvements
 in all steps of the process.



(8) Understanding estimated The penalty protects our pay
 tax payments. as you go system.






(9) Explanation of math The IRS corrects most errors
 errors. and informs the taxpayer. We
 are trying to improve clarity.


(10) Processing claims for Internal changes will speed up
 refunds, some processing. More complex
 amended returns will take
 longer to process.


(11) Recertification for EITC. The IRS is working to improve
 this complex process.



(12) Computing tax using A new shortened Schedule D
 Schedule D. will be introduced in 2001.




(13) Understanding Federal The IRS has been aggressive in
 Tax Depository educating taxpayers and
 requirements. devoting significant resources
 to the development of
 educational tools.

(14) Obtaining EINs. Securing an EIN has been a
 continuing problem for the
 taxpayer. Improvements planned
 for 2002 should significantly
 ease the problem.

(15) Misapplied payments. While the volume has decreased
 significantly over the years,
 misapplied payments remain a
 challenge. Procedural changes
 and new computer applications
 have resolved some
 discrepancies.

(16) Lack of access to free tax The needs of low-income tax-
 income taxpayers. to the IRS.



(17) Processing Offer in The growth of OIC applications
 Compromise (OIC) has caused processing delays. A
 applications. great effort is being expended
 to speed up processing.

(18) Computing the Until the underlying complex
 Alternative Minimum Tax tax law is revised, taxpayers will
 (AMT). continue to have problems
 computing the AMT.

(19) Determination and The Automated Underreporter
 notification of revised tax cases are closed within 18
 liability. months in 98% of the cases; the
 general examination program
 requires additional focus and
 staffing to accomplish the goal.

(20) Cost of E-File for low The IRS does not play a role in
 income taxpayers. setting fees.


(21) Automated Underreporter A new program has been
 (AUR) tax assessments. implemented which enables the
 IRS to access the USPS National
 Change of Address database,
 However, it is outside of IRS'
 control on how taxpayers
 choose to interact with the IRS.



(22) Status of "innocent Taxpayers expect their claims to
 spouse" claims. be handled expeditiously when
 the steps required by law add
 165 days in optimal situations.
 The IRS has taken a variety of
 steps to expedite the processing
 of claims.

(23) Delay in receiving IRS will assemble a study group
 documents. ... to explore ways in which to
 improve the tracking and
 availability of returns as they
 are retrieved and filed.


Taxpayer Problems TAS View

(1) Inability to reach IRS Inability to access the phone
 through toll-free lines. system remains a major
 problem.

(2) Multiple definations of Congressional action is
 "Qualifying Child." necessary.

(3) Determining EITC The IRS is doing the best is can.
 eligibility. The EITC population cannot
 afford to get help and they
 generally fear the IRS.

(4) Insuring correct answers on The IRS needs to select people
 the toll-free line. who can provide accurate
 answers to questions and
 Congress needs to simplify
 some of the rules.

(5) Documenting EITC The IRS must improve its
 eligibility. standards for acceptable
 documentation.



(6) Refunds inquiries. The IRS is making progress;
 TAS is working with W & I to
 find ways to reduce undue
 burdens.

(7) EITC examinations. EITC examinations are a
 challenging area. The IRS needs
 to be sensitive to the low-
 income population.

(8) Understanding estimated Index the penalty to
 tax payments. inflation.






(9) Explanation of math The IRS needs to place more
 errors. emphasis on improving the
 system.


(10) Processing claims for There is no mechanism to track
 refunds, the time it takes to process
 amended returns.



(11) Recertification for EITC. We look forward to discovering
 which of our suggestions will
 be implemented for the 2003
 filing season.

(12) Computing tax using The law is complicated and
 Schedule D. will be difficult to simplify
 without legislative changes.



(13) Understanding Federal In spite of IRS' extensive
 Tax Depository outreach, business taxpayers
 requirements. struggle to comply with FTD
 requirements.


(14) Obtaining EINs. TAS will monitor changes and
 assess progress.




(15) Misapplied payments. The IRS has made improve-
 ments. Continued support of
 IRS' information systems
 modernization efforts is
 essential to resolve this
 problem.


(16) Lack of access to free tax While the IRS has provided
 income taxpayers. taxpayers, a small fraction
 actually uses these services.


(17) Processing Offer in The IRS is making some
 Compromise (OIC) meaningful changes that should
 applications. reduce the OIC inventory.


(18) Computing the We concur with the IRS that tax
 Alternative Minimum Tax law must also change...
 (AMT).


(19) Determination and The delay in resolving an
 notification of revised tax examination causes unnecessary
 liability. frustration and anxiety to the
 affected taxpayer.



(20) Cost of E-File for low Many taxpayers incur a
 income taxpayers. substantial cost to receive an
 EITC.

(21) Automated Underreporter The AUR issue ranks first
 (AUR) tax assessments. among the ten "most litigated
 cases" ... this issue continues to
 be a major source of cases with
 the TAS.





(22) Status of "innocent TAS is receiving fewer cases--
 spouse" claims. based in part on IRS' recently
 revised procedures for keeping
 taxpayers apprised of the status
 of their claims.



(23) Delay in receiving TAS welcomes the opportunity
 documents. to participate in a study group
 to improve the tracking,
 retrieving and refiling of tax
 returns.


Taxpayer Problems NSA Reaction

(1) Inability to reach IRS The practitioner community is
 through toll-free lines. weary of IRS excuses; fix the
 phone system!

(2) Multiple definations of We agree with TAS and JCT--
 "Qualifying Child." we need a legislative fix.

(3) Determining EITC The EITC program should be
 eligibility. administered by another
 agency. It is a welfare program
 that burns up IRS resources.

(4) Insuring correct answers on No comment.
 the toll-free line.




(5) Documenting EITC It is very constly to help EITC
 eligibility. people. Practitioners generally
 do not charge for these returns
 and our time is squandered by
 an unresponsive IRS.

(6) Refunds inquiries. Practitioners appreciate the IRS
 efforts in this area. However, we
 need to be able to make contact
 before we can fix the problem.

(7) EITC examinations. Most EITC work is pro bono.
 We don't have time for a
 protracted exam process.


(8) Understanding estimated These penalties can be unfair-
 tax payments. many taxpayers are normally
 compliant but complex rules
 make them non-compliant. The
 elderly feel greatly abused
 when tagged with a 2210
 penalty.

(9) Explanation of math Most notices sent to taxpayers
 errors. are forwarded unopened to
 practitioners. Translating IRS
 speak is problematic.

(10) Processing claims for We hope modernization will
 refunds, speed up claims for refunds.
 The clients call us and we, in
 turn, have to contact the IRS
 which can be a nightmare.

(11) Recertification for EITC. The rules are unclear.




(12) Computing tax using Once the information is
 Schedule D. entered, calculating the tax
 is done by the computer. The
 problem is to obtain accurate
 information.

(13) Understanding Federal FTD penalties attack normally
 Tax Depository compliant taxpayers. Those
 requirements. whose businesses fail generall
 pay no tax and no penalties.


(14) Obtaining EINs. NSA cheers any effort to make
 it easier to obtain EINs. We
 are disappointed that W & I
 said it shared changes with
 AICPA but not NSA.

(15) Misapplied payments. We cheer some of the
 improvements made to date.
 However, getting through to
 the correct IRS employee is
 still problematic.



(16) Lack of access to free tax Most practitioners provide pro
 income taxpayers. some lower income taxpayers
 and generally resolve their
 IRS problems at no charge.

(17) Processing Offer in Processing is the least of the
 Compromise (OIC) OIC problem. The program
 applications. needs to change and to be
 reassigned out of Compliance.

(18) Computing the NSA agrees with the IRS, TAS
 Alternative Minimum Tax and JCT: The AMT needs to be
 (AMT). revised or repealed. It is a
 middle class predator.

(19) Determination and When an "underreporter" case
 notification of revised tax is caused hy an IRS error,
 liability. practitioners generally represent
 the taxpayer at no additional
 charge. We would be grateful
 for any constructive change.

(20) Cost of E-File for low The E-File process adds
 income taxpayers. significant cost, in money and
 in time, to practitioners.

(21) Automated Underreporter Practitioners generally absorb
 (AUR) tax assessments. the cost of representing
 taxpayers in AUR cases. It is
 particularly frustrating to us
 when the problem is caused by
 the IRS. We are pleased the IRS
 implemented the USPS
 recommendation we made to
 CAG in 1996.

(22) Status of "innocent The innocent spouse cases are a
 spouse" claims. loss leader for practitioners, but
 we work these cases anyway.





(23) Delay in receiving Delays in retrieving
 documents. information results in
 additional costs to practitioners
 while undermining the
 taxpayers' confidence in the
 system.

Bill Stevenson heads the federal taxation area of NSA's Right to
Practice Committee. He was selected Accountant of the Year for 2001.
COPYRIGHT 2002 National Society of Public Accountants
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Author:Stevenson, William
Publication:The National Public Accountant
Geographic Code:1USA
Date:Apr 1, 2002
Words:1632
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