TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, June 29, 2011

National Taxpayer Advocate Releases Report to Congress

Taxpayer Advocate National Taxpayer Advocate Nina E. Olson today released (IR-2011-71) her mid-year report to Congress, Fiscal Year 2012 Objectives:

The report expresses particular concern about the impact of IRS budget cuts on taxpayer service and tax compliance and about IRS lien filing practices. ...

Impact of Possible Budget Cuts on Taxpayer Service and Compliance.  ...  “In recent years, the IRS has been given more and more tasks, but it is not receiving the resources it needs to fulfill these tasks without cutting corners,” the report says.  “And when the IRS cuts corners, taxpayers can be harmed and revenue collection may suffer.” The National Taxpayer Advocate has previously suggested that the IRS generally be exempt from budget caps or reductions.  She has noted that the “tax gap” (i.e., the amount of tax due but not paid voluntarily and timely) is estimated to be about $345 billion a year.  ... On a budget of about $12.1 billion, the IRS collected $2.35 trillion in FY 2010, or about $194 in federal revenue for each dollar it spent. ...

IRS Collection Practices.  The National Taxpayer Advocate has expressed concern about IRS collection practices in prior reports and has, in particular, made recommendations to reduce the harm that unproductive liens can inflict on taxpayers.  This report praises several recent changes the IRS has announced, including making lien withdrawals available to taxpayers in a wider range of cases.  However, the report expresses continuing concern about the IRS’s practice of automatically filing tax liens based on a dollar threshold instead of basing lien-filing decisions on an analysis of the taxpayer’s financial situation.  The National Taxpayer Advocate believes that such an analysis “should balance the need to protect the government’s interests in the taxpayer’s assets with a corresponding concern for the financial harm the lien will create for that taxpayer.”

In cases where the IRS has determined a taxpayer is suffering an economic hardship or possesses no significant assets, the filing of a lien is unlikely to further tax collection but will further damage a taxpayer’s credit rating, thus harming the taxpayer, increasing the taxpayer’s cost of living, and reducing the chance the taxpayer will be able to obtain a job and pay off the tax debt. ...

Other Areas of Focus.  Additional areas on which the National Taxpayer Advocate intends to focus in the coming year include the following:

  • Taxpayer Impact of Possible Government Shutdown
  • Tax Reform and Tax Complexity
  • Earned Income Tax Credit (EITC) Improvements
  • Tax-Related Identity Theft
  • Innocent Spouse Relief

Media and blogosphere coverage:

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