Paul L. Caron

Wednesday, June 26, 2013

National Taxpayer Advocate Releases Reports to Congress, Calls for $1,000 'Apology Payments' to Taxpayers Abused by the IRS

National Taxpayer Advocate Nina Olson today released (IR-2013-63) her semi-annual report to Congress on Fiscal Year 2014 Objectives as well as a special report to Congress on Political Activity and the Rights of Applicants for Tax-Exempt Status:

National Taxpayer Advocate Nina E. Olson today released her statutorily mandated mid-year report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year.  The report expresses particular concern about the impact of budget cuts on the IRS’s ability to meet taxpayer needs, the IRS’s unwillingness to issue full refunds to victims of tax return preparer fraud and shortcomings in IRS procedures for assisting victims of tax-related identity theft.

In addition, Olson released a special report examining the IRS’s use of questionable criteria to screen applicants for tax-exempt status.  The special report analyzes the sources of the problem and makes preliminary recommendations to address them.

“Today, the IRS is an institution in crisis,” Olson wrote.  “In my view, however, the real crisis is not the one generating headlines.  The real crisis facing the IRS – and therefore taxpayers – is a radically transformed mission coupled with inadequate funding to accomplish that mission.  As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.”

Cover 1National Taxpayer Advocate Report to Congress: Fiscal Year 2014 Objectives:

Table of Contents


Areas of Focus

Filing Season Review

TAS Research Initiatives

Case Advocacy

Systemic Advocacy

Integrated TAS Technology

Advancing a Climate of Advocacy Through New Approaches to Education


Cover 2National Taxpayer Advocate Special Report to Congress: Political Activity and the Rights of Applicants for Tax-Exempt Status:

The IRS must administer the requirements for tax-exempt status in a nonpartisan and even-handed manner. When an organization seeks exempt status, it is essentially asking all other taxpayers for a contribution to its activities. Thus, the IRS has an obligation to review these applications closely.

According to a report by the Treasury Inspector General for Tax Administration (TIGTA), IRS Tax Exempt Organization (EO) function employees inappropriately selected for further review applications for tax-exempt status under Internal Revenue Code (IRC) § 501(c)(4) from organizations with “Tea Party” or similar terms in their names. These terms were on a “Be on the Lookout” or BOLO list, which flagged 298 applicants for further review. According to TIGTA, the IRS also asked the applicants unnecessary questions, including questions about donors, and delayed processing their applications while awaiting guidance about how to handle them. TIGTA found that IRS employees used inappropriate selection criteria because they did not understand the law or believed it was unworkable, and they created inappropriate job aids and information requests that were not vetted.

TAS has reviewed the TIGTA report, researched the applicable legal standards and IRS procedures, searched for TAS cases involving these issues, and reviewed known systemic issues in EO. Although TAS agrees with TIGTA’s recommendations, we reviewed these materials to further analyze the causes of the problem, and determine why it was not identified or corrected sooner. Our goal was to develop additional recommendations to help prevent the problem from recurring and restore trust with the taxpaying public. A summary of TAS’s findings and recommendations, which fall into four broad categories, follows:

  1. Lack of Guidance and Transparency
  2. Absence of Adequate Checks and Balances
  3. Management and Administrative Failures
  4. EO’s Cultural Difficulty with TAS

The National Taxpayer Advocate plans to make recommendations on this subject in her year-end report.8 At a minimum, she recommends that Congress enact a Taxpayer Bill of Rights that sets forth ten broad rights, modeled on the U.S. Constitution’s Bill of Rights, to help make existing rights clearer and help taxpayers better understand them. The National Taxpayer Advocate has made this recommendation in prior annual reports, and the treatment of § 501(c)(4) applicants violated most of the ten proposed taxpayer rights.

We further recommend that Congress authorize the National Taxpayer Advocate to make symbolic “apology payments” of up to $1,000 to taxpayers where the IRS has caused excessive expense or undue burden to the taxpayer, and the taxpayer has experienced a significant hardship. This is something that tax administrations in a number of other countries already provide for. For present purposes, we offer the following preliminary proposals for consideration and discussion by Congress and the IRS, which merit additional study, but are likely to evolve after further analysis.

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The Pigford payments were $50,000. Why not use $50,000 instead of $1000

Posted by: Col Douglas Mortimer | Jun 27, 2013 3:37:04 AM

why not take the money from obama's travel budget?

Posted by: dw.dude | Jun 26, 2013 5:15:49 PM

"Unfortunately, you and I pay."

And that's why so many are so willing to do it. These people will not be fined. They will not be charged with crimes. They will receive no punishment whatsoever. In fact, I predict many will get bonuses and promotions for being repressive, obedient thugs for the Democratic Party leadership.

Think of IRS as a budding form of the Stasi.

IRS - Internal Repression Soldiers

Posted by: Michael Hiteshew | Jun 26, 2013 2:55:21 PM

NO!!! There is no need to dole out funds we do not have, to people who received no financial injury. If they felt slighted, then grow up and get over yourself already! Just take your ball and go home. Not every minor slight deserves a windfall. Get a grip.

Posted by: Nancy Prosser | Jun 26, 2013 1:44:26 PM

Too little, too late. the IRS is on the hook for massive damages when civil rights suits get into high gear. Look for 100s of millions in loss, not including defence costs. Unfortunately, you and I pay.

Posted by: garrettc | Jun 26, 2013 11:39:11 AM

The Apology Payments are a good idea, but even better would be automatic $1,000 payments to anyone who is audited. Ideally, we'd compensate people enough that a person would *want* to be audited if his conscience was clean, just as a good worker likes it when his boss checks the quality of his work.

Posted by: Eric Rasmusen | Jun 26, 2013 11:35:38 AM

I keep hearing the IRS is underfunded, yet they seem to have plenty of time to waste on harassment of conservative citizens and conferences. They held 225 conferences from 2010 to 2012, or about two per week. Can't they train online like most businesses do? The government is a lot of things, underfunded isn't one of them. Instead of spending tax payer funded time on airfair, cocktails, videos, lavish rooms and food, why not spend that time figuring out why they pay refunds to fraudulent accounts?

Posted by: Gmama | Jun 26, 2013 10:52:34 AM

$1000 is a pittance. They should take all IRS employee bonuses for the next 4 years and redirect them to the abused parties.

Posted by: Ancient Bacon | Jun 26, 2013 10:49:16 AM