National Taxpayer Advocate (NTA) Nina E. Olson on January 10 released the NTA 2017 Annual Report to Congress. In the report, Olson described the challenges the IRS faces implementing the recently enacted tax reform legislation. In addition, Olsen unveiled, “The Purple Book,” which presents 50 legislative recommendations intended to strengthen taxpayer rights and improve tax administration.
The NTA’s report pointed out that the approximately 20-percent reduction in IRS funding since fiscal year (FY) 2010 has challenged the Service’s ability to administer the tax system. Moreover, funding cuts have hurt the IRS’s ability:
- to provide acceptable levels of taxpayer service;
- update its technology to improve its efficiency and effectiveness; and,
- maintain programs that both promote compliance and protect taxpayer rights.
Further, since FY 2009, the IRS’s employee training budget has been cut by nearly 75 percent. While Olson said the IRS needs additional funding, she also expressed concern that the Service has sometimes been too quick to cite funding constraints as a basis for inaction. However, notwithstanding funding constraints, she said there were steps the Service could take to improve taxpayer service through creativity and innovation.
Implementing Tax Reform
Still, the report says the implementation of major tax legislation is always a heavy lift for the Service. Implementation challenges include:
- programming and systems updates,
- answering taxpayer phone calls,
- drafting and publishing new forms and publications,
- revising regulations and issuing other guidance,
- training employees on the new law and guidance and
- developing the system’s capacity to verify compliance with new eligibility and documentation requirements.
“The IRS will have its hands full in implementing the new law,” Olson said in releasing the report. “The IRS will have a lot of issues to work through, and taxpayers will have a lot of questions. But with more funding, strong leadership, and a closer working relationship with Congress, I am convinced the IRS can do the job well,” she added.
In addition, the NTA has released a new publication, “The Purple Book,” which is modelled on the Treasury Department’s “Green Book.” The Purple Book contains legislative proposals to improve the IRS. Among the recommendations, Olson has suggested that Congress codify both the Taxpayer Bill of Rights and the IRS mission statement as section 1 of the Internal Revenue Code (IRC). Also, the Purple Book makes other recommendations to:
- strengthen taxpayer rights,
- improve the tax-return filing process,
- improve IRS assessment and collection procedures,
- reform the IRC’s penalty and interest provisions,
- strengthen taxpayer rights before the Office of Appeals,
- enhance confidentiality and disclosure protections and,
- strengthen the independence of the Office of the Taxpayer Advocate.
NTA 2017 Annual Report
Further, the 2017 Annual Report identified 21 problems, made dozens of recommendations for administrative change, made 11 recommendations for legislative change, analyzed the 10 tax issues most frequently litigated in the federal courts and presented seven research studies and two literature reviews. The problems addressed included the IRS’s administration of the private debt collection program, the Service’s increasing emphasis on online taxpayer accounts and its implementation of a recent law that would deny or revoke the passports of taxpayers with significant tax debts.