Taxpayer advocate says IRS strained
Workload, budget cuts put citizen services, rights at risk
A new federal report warned Wednesday that the Internal Revenue Service’s budget is too small and its workload too heavy for the agency to give taxpayers adequate service or protect their tax rights fully.
The problems have grown so serious that National Taxpayer Advocate Nina Olson, in delivering her office’s annual report to Congress, called for enactment of a comprehensive taxpayer bill of rights to protect Americans from being improperly penalized.
“The overriding challenge facing the IRS is that its workload has grown significantly in recent years, while its funding is being cut,” Olson said of the findings. “This is causing the IRS to resort to shortcuts that undermine fundamental taxpayer rights and harm taxpayers — and at the same time reduces the IRS’ ability to deliver on its core mission of raising revenue.”
Driving the IRS workload increase is increasing complexity of federal tax laws and regulations and frequent changes in the tax code — an estimated 579 changes in 2010 alone that had to be explained to taxpayers, put in IRS computers and added to auditor training.
The IRS also has had to process a host of refundable tax credits enacted in recent years, such as the Health Coverage Tax Credit. Compounding the workload rise, those programs have spawned a rise in bogus refund claims. Many were filed by thieves who stole the identities of honest taxpayers, the report said.
Simultaneously, Congress has moved to cut IRS funding, making it harder for the agency to collect all taxes owed — placing a heavier burden on compliant taxpayers.
Other problems and threats the report said taxpayers face include:
-Mistakes by automated data-matching systems the IRS uses to identify and target potentially inaccurate or fraudulent tax returns. “By defining these procedures as ‘not an examination,’ without explaining what they are and what taxpayer rights apply, the IRS abridges longstanding taxpayer rights,” the report said.
-IRS decisions to avoid classifying most inquiries as formal taxpayer audits. That leads to loss of audit protections, including the right to avoid repetitive and unneeded exams and to challenge the IRS in U.S. Tax Court.
-IRS notices about math errors on tax returns are often vague, making them difficult to decipher and contest.