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A second call to help hurting taxpayers

The IRS train heading out to help Jim and Jane Taxpayer is getting quite crowded. The latest to board is National Taxpayer Advocate Nina Olson.

Actually, Olson is the conductor. As the National Taxpayer Advocate, she's the person in charge of holding the IRS accountable for doing its job effectively and while also keeping the customers -- that's you and me -- in mind.

And she does a fine job of that in her latest Annual Report to Congress, where she called on the IRS and Capitol Hill to help taxpayers who are in financial trouble. With the recession expected to worsen in 2009, Olson said the tax agency must consider whether filers are facing financial hardship before it starts cracking down on delinquent taxpayers.

"Taxpayers who previously were able to pay their taxes find themselves unemployed, behind on housing payments, and unable to meet their basic living expenses," Olson wrote in the report.

Same song, second verse: But she wasn't the first one to call last week for more compassionate treatment of taxpayers who are having trouble meeting all their costs of living, not just the tax-related ones.

Does IRS Commissioner Doug Shulman have a mole in the Taxpayer Advocate's office? Just days before Olson's plea for enforcement leniency when taxpayers are facing financial troubles, Shulman delivered essentially the same message.

Don't get me wrong. I'm not complaining that the IRS and its in-house but independent watchdog are heading the same direction when it comes to dealing with taxpayers and their economic woes. I'm just surprised. Maybe Olson's added voice will mean my previously mentioned hopeful skepticism will turn into just plain hopefulness when it comes to IRS activities.

What's your biggest tax problem? OK, wise guys and gals, you can just put a lid on the flippant "paying taxes" response. You're stuck with that responsibility.

But Olson's job is to make sure that it's not any more onerous than it has to be. And she deftly  connected the theme of helping taxpayers facing economic hardship to her perennial call for tax code simplification.

Yes, for the umpteenth time, tax complexity topped the annual Taxpayer Advocate list of the 20 most serious problems facing taxpayers. That list is the core of Olson's 2009 Congressional report.

Here are the things she cited as making our taxpaying lives even more of a pain:


  1. Complexity of the tax code

  2. Taxpayer economic difficulties and IRS enforcement actions

  3. Understanding and reporting cancellation of debt income

  4. Employment taxes

  5. Identity theft and the IRS response

  6. IRS service to taxpayers

  7. Navigating the IRS

  8. ITIN (taxpayer ID numbers) applications

  9. IRS access by taxpayers outside the United States

  10. Customer service within compliance

  11. Local compliance issues

  12. Customer service issues in the automated collection system

  13. Emerging issues, such as "virtual worlds" and taxation

  14. Examination process

  15. IRS notice problems

  16. Impact of centralized IRS administration

  17. Incorrect examination referrals and prioritization

  18. Inadequate files management by IRS

  19. Miscalculated interest and penalties

  20. Inefficiencies in and employer burdens imposed by the wage reporting program

To highlight the complexity issue, Olson noted that nearly 73 percent of low-income taxpayers who claim the earned income tax credit use a tax professional to file their return, a move that runs counter to the expectation that individuals with lower incomes are more likely to require simpler returns.

Then we have the constant changing of and addition to the tax code. According to the report, since 2001  more than 3,250 tax code changes have been implemented, including more than 500 in 2008.

AMT still in the mix: Where's the evil alternative minimum tax, you ask? While it didn't specifically make Olson's top 20, she included that nasty parallel tax system in her recommendations to Congress on ways to streamline the tax code. Her suggestion: Repeal the AMT entirely.

She has some support for that position on Capitol Hill, but given Uncle Sam's own financial situation after bailing out so many industries, Congress might just decide it needs to continue to rely on the AMT to help bring in a few more federal bucks.

There's much, much more in the Taxpayer Advocate's complete 2009 Report to Congress. Read it all here.


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Anne Kilkenny

Sure Ms. Olson has talked about the IRS’s shortcomings, ruffled a few feathers, and wrote some tough reports. Unfortunately, Ms. Olson has not been able to get very much accomplished in her seven years on the job other then create a high employee turnover rate. She tried to simplify the tax code by creating a standard definition of a child. When all was said and done, she only made matters worse. So much worse, the law had to be amended.

Ms. Olson also destroyed the very program in the IRS that was set up to assist taxpayers. Before Ms. Olson, if you needed help with a tax problem that was not dealt with satisfactorily through normal channels the IRS would transfer your case over to a group that had the experience in your particular issue and the authority to fix your problem on the spot. Ms. Olson has forsaken this logic. Now if you need help and your case is transferred over to her program it will most likely be assigned to someone that is not experienced or even properly trained to assist you. Moreover, even if the employee understands your situation they will not be able to fix it. They will have to turn around and request the IRS to fix it. Not only is this a poor way to assist taxpayers it also costs taxpayers more money.

The Taxpayer Advocate’s office has an important role of advocating for all taxpayers. While Ms. Olson does an adequate job of this, she does not advocate very well for the individual taxpayer who comes into her office for assistance. For that reason, her employees that work with taxpayers should be reassigned back to the IRS where they will be better trained and better able to quickly assist taxpayers in their moment of need.


The only thing harder than gradually improving the tax code would be to rebuild it from the ground up -- so I suspect that any attempt at reform is going to gradually increase complexity at the same time.

Tax prep software and websites have actually done a lot more than the IRS could to automate and streamline the process. We might actually reach the point where tax preparers are making things easy faster than the IRS is making things more difficult, if we're lucky.

Jeff T

I am of the opinion our tax code needs to be simplified drastically. I have heard it said the tax code is over 60,000 pages long and with all the amendments (changes) it averages out to about one change every day. This being the case it is literally impossible to keep up with it. Something needs to be done.

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