Welcome to the National Taxpayer Advocate's Blog
Welcome to the National Taxpayer Advocate’s blog about taxpayer rights and taxpayer burden. For starters, let me explain that I use the term “taxpayer rights” here to mean not only statutory rights but also the unstated “agreement” underlying our system of voluntary tax compliance. That is, the government expects and requires taxpayers to pay the correct amount of tax due under the laws, and in return commits to treating taxpayers fairly, with dignity and respect, and providing them with the necessary assistance and guidance to comply with the tax law. In short, taxpayer rights incorporate the government’s obligation to minimize taxpayer burden.
Why a blog about taxpayer rights, and why now? As I said in my preface to the 2011 Annual Report to Congress, the IRS has experienced a huge increase in its workload while its resources have declined over the last two years. This trend increases the risk that the IRS will take shortcuts that, perhaps unintentionally, deprive taxpayers of their ability to dispute effectively an IRS action or achieve a reasonable resolution to their tax problems.
The imbalance between work and resources drives the IRS to use automation to increase the productivity of its employees. While on the surface this observation may seem like a good thing, further analysis yields a number of areas of concern. First, how should we define “productivity”? Is it the number of audits closed or levies issued during the year? Or is it the number of cases in which taxpayers achieved resolution – from their perspective – on their first point of contact with the IRS? Are these definitions irreconcilable? (I don’t think so, but I’ll explore that issue in future postings.)
Second, at what points in the tax administration process should we use automated processes? Will automation be used to free IRS employees from manual, clerical tasks so that they can talk longer or with more taxpayers and provide them the assistance they need? Or will automation result in downsizing, thereby reducing the ability of its employees to engage with taxpayers?
Automation and technology can enhance our modes of communication with taxpayers. For example, the IRS has automated its correspondence examination process such that no single IRS employee is responsible for an audit from start to finish and taxpayers often don’t even realize they are under audit. (For an interesting study about the audit barriers low income taxpayers face and the impact of representation on such audits, see “IRS Earned Income Credit Audits: A Challenge to Taxpayers” in volume 2 of the 2007 Annual Report to Congress.) Instead, we could use computer technology to enable “virtual” face-to-face audits, where taxpayers could see the IRS employee handling their cases. The taxpayers could hold up documents to their home computer cameras, and IRS employees could capture digital images for the taxpayers’ case files. (To learn more about the IRS’s examination strategy, check out our research study, “An Analysis of the IRS Examination Strategy: Proposals to Maximize Compliance, Improve Credibility, and Respect Taxpayer Rights.”)
Third, what impact do automated processes, increased productivity, and less direct engagement with taxpayers have on taxpayer rights? If a taxpayer can never get through to the IRS on the phone to protest an impending levy action, he or she may suffer significant economic harm – such as not being able to pay rent or utilities and consequent eviction or loss of winter heat. Less tangible but as troubling in its implications for tax administration is the fact that the fundamental right to be heard would have been violated, reducing respect for the tax system and increasing the risk of noncompliance.
All of these concerns are heightened when the IRS has a constrained budget, which is the environment today, because the IRS is under pressure to collect more revenue with fewer resources.
Hence this blog. I intend to examine, on a regular basis, the impact of governmental action on taxpayers’ ability to comply with the tax laws and resolve their disputes in a way that affords them all of the rights to which they are entitled, including minimal burden. By using the topics covered in my Annual Reports to Congress as a basis for discussion, I hope to increase the transparency of U.S. tax administration. In each posting, I’ll explore why I am interested in a given issue covered in the Reports, provide additional background information, and describe new developments.
As I note in the Annual Report, “[we] may disagree fervently about the appropriate level of taxation, but whatever that level is, the law must be enforced fairly and consistently." To achieve that goal, taxpayers must be informed about why taxation and the work of the IRS matter to U.S. society today and what is needed to run a truly effective and productive tax system that respects taxpayer rights and minimizes taxpayer burden.
So, here’s to the opening of a dialogue about tax administration, taxpayer rights, and taxpayer burden. For more information about what inadequate IRS funding means to you as a taxpayer, read our #1 Most Serious Problem, “The IRS Is Not Adequately Funded to Serve Taxpayers and Collect Taxes."
Read the full 2011 Annual Report to Congress.