Refund delayed? Our ability to help may be limited.
Last week, we issued the National Taxpayer Advocate’s annual report to Congress. As some of you probably noticed, we also issued the first-ever edition of the National Taxpayer Advocate “Purple Book.” In this week’s blog, I will explain why we developed the Purple Book and what it’s intended to accomplish.
Section 7803(c)(2)(B) of the Internal Revenue Code requires the National Taxpayer Advocate to issue an annual report to Congress that, among other things, proposes legislative recommendations to resolve systemic taxpayer problems. In our annual reports, we generally make between five and 15 legislative recommendations, and for each recommendation, we present a comprehensive assessment of the problem the recommendation is designed to address and a detailed explanation of how we think our proposed solution will help.
Those discussions are useful for readers wanting to take a deep dive into an issue, and we have continued that format in Volume 1 this year with 11 detailed recommendations. But we’ve decided there are also benefits to presenting all our key recommendations about taxpayer rights and tax administration in a single volume and in a concise form – particularly this year.
During the last two years, Congress has shown renewed interest in addressing and improving the IRS’s operations. Most notably, the House Ways and Means Subcommittee on Oversight has held several hearings to consider “IRS reform.” I testified at the first one last May, which was titled, “IRS Reform: Lessons Learned from the National Taxpayer Advocate.”
The Purple Book is designed to assist the tax-writing committees in their efforts. It presents a concise summary of 50 legislative recommendations that we believe will strengthen taxpayer rights and improve tax administration. Most of the recommendations have been made in detail in our prior reports, but others are presented here for the first time.
The first recommendation we make is that Congress codify the Taxpayer Bill of Rights as Section 1 of the Internal Revenue Code. Most readers of this blog are aware that the IRS in 2014 adopted the Taxpayer Bill of Rights by press release and that Congress in 2015 enacted a requirement that the IRS Commissioner “ensure that all employees of the Internal Revenue Service are familiar with and act in accord with” the provisions of the Taxpayer Bill of Rights. See IRC § 7803(a)(3).
Those were significant steps forward. Yet I believe we can and should do more by making clear that taxpayer rights serve as the foundation for our tax system. While the IRS possesses significant enforcement authority, our system relies on taxpayers to file tax returns on which they self-declare their income (much of which is not reported to the IRS by third parties and is therefore difficult for the IRS to discover in the absence of self-reporting) and to pay the required tax. Clarifying that taxpayers possess these rights by stating them as the first provision of the Internal Revenue Code is not only the right thing to do, but TAS research suggests that when taxpayers have confidence the tax system is fair, they are more likely to comply voluntarily, which should translate into enhanced revenue collection. In other words, putting the Taxpayer Bill of Rights front and center in the law is both an important statement to U.S. taxpayers about how Congress believes they should be treated and, quite possibly, a means to improve voluntary tax compliance as well.
We also recommend that Congress clarify and codify the IRS mission statement, because the definition of an agency’s mission heavily influences its strategic planning priorities and performance measures, and that Congress authorize the IRS to establish minimum standards for non-credentialed tax return preparers both to protect taxpayers from incompetent preparers and to protect the public fisc.
Those three recommendations are the most “high profile” in the Purple Book. Summarizing the other 47 is beyond the scope of this blog. But generally speaking, our recommendations fall into seven categories and are designed to accomplish the following objectives: (1) strengthen taxpayer rights; (2) improve the tax-return filing process; (3) improve the IRS’s assessment and collection procedures; (4) reform the Internal Revenue Code’s penalty and interest provisions; (5) strengthen taxpayer rights before the Office of Appeals; (6) enhance confidentiality and disclosure protections; and (7) strengthen the independence of the Office of the Taxpayer Advocate.
Each proposal is presented in a format like the one used for congressional committee reports, with “Present Law,” “Reasons for Change,” and “Recommendation(s)” sections. Most of our recommendations have been introduced at one time or another as freestanding bills, and some have been reported favorably by the House Committee on Ways and Means or the Senate Committee on Finance. A few have been approved by the full House or Senate.
At the end of each recommendation, we identify bills that have been introduced in the House or Senate that are consistent with our proposal. That should enable Members interested in developing a proposal to use existing legislative language as a starting point and not have to start from scratch and (to mix metaphors) reinvent the wheel.
Of particular note, these recommendations generally run only about one page in length. Our intent is to make it as easy as possible for readers to gain a general understanding of each issue. For readers interested in learning more, we include a chart at the end of the Purple Book where we identify additional reference material. The chart provides references to prior bills and committee reports and to National Taxpayer Advocate recommendations presented in prior annual reports.
Why call it the “Purple Book”? Because the Office of the Taxpayer Advocate is non-partisan, and the color purple, as a mix of red and blue, has come to symbolize a blending of the parties.
In that vein, it is worth emphasizing that congressional efforts to protect taxpayer rights and improve tax administration have almost always proceeded on a bipartisan basis. Between 1988 and 1998, Congress passed three significant pieces of legislation to improve tax administration and protect taxpayer rights. Members of both parties contributed to each of these bills, and the landmark IRS Restructuring and Reform Act of 1998 (RRA 98) was enacted only after a bipartisan commission known as the National Commission on Restructuring the Internal Revenue Service had conducted a broad assessment of IRS operations and made recommendations for reform.
A lot has happened in the last 20 years. Tax administration has changed in many ways, largely due to the increasing use of automation by the IRS and the increasing use of the Internet and other digital services by taxpayers.
For these reasons, an update to RRA 98 is very much needed. We are encouraged by congressional interest in examining the current state of tax administration and developing legislation to improve it. In light of my office’s statutory role in advocating for the interests of U.S. taxpayers, my hope is that the National Taxpayer Advocate Purple Book will be a helpful contribution to the discussion.
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.
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