Each December, the National Taxpayer Advocate identifies the Most Serious Problems facing taxpayers and makes recommendations for addressing them in the Annual Report to Congress (ARC). Each June, the National Taxpayer Advocate submits the Objectives Report to Congress, which includes a second volume that contains the IRS’s responses to our recommendations together with our analysis of the IRS’s responses.
As the Acting National Taxpayer Advocate, I believe it is important for taxpayers, tax practitioners, and Members of Congress to see how the IRS responded, and I will highlight a few examples of its responses and related analysis.
- Most Serious Problem 1 – Tax Law Questions: The IRS has agreed to study the feasibility of returning to its previous practice of answering in-scope tax law questions year-round on the phones.
- Most Serious Problem 2 – Chief Counsel Transparency: IRS Counsel has agreed to clarify the standards that should be considered when deciding whether legal advice should be issued in a formal memorandum.
- Most Serious Problem 4 – Free File: The IRS has agreed to make numerous improvements to the Free File program, including evaluating ways to expand the program for English as second language taxpayers.
- Most Serious Problem 5 – False Positive Rate: The IRS has agreed to take steps to evaluate the effectiveness of its fraud detection systems (and their associated high false positive rates) and to collaborate with TAS on a study analyzing why some taxpayers delay responding to IRS identity-authentication notices.
- Most Serious Problem 9 – Field Examination and Most Serious Problem 10 – Office Examination: For these two problems, the IRS continues to disagree that it needs to more carefully track what happens after an audit, including whether the taxpayer appeals and maintains future compliance, to better refine its audit selection process and maximize limited resources.
- Most Serious Problem 11 – Post Processing Math Error and Most Serious Problem 12 – Math Error Notices: The IRS has declined to adopt a policy to limit its use of math error authority to circumstances least likely to burden taxpayers or waste IRS resources. While it did agree to implement some of TAS’s recommended changes to improve math error notice clarity, the IRS has not adopted TAS’s recommendations to improve the efficiency of math errors and protect taxpayer rights.
- Most Serious Problem 13 – Statutory Notices of Deficiency: The IRS has agreed to include specific TAS office information in statutory notices of deficiency.
- Most Serious Problem 15 – Economic Hardship: While the IRS has implemented certain safeguards for taxpayers experiencing economic hardship, it has not agreed to implement a systemic economic hardship indicator that would identify taxpayers who have incomes lower than their allowable living expenses and no detectable assets. We recommended the IRS implement an economic hardship indicator to help ensure it doesn’t collect from low income taxpayers under circumstances that would leave them without adequate means to provide for their basic living expenses.
For those interested in more detail on the IRS’s full responses to all 20 Most Serious Problems identified in our Annual Report to Congress, I encourage you to read this year’s Volume 2 included in our Fiscal Year 2020 Objectives Report to Congress.