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2018 Annual Report to Congress


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IMPORTANT NOTICE: This report to Congress may currently contain some broken hyperlinks. The Taxpayer Advocate Service recently migrated our website to a new digital platform and we are currently working to repair any hyperlinks that may have been affected by the migration. We apologize for any inconvenience.

Report Highlights

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PREFACE

Introductory Remarks by the National Taxpayer Advocate

Including an Analysis of the Initial Effects of the Government Shutdown

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PURPLE BOOK

National Taxpayer Advocate 2019 Purple Book

Compilation of Legislative Recommendations to strengthen taxpayer rights and improve tax administration

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“IRS performance already is significantly limited by its aging systems, and if those systems aren’t replaced, the gap between what the IRS should be able to do and what the IRS is actually able to do will continue to increase in ways that don’t garner headlines but increasingly harm taxpayers and impair revenue collection.”

 

Nina E. Olson, Former National Taxpayer Advocate

Most Serious Problems Highlights

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Tax Law Questions

In 2014, the IRS implemented a policy to only answer tax law questions during the filing season, roughly from January through mid-April of any year. It justified this abrupt change in policy as a cost-savings effort in a time of budget constraints. This change does not comport with an agency charged with administering the tax law and focused on the customer experience.

Taxpayers have ever-changing tax situations year-round. People move, open a business, close a business, get married, get divorced, have children, and experience many other life changes that affect their tax obligations. Forcing taxpayers into a 3.5-month window to ask questions or making it necessary for them to seek advice from a third-party source can be frustrating and costly to the taxpayer and result in eroded trust and confidence in the IRS.

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Navigating the IRS

Taxpayers often have difficulty locating IRS personnel who can provide accurate and responsive information regarding their cases.

The IRS emphasizes its main toll-free phone line, which includes difficult-to-interpret options and often leads to extended hold times. Even when taxpayers are provided with a specific phone number, most often it is for a group, rather than for an individual employee. These group numbers make it difficult for taxpayers to have a sense of continuity and rapport with the personnel working their cases. Moreover, a lack of ownership on the part of IRS personnel who work these cases can decrease the efficiency and effectiveness of case resolutions and worsen the customer experience.

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False Positive Rates

IRS fraud detection systems generate high false positive rates (FPRs) and long processing times, which increase taxpayer burden, generate phone calls to the IRS, and create TAS cases.

Several IRS policies affect the ability of taxpayers to timely receive legitimate refunds, including the IRS’s failure to capture necessary information to evaluate the accuracy and efficiency of its non-IDT and IDT refund fraud programs; its past failure to check for third-party information on a daily, versus weekly, basis; and its failure to implement systemic verification capabilities in its fraud detection systems. Simple adjustments such as these could very well prevent taxpayers from being selected into the pre-refund wage verification process or could expedite the release of the return if selected, allowing the IRS to better use its resources to verify returns where there is a substantial potential for fraud.

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Economic Hardship

Economic hardship, as defined in Treasury regulations and the Internal Revenue Manual, occurs when an individual is “unable to pay his or her reasonable basic living expenses.”

Although Congress requires the IRS to halt some collection actions, like a levy, if a taxpayer is in economic hardship, the IRS is not proactive in identifying these taxpayers throughout the collection process. This means that the IRS does not have a method to alert collection employees that a taxpayer may be at risk of economic hardship and, when responding to taxpayer inquiries, to ask questions about the taxpayer’s finances to determine an appropriate collection action or alternative. As a result, taxpayers may be lured into entering installment agreements (IAs) they cannot afford, violating their right to be informed, to right to quality service, and right to a fair and just tax system.

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Private Debt Collection

The IRS implemented its current Private Debt Collection (PDC) initiative in April 2017.

As of September 13, 2018, about $5.7 billion in debts of more than 600,000 taxpayers were in the hands of private collection agencies (PCAs). As of September 30, 2018, more than 400,000 taxpayers’ debts were in Private Collection Agency (PCA) inventory with no installment agreement (IA) or payment for more than three months after assignment, and had been in PCA inventory for 244 days on average. Thus, PCA inventory is fast becoming a substitute of the IRS collection queue.

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The Taxpayer Journey

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Full Report