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The National Taxpayer Advocate’s Annual Report to Congress identifies taxpayers’ problems and provides suggestions to further protect taxpayer rights and ease taxpayer burden.

Report Contents

2023 Annual Report to Congress

Preface

  1. Introductory Remarks by the National Taxpayer Advocate
  2. Taxpayer Rights and Service Assessment: IRS Performance Measures and Data Relating to Taxpayer Rights and Service

The Most Serious Problems Encountered by Taxpayers

Introduction
Most Serious Problems At a Glance

  1. PROCESSING: Ongoing Processing Delays Burden and Frustrate Taxpayers Awaiting Refunds and Other Account Actions
  2. IRS HIRING, RECRUITMENT, AND TRAINING: Shortcomings in the IRS’s Employee Hiring, Retention, Recruitment, and Training Programs Adversely Affect the Quality of Taxpayer Service the IRS Provides and Undermine Effective Tax Administration
  3. IRS TRANSPARENCY: The IRS Still Does Not Provide Sufficient Clear and Timely Information to the Public, Causing Confusion and Frustration and Complicating Agency Oversight
  4. TELEPHONE AND IN-PERSON SERVICE: Despite Improvements in Its Service Levels, the IRS Still Does Not Provide Taxpayers and Tax Professionals With Adequate, Timely Telephone and In-Person Service
  5. RETURN PREPARER OVERSIGHT: The Lack of Return Preparer Oversight Endangers Taxpayers, Burdens the IRS, and Harms Tax Administration
  6. IDENTITY THEFT: Lengthy Issue Resolution Delays and Inadequate Notices Burden Taxpayers Who Are Victims of Identity Theft or Whose Returns the IRS Has Flagged for Possible Identity Theft
  7. ONLINE ACCOUNT ACCESS FOR TAXPAYERS AND TAX PROFESSIONALS: Digital Services Remain Inadequate, Impeding Efficient Case Resolution and Forcing Millions of Taxpayers to Call or Send Correspondence to the IRS
  8. INTERNATIONAL: The IRS’s Approach to International Information Return Penalties Is Draconian and Inefficient
  9. COMPLIANCE CHALLENGES FOR TAXPAYERS ABROAD: Taxpayers Abroad Continue to Be Underserved and Face Significant Challenges in Meeting Their U .S . Tax Obligations
  10. APPEALS: Despite Some Improvements, Many Taxpayers and Tax Professionals Continue to Perceive the IRS Independent Office of Appeals as Insufficiently Independent

Most Litigated Issues

TAS Advocacy

TAS Case Advocacy
TAS Systemic Advocacy
Taxpayer Advocate Directives
Highlights of TAS Successes Throughout Fiscal Year 2023

Appendices

Appendix 1: Taxpayer Advocate Service Directory
Appendix 2: Data Compilation and Validation
Appendix 3: Glossary of Acronyms

TAS Performance Measures and Indicators
Fiscal Year 2023 Objectives Report to Congress: Objectives Status Update

INTRODUCTION

STRENGTHEN TAXPAYER RIGHTS AND TAXPAYER SERVICE

  1. Elevate the Importance of the Taxpayer Bill of Rights by Redesignating It as Section 1 of the Internal Revenue Code
  2. Require the IRS to Timely Process Claims for Credit or Refund

IMPROVE THE FILING PROCESS

  1. Treat Electronically Submitted Tax Payments and Documents as Timely If Submitted on or Before the Applicable Deadline
  2. Authorize the IRS to Establish Minimum Competency Standards for Federal Tax Return Preparers and Revoke the Identification Numbers of Sanctioned Preparers
  3. Extend the Time for Small Businesses to Make Subchapter S Elections
  4. Adjust Individual Estimated Tax Payment Deadlines to Occur Quarterly
  5. Eliminate Duplicative Reporting Requirements Imposed by the Bank Secrecy Act and the Foreign Account Tax Compliance Act

IMPROVE ASSESSMENT AND COLLECTION PROCEDURES

  1. Require That Math Error Notices Describe the Reason(s) for the Adjustment With Specificity, Inform Taxpayers They May Request Abatement Within 60 Days, and Be Mailed by Certified or Registered Mail
  2. Continue to Limit the IRS’s Use of “Math Error Authority” to Clear-Cut Categories Specified by Statute
  3. Require Independent Managerial Review and Written Approval Before the IRS May Assert Multiyear Bans Barring Taxpayers From Receiving Certain Tax Credits and Clarify That the Tax Court Has Jurisdiction to Review the Assertion of Multiyear Bans
  4. Give Taxpayers Abroad Additional Time to Request Abatement of a Math Error Assessment
  5. Give Taxpayers Abroad Additional Time to Request a Collection Due Process Hearing and to File a Petition Challenging a Notice of Determination in the U .S . Tax Court
  6. Provide That Assessable Penalties Are Subject to Deficiency Procedures
  7. Direct the IRS to Implement an Automated Formula to Identify Taxpayers at Risk of Economic Hardship
  8. Provide That “an Opportunity to Dispute” an Underlying Liability Means an Opportunity to Dispute Such Liability in the U .S . Tax Court
  9. Prohibit Offset of the Earned Income Tax Credit (EITC) Portion of a Tax Refund to Past-Due Federal Tax Liabilities
  10. Eliminate Installment Agreement User Fees for Low-Income Taxpayers and Those Paying by Direct Debit
  11. Improve Offer in Compromise Program Accessibility by Repealing the Upfront Payment Requirements
  12. Require the IRS to Consider a Taxpayer’s Current Income When Determining Whether to Waive an Installment Agreement User Fee
  13. Modify the Requirement That the Office of Chief Counsel Review Certain Offers in Compromise
  14. Require the IRS to Mail Notices at Least Quarterly to Taxpayers With Delinquent Tax Liabilities
  15. Clarify When the Two-Year Period for Requesting Return of Levy Proceeds Begins
  16. Protect Retirement Funds From IRS Levies, Including So-Called “Voluntary” Levies, in the Absence of “Flagrant Conduct” by a Taxpayer
  17. Provide Taxpayer Protections Before the IRS Recommends the Filing of a Lien Foreclosure Suit on a Principal Residence
  18. Provide Collection Due Process Rights to Third Parties Holding Legal Title to Property Subject to IRS Collection Actions
  19. Extend the Time Limit for Taxpayers to Sue for Damages for Improper Collection Actions
  20. Revise the Private Debt Collection Rules to More Accurately Identify and Protect Taxpayers With Incomes Below 200 Percent of the Federal Poverty Level

REFORM PENALTY AND INTEREST PROVISIONS

  1. Convert the Estimated Tax Penalty Into an Interest Provision to Properly Reflect Its Substance
  2. Apply One Interest Rate Per Estimated Tax Underpayment Period
  3. Pay Interest to Taxpayers on Excess Payments of Estimated Tax to the Same Extent Taxpayers Must Pay a Penalty on Underpayments of Estimated Tax
  4. Extend the Reasonable Cause Defense for the Failure-to-File Penalty to Taxpayers Who Rely on Return Preparers to E-File Their Returns
  5. Authorize a Penalty for Tax Return Preparers Who Engage in Fraud or Misconduct by Altering a Taxpayer’s Tax Return
  6. Clarify That Supervisory Approval Is Required Under IRC § 6751(b) Before Proposing Penalties
  7. Require an Employee to Determine and a Supervisor to Approve All Negligence Penalties Under IRC § 6662(b)(1)
  8. Modify the Definition of “Willful” for Purposes of Determining Report of Foreign Bank and Financial Accounts Violations and Reduce the Maximum Penalty Amounts

STRENGTHEN TAXPAYER RIGHTS BEFORE THE OFFICE OF APPEALS

  1. Require Taxpayers’ Consent Before Allowing IRS Counsel or Compliance Personnel to Participate in Appeals Conferences

STRENGTHEN THE OFFICE OF THE TAXPAYER ADVOCATE

  1. Clarify That the National Taxpayer Advocate May Hire Legal Counsel to Enable Her to Advocate More Effectively for Taxpayers
  2. Clarify the Authority of the National Taxpayer Advocate to Make Personnel Decisions to Protect the Independence of the Office of the Taxpayer Advocate
  3. Clarify the Taxpayer Advocate Service’s Access to Files, Meetings, and Other Information
  4. Authorize the National Taxpayer Advocate to File Amicus Briefs
  5. Authorize the Office of the Taxpayer Advocate to Assist Certain Taxpayers Experiencing Economic Hardships During a Lapse in Appropriations
  6. Repeal Statute Suspension Under IRC § 7811(d) for Taxpayers Seeking Assistance From the Taxpayer Advocate Service

STRENGTHEN TAXPAYER RIGHTS IN JUDICIAL PROCEEDINGS

  1. Expand the U .S . Tax Court’s Jurisdiction to Hear Refund Cases
  2. Authorize the Tax Court to Order Refunds or Credits in Collection Due Process Proceedings Where Liability Is at Issue
  3. Promote Consistency With the Supreme Court’s Boechler Decision by Making the Time Limits for Bringing All Tax Litigation Subject to Equitable Judicial Doctrines
  4. Extend the Deadline for Taxpayers to Bring a Refund Suit When They Have Requested Appeals Reconsideration of a Notice of Claim Disallowance But the IRS Has Not Acted Timely to Decide Their Claim
  5. Authorize the Tax Court to Sign Subpoenas for the Production of Records Held by a Third Party Prior to a Scheduled Hearing
  6. Provide That the Scope of Judicial Review of “Innocent Spouse” Determinations Under IRC § 6015 Is De Novo
  7. Clarify That Taxpayers May Raise Innocent Spouse Relief as a Defense in Collection, Bankruptcy, and Refund Cases
  8. Fix the Donut Hole in the Tax Court’s Jurisdiction to Determine Overpayments by Non-Filers With Filing Extensions

MISCELLANEOUS RECOMMENDATIONS

  1. Restructure the Earned Income Tax Credit (EITC) to Make It Simpler for Taxpayers and Reduce Improper Payments
  2. Adopt a Consistent and More Modern Definition of “Qualifying Child” Throughout the Internal Revenue Code
  3. Permanently Give Taxpayers Affected by Federally Declared Disasters the Option of Using Prior Year Earned Income to Claim the Earned Income Tax Credit (EITC)
  4. Amend the Lookback Period for Allowing Tax Credits or Refunds to Include the Period of Any Postponement or Additional or Disregarded Time for Timely Filing a Tax Return
  5. Protect Taxpayers in Federally Declared Disaster Areas Who Receive Filing and Payment Relief From Inaccurate and Confusing Collection Notices
  6. Exclude Taxpayers in Specific Circumstances From the Requirement to Provide a Social Security Number for Their Children to Claim the Child Tax Credit
  7. Clarify Whether Dependents Are Required to Have Taxpayer Identification Numbers for Purposes of the Credit for Other Dependents
  8. Allow Members of Certain Religious Sects That Do Not Participate in Social Security and Medicare to Obtain Employment Tax Refunds
  9. Remove the Requirement That Written Receipts Acknowledging Charitable Contributions Must Be Contemporaneous
  10. Establish a Uniform Standard Mileage Deduction Rate for All Purposes
  11. Eliminate the Marriage Penalty for Nonresident Aliens Who Otherwise Qualify for the Premium Tax Credit
  12. Encourage and Authorize Independent Contractors and Service Recipients to Enter Into Voluntary Withholding Agreements
  13. Require the IRS to Specify the Information Needed in Third-Party Contact Notices
  14. Enable the Low Income Taxpayer Clinic Program to Assist More Taxpayers in Controversies With the IRS
  15. Compensate Taxpayers for “No Change” National Research Program Audit
  16. Establish the Position of IRS Historian Within the Internal Revenue Service to Record and Publish Its History

Appendix 1: Additional Reference Materials for Legislative Recommendations in This Volume

Appendix 2: Prior National Taxpayer Advocate Legislative Recommendations Enacted Into Law