Background: Since 2018, TAS has been urging the IRS to stop assigning to private collection agencies (PCAs) the accounts of taxpayers who receive Supplemental Security Income (SSI) or Social Security Disability Income (SSDI). In 2019, Congress passed the Taxpayer First Act (TFA), which required the IRS to exclude these accounts. Specifically, TFA § 1205(a) amended Internal Revenue Code § 6306(d)(3) to exclude from assignment to PCAs the debts of taxpayers “substantially all of whose income consists of disability insurance benefits under section 223 of the Social Security Act or supplemental security income benefits under title XVI of the Social Security Act.”

Taxpayers who are winding down full-time work may think that they can also wind down their tax return filing requirements.  However, taxpayers are never too old to have a filing requirement.

Many taxpayers experience difficulties with correspondence audits. Once a return is selected for examination, the IRS notifies the taxpayer by letter and, as the name implies, conducts the audit via correspondence. Correspondence audit letters fail to provide a point of contact – the taxpayer is not given a direct phone number or the name of an IRS employee to contact. Instead, the letter provides a phone number for all correspondence audits. If no response to the initial contact letter is received, the IRS generally makes no effort to contact the taxpayer before proposing adjustments, issuing a Statutory Notice of Deficiency, and closing the case. Taxpayers wishing to speak with someone regarding an audit are limited to calling a representative on a toll-free line. The correspondence audit process is meant to create efficiency; however, these audits can present a host of challenges for our nation’s most vulnerable taxpayers and have downstream consequences for taxpayers and the IRS, as discussed in my 2021 Annual Report to Congress, Low-Income Taxpayers Encounter Communication Barriers That Hinder Audit Resolution, Leading to Increased Burdens and Downstream Consequences for Taxpayers, the IRS, TAS, and the Tax Court.

In my 2021 Annual Report to Congress, I reported on the IRS’s processing backlogs and recommended that the IRS suspend all automated collection notices until it is current on processing original and amended returns and unprocessed correspondence. I also described the IRS’s collection policies and recommended that the IRS postpone the issuance of Notices of Intent to Levy and the filing of Notices of Federal Tax Lien until it has eliminated its backlog of unprocessed mail and responded to taxpayers’ correspondence.

In December 2020, we redesigned our website, and I am excited to share our continued commitment to advocacy by providing our website in Spanish.

In my 2020 Annual Report to Congress (ARC), I discussed the unnecessary delays and difficulties taxpayers encounter reaching an accountable and knowledgeable IRS employee for assistance with correspondence audits. More than 70 percent of the audits conducted by the IRS are correspondence audits, making this audit type one of the most significant tools the IRS employs to pursue compliance with tax laws. The taxpayer’s ability to interact and communicate with the IRS is crucial to the success of the correspondence audit process and the taxpayer’s IRS experience.

As the National Taxpayer Advocate, part of my statutory duties and the duties of the Taxpayer Advocate Service (TAS) are to identify and inform Congress of challenges facing the IRS and taxpayers. In the interest of transparency, I want to discuss challenges taxpayers are facing not only with the IRS but also with TAS. While previous blogs have spoken about the delays taxpayers and practitioners are experiencing with the IRS, it is important to acknowledge taxpayers are experiencing similar delays when contacting TAS.

Despite all its challenges, the IRS processed 136 million individual income tax returns and issued 96 million refunds totaling $270 billion during the 2021 filing season. For those not familiar with IRS jargon, the term “filing season” is a term of art that includes income tax returns filed on or before the due date of the return, without considering returns filed after the due date or before the October 15 extension date.

In my previous blog post, we discussed a combination of the nearly 30 million 2020 tax returns requiring manual processing, the backlog of unprocessed 2019 paper tax returns, congressional mandates to issue economic impact payments (EIPs) and provide other relief to taxpayers during the pandemic, IRS limited resources, and technology issues that have contributed to more and longer refund delays.

I previously discussed the significance of this potential legislation in terms of enhancing taxpayer rights. In upcoming blogs, I will highlight some of the provisions which, if ultimately enacted, will make great improvements in tax administration and help protect and strengthen taxpayer rights. This blog highlights the proposal to expand the Tax Court’s jurisdiction to allow taxpayers to bring refund suits in the Tax Court. As a former litigator, I understand the significance of this change for many low-income taxpayers and small businesses. It will make the difference of pursuing litigation or being forced to walk away from contesting the merits of an IRS adjustment.

National Taxpayer Advocate delivers 2023 Annual Report to Congress. his year’s report focuses on the taxpayer impact of processing delays.