As the National Taxpayer Advocate, I have previously recommended reforms to prevent scam victims from being penalized by the tax system. Chief Counsel’s memo shows that more victims than perhaps previously thought might qualify for the theft loss deduction, but it also illustrates how much work remains to help all taxpayers who find themselves victims of fraud.

Theft Loss Deductions Then and Now

Section 165(c) of the Internal Revenue Code allows taxpayers to deduct losses sustained during the taxable year that are not reimbursed by insurance or other compensation. Historically, this provision has been a help to individuals suffering financial losses from theft, fraud, or other criminal conduct. Before the Tax Cuts and Jobs Act (TCJA) of 2017, theft losses – whether personal or investment-related – were subject to certain limitations based on adjusted gross income thresholds.

The Treasury Inspector General for Tax Administration (TIGTA) recently issued a report finding that TAS’s local office telephone lines were not giving taxpayers the opportunity to speak with TAS representatives or leave messages. Fortunately, this problem was limited in scope because most calls are placed to our national toll-free number, and we immediately took corrective actions to address TIGTA’s findings.

But the audit highlighted a larger issue: Although TAS ultimately serves most taxpayers well, we are not starting to work cases and we are not returning telephone calls as quickly as we would like. Part of my job is to highlight areas where the IRS is not meeting expectations, so it’s only fair that I be transparent in acknowledging where TAS is falling short. In this blog, I will explain some of the challenges we are facing and describe actions we are taking to improve the level of service we provide to taxpayers, from immediate steps to those we’re planning to implement over the next year and beyond.

Each year, I submit the National Taxpayer Advocate Annual Report to Congress with recommendations for administrative actions the IRS can take to resolve the most serious problems encountered by taxpayers. The IRS is statutorily required to respond to our recommendations, and while most of its responses are good, some are bad, and some concerning. Of the 78 recommendations I made in the 2023 Annual Report to Congress, the IRS adopted 63 in full or in part. I am very appreciative of the IRS’s efforts to incorporate TAS’s recommendations on behalf of taxpayers.

In its responses to the recommendations, the IRS has outlined several exciting, anticipated technology, policy, and procedural improvements that should lead to a better taxpayer experience and the protection of important taxpayer rights. In this blog, I will highlight some of these positive IRS responses. Then, in two upcoming blogs, I will highlight several instances where the IRS’s responses to our recommendations were bad, and in the case of recommendations focusing on the experience of international taxpayers, are concerning.

National Taxpayer Advocate delivers Annual Report to Congress; focuses on taxpayer impact of processing and refund delays

You submitted a written request for a Collection Due Process (CDP)equivalent hearing, most likely by using the Form 12153, Request for Collection Due Process or Equivalent Hearing. Appeals made a decision and you agreed with the decision.

For many Americans, starting a business represents independence, opportunity, and the chance to contribute to their communities. But before they can open a bank account, hire employees, or file taxes, they need one thing from the IRS: an Employer Identification Number (EIN).

Unfortunately, too many taxpayers encounter obstacles in obtaining an EIN. The process, which should be straightforward, can be marred by delays, technical glitches, and inconsistent procedures that frustrate both taxpayers and tax professionals.

As we all start to gather for the holidays, we at the Taxpayer Advocate Service (TAS) want to wish everyone a happy, healthy, and safe holiday season.

A payment was applied to your account.

These letters entitle you to request a Collection Appeal Program (CAP) appeal because you have property subject to collection action and received a collection action notice or warning of collection action.

This form is used by Appeals to memorialize an agreement reached in a Collection Due Process (CDP) case.

National Taxpayer Advocate delivers Annual Report to Congress; focuses on taxpayer impact of processing and refund delays