It’s not exactly the rallying cry of “no taxation without representation,” but National Taxpayer Advocate (NTA) Nina E. Olson has called on the IRS to adopt a comprehensive new Taxpayer Bill of Rights (TBOR).
The NTA, which functions independently within the IRS, also expressed deep concerns over inadequate funding for the nation’s tax-collection agency. Olson pointed out numerous IRS deficiencies in public service that have occurred during the past decade. In addition, the report identified the main problems facing taxpayers today.
“The year 2013 was a very challenging one for the IRS. Because of sequestration, the IRS’s funding was substantially cut, which translated into a reduction in taxpayer service,” Olson stated in the report. “Public trust in its fairness and impartiality was called into question because of reports the IRS subjected certain applicants for tax-exempt status to greater review based on political-sounding names. And because of the sixteen-day government shutdown, the agency could not complete preparations for the upcoming tax-filing season on time, delaying the date on which taxpayers can first file returns and claim refunds.”
Olson continued: “From challenges can come opportunities, and this report presents a ‘21st century vision’ designed to meet taxpayer needs and enhance voluntary tax compliance.”
The report reiterates the NTA’s longstanding recommendation for the IRS to adopt a TBOR. Previously, Olson analyzed the IRS’s processing of applications for tax-exempt status and concluded that the procedures violated eight of the ten taxpayer rights she had proposed. But in the new report, she insisted that the rationale for a TBOR is even broader.
“Taxpayer rights are central to voluntary compliance,” Olson wrote. “If taxpayers believe they are treated, or can be treated, in an arbitrary and capricious manner, they will mistrust the tax system and be less likely to comply with the laws voluntarily. If taxpayers have confidence in the fairness and integrity of the system, they will be more likely to comply.”
In arguing that knowledge of taxpayer rights promotes voluntary compliance, Olson cited a 2012 study that found that less than half of respondents believed they have rights before the IRS, and only 11 percent said they knew what those rights are.
“The Internal Revenue Code provides dozens of real, substantive taxpayer rights,” the report stated. “However, these rights are scattered throughout the Code and are not presented in a coherent way. Consequently, most taxpayers have no idea what their rights are and, therefore, often cannot take advantage of them.”
Olson has issued a “call to action” by urging the IRS to produce a TBOR – modeled after the U.S. Constitution Bill of Rights – that would cover ten broad categories.
“A Taxpayer Bill of Rights would serve as an organizing principle for tax administrators in establishing agency goals and performance measures, provide foundational principles to guide IRS employees in their dealings with taxpayers, and provide information to taxpayers to assist them in their dealings with the IRS,” she said.
Olson acknowledged the IRS is open to publishing a TBOR. She vowed to continue working with the agency’s leaders to refine and complete the initiative this year.
The report also emphasized that IRS responsibilities have increased over the past decade, while funding and staffing have been cut by 8 percent in the last three years. In particular, the NTA focused on cuts to the IRS’s training budget. Since fiscal year 2010, this budget has been slashed from $172 million to $22 million.
“If IRS customer service representatives are not well-trained, taxpayers calling for help are more likely to receive incorrect information or no information,” the report said. “If IRS enforcement employees are not well-trained, auditors may make inappropriate adjustments and assessments, and collection employees may issue inappropriate levies or file inappropriate liens.”