National Taxpayer Advocate Nina Olson’s recent annual report to Congress makes clear that she wants the embattled IRS to make a 180-degree shift in its game plan: focus more on service to taxpayers rather than enforcement.
While certain aspects of the IRS’s Future State plan are commendable, it fails to include “the needs and preferences of US taxpayers – an incredibly diverse and complex population,” she states in the report.
Though the IRS budget cutbacks understandably have brought an increase in “digital self-service options,” such “constrained communication, coupled with automated impersonal and often harmful IRS actions, can alienate the taxpayer population and over time may undermine compliance,” the report states.
Even if there wasn’t an effect on compliance (which Olson doesn’t believe), it’s just not good government to have taxpayers “alienated from and distrustful of the one government agency they interact with at least annually throughout their adult lives,” the report states.
So, Olson made three general recommendations and seven specific ones. Her goal? A “world-class 21st century tax administration.”
From the broad perspective, she wants “the compelling need for tax reform” addressed, the IRS to actually talk to taxpayers, and minimum standards and competency tests for tax return preparers. Without the latter, “the entire tax system is at risk,” the report states.
Here’s a snapshot of the seven specific recommendations:
1. IRS budget and oversight. To do it right, the IRS needs more funding, but that should come with more congressional oversight of IRS plans.
2. IRS culture. Change from an enforcement-centric to service-centric culture.
3. IRS mission statement. It must be revised to “explicitly acknowledge” the agency’s twin mission of collecting revenues and paying benefits, and its “foundational role” of the Taxpayer Bill of Rights. The revised mission statement will ensure that IRS employees have the right skill sets.
4. Understanding taxpayer needs and preferences. The IRS’s Future State mission should be based on what taxpayers want and need. To accomplish that, the agency has to actually engage with taxpayers and launch research to improve its understanding of how taxpayers comply with the tax laws.
5. Taxpayer rights and the Future State. Begin a comprehensive review of the Internal Revenue Code’s key provisos for taxpayer rights, offer proposed guidance for public comment, and update the provisos to protect taxpayer rights in the digital age that the Future State envisions.
6. Grossly outdated technology and infrastructure. To meet the major technological improvements that the IRS needs to be that 21st century tax administrator, the agency has to determine how it will reassure legislators and taxpayers that funding will be spent appropriately.
7. Office of the Taxpayer Advocate. Congress should give the office more muscle. Olson ranked an increase in IRS funding and oversight first because taxpayers “are being and will be harmed by the ‘efficiencies’ the IRS imposes to deal with budget reductions,” the report states.
That’s also why she wants more legislative oversight of what the agency wants to do, how it spends its funding, and whether taxpayer needs – not just the agency’s – are met.