In a strongly worded letter to two Congressional committees, the president of the National Association of Enrolled Agents (NAEA) makes clear that the IRS is in dire need of help.
Enrolled agents increasingly “are expressing the view that the quality of taxpayer and practitioner service within [the] IRS has deteriorated to an unacceptable level over the last decade,” wrote James Adelman in the March letter.
The numbers substantiate that, he notes. Taxpayer calls increased from 71 million to 104 million between 2004 and 2016. Yet the number of calls that IRS staffers actually answered dropped from 36 million to 26 million during the same time period.
“Too often, policymakers and IRS create a false choice between providing service and assuring compliance,” Adelman stated. “From a taxpayer’s perspective, any interaction with the IRS is essentially compelled.”
In fact, taxpayers generally comply out of fear of the consequences. That fear, and the agency’s power, require that the IRS “remains relentlessly focused on service grounded in fairness, accuracy and timeliness at all points of the tax administration process.”
That’s no small task. Adelman notes that in the 20 years since the last Congressional action to reform the IRS, identity theft — which he describes as a “cottage industry” — electronic commerce and the internet have upended all rules and expectations.
Reform, therefore, should tackle oversight, governance; management, workforce and budget; taxpayer services and dispute resolution; future state and practitioners.
Here’s a quick snapshot of what the NAEA recommends:
IRS Oversight, Governance, and Management Reform
- The IRS Oversight Board should be reduced to five private-sector members with tax, legal and business expertise, appointed by the president for five-year terms without Senate approval.
- The board should be empowered to approve all agency operational plans and to direct the Treasury Inspector General for Tax Administration to investigate systemic issues involving customer service, enforcement and modernization.
- The IRS Commissioner should certify to the board annually that the agency doesn’t use enforcement or approval criteria based on political, religious or racial standards.
- While the IRS’ Taxpayer Bill of Rights is “an excellent starting point,” the NAEA believes consistent training will focus the IRS on service. Cultural and leadership training also is required, and “state-of-the-art tax administration techniques” should be included in education materials and the IRS manual.
IRS Budget Reform
- The upshot? It’s all about money and the IRS needs more to manage itself better. “The IRS for years has met the constraints of a shrinking real budget through attrition, yet shrinking through attrition is, to put it kindly, a suboptimal management technique,” Adelman wrote. “The service has not been in real control of much of its staffing for years and presently faces demographics that should concern all.”
Taxpayer Service/Dispute Resolution Reform
- Compliance delays serve neither tax administrators nor taxpayers, and become a vicious circle. Taxpayers who can’t promptly answer decisions run the risk of penalties adding up on subsequent returns.
- Collections staffers should have more discretion in reaching earlier payment plans.
- The agency should re-evaluate the National Standards for Collection Information Statements by adjusting the allowable living expenses for regional or local cost of living variations or by returning to use of a dollar range, based on gross monthly income.
- Increase the authority of and set higher standards for appeals personnel. “The knowledge, experience and authority of the appeals personnel should meet a higher standard than the campus appeals technical employees, who may have very little authority and may not grasp the intricacies of cases assigned to them,” Adelman wrote.
- National Taxpayer Advocate Nina Olson’s recommendations should be heeded, including requiring the IRS to work with financial institutions in reversing misdirected deposits.
- Clarify that taxpayers can use “innocent spouse relief” as a defense in collection proceedings and bankruptcies.
- Taxpayers should have the right to consent to IRS counsel or compliance staffers sitting in on appeals conferences.
- Ensure that compliance staffers understand that bypassing an active Power-of-Attorney is a violation of taxpayer rights.
- A fair and just tax system is the ultimate goal. That should include secure online communication, and earlier and more efficient dispute resolutions.
- The IRS needs to strengthen taxpayers’ right to representation and better ensure that tax preparers meet standards.
- Congress should clarify that CPAs, enrolled agents and lawyers who prepare a return may provide a statement to verify any element of the return, such as adjusted gross income, for purposes of qualifying for any federal program or benefit.
- The IRS should provide practitioner priority hotlines staffed by employees with more training who can understand more complex issues. If issues can’t be resolved through the priority hotlines, IRS customer service representatives in each geographic area should be assigned to address complex or unusual issues.