The Taxpayer Advocate Service (TAS) sends an annual report to Congress that flags problems with the federal government’s tax collection efforts. The latest such report from the agency makes for particularly depressing reading.
On top of the usual problems discussed in these annual reports -- tax code complexities, inadequate IRS funding, questionable administrative decisions and so on -- the IRS was hit by the long partial government shutdown while preparing for an avalanche of questions about the 2017 tax overhaul legislation that took effect last year.
“The five weeks (of the shutdown) could not have come at a worse time for the IRS -- facing its first filing season implementing a massive new tax law, with a completely restructured tax form,” writes National Taxpayer Advocate Nina E. Olson.
She heads TAS, which is an independent agency within the Internal Revenue Service charged with representing the interests of U.S. taxpayers and advising lawmakers and IRS officials on possible improvements.
Over the years Olson has proven to be been a credible source of information, willing to both criticize and defend the IRS, depending on what's appropriate. She has also suggested reform legislation and repeatedly urged Congress to provide the IRS with more money to both improve service to the public and boost government revenue through better tax collection programs.
In the TAS report released last week, Olson warned that because of the shutdown the IRS “is entering the filing season inundated with correspondence, phone calls, and inventories of unresolved prior-year audits and identity theft cases.”
By the end of the shutdown, for example, the IRS had more than five million pieces of mail waiting to be processed.
During the first week of the current tax-filing period, the IRS answered only 48 percent of its calls, compared to 86 percent in the first week of last year’s filing season. The average wait time was 17 minutes, compared to four minutes last year.
“Make no mistake about it,” Olson writes. “These numbers translate into real harm to real taxpayers. And they represent increased re-work for the IRS downstream, at a time when the IRS is already resource-challenged. The IRS will be facing tough decisions in light of the shutdown’s impact.”
These are some of the more distressing and long-lasting consequences of the political brinksmanship that led to the shutdown.
As IRS officials have regularly reminded lawmakers, the U.S. tax system relies heavily on voluntary compliance. So Washington should be doing everything it can to ensure that taxpayers get prompt, accurate assistance when they need it.
When taxpayers throw up their hands in frustration, the government stands to lose revenue. With the federal debt at the $22 trillion mark, unnecessary tax revenue losses are something to be avoided.
In addition to the shutdown’s impact, federal tax collection work continues to be hobbled by a long list of problems that result in what Olson describes as the “extreme frustration” many taxpayers experience in dealing with the IRS.
She sees replacement of “antiquated” technology systems as the top need for the IRS.
“The IRS systems that constitute the official record of taxpayers accounts . . . .are the oldest in the federal government and for the last 25 years the IRS has tried -- and been unable -- to replace them,” she writes.
Taxpayer information is stored in more than 60 separate case management systems, which is part of the reason why Olson says the IRS “can’t be sure it is focusing on the right taxpayers or the right issues in its outreach, audit and collection activities.”
She reminds lawmakers that last year an IRS systems crash on the last day of the filing season required a 1-day extension of the season.
The TAS report covers many other problems and suggests ways in which IRS officials could improve their operations. The report includes the second edition of “The Purple Book,” which contains 58 legislative recommendations that would improve tax administration and strengthen taxpayer rights.
Olson has made many of these recommendations before, while others are new. She also sounds a hopeful note, saying that in recent years Congress has shown “renewed interest in examining and improving the operations of the IRS.”
Several bills were introduced last year that Olson said “would go a long way towards helping taxpayers and modernizing the IRS.” She urges Congress to consider “comprehensive tax administration legislation” again this year.
That’s good advice. IRS officials and the new Congress should carefully review and consider Olson’s report. Lawmakers particularly need to provide adequate resources to the IRS for computer modernization, answering the phone more often and other fundamental improvements -- spending that should pay for itself many times over in better tax collection.