Thursday, July 08, 2010

National Taxpayer Advocate Submits Mid-Year Report to Congress

According to the IRS’ newest press release, National Taxpayer Advocate Nina E. Olson released her mid-year report to Congress yesterday. The report “identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the coming fiscal year.”

The report expresses concern about the adequacy of IRS taxpayer service, particularly as the IRS begins to implement health care reform, about new information reporting burdens facing small businesses and others, and about certain IRS collection practices.

Among the areas the report identifies for particular emphasis in FY 2011 are the following:

1. Taxpayer Services

Spending for IRS taxpayer service programs has been declining in recent years. At the same time, more taxpayers have been contacting the IRS for assistance as the IRS has been tasked with administering an increasing number of social benefit programs, including Economic Stimulus Payments, Making Work Pay credits, and First-Time Homebuyer credits. The report says that as a result of the imbalance between taxpayer demand and IRS resources, the IRS has fallen short of providing adequate taxpayer service in important areas. Most notably, after answering a high of 87 percent of its calls from taxpayers seeking to reach a telephone assistor in FY 2004, the IRS answered only 53 percent of its calls in FY 2008 and has set of goal of answering only 71 percent in the current fiscal year.

The report attributes much of the problem to inadequate funding for taxpayer services. While funding for the IRS overall has been increasing in recent years, the additional funding has been earmarked for enforcement programs. An analysis of IRS budget trends conducted by TAS shows that since FY 2004, inflation-adjusted funding for IRS enforcement activities has risen by 17.9 percent while spending for taxpayer service programs has declined by 6.8 percent, as shown in the following chart:

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