House Oversight and Government Reform Subcommittee on Government Operations Hearing
Chairman Meadows, Ranking Member Connolly, and distinguished Members of this Subcommittee:
Thank you for holding today's hearing on the
In my testimony today, I will begin by providing an overview of the functions of the Taxpayer Advocate Service (TAS), which I lead, and the
1. The
2. The
3. Accelerated third-party information reporting and matching will reduce opportunities for error and fraud, including identity theft.
. The
5. The
6. In response to a congressional directive, the
7. More can be done to reduce improper payments of the earned income tax credit (EITC) and other refundable credits without unduly burdening taxpayers and undermining taxpayer rights.
8. Delegating authority to the
9. The
As you know, I lead the Taxpayer Advocate Service (TAS), which predominately has two functions - "case advocacy" and "systemic advocacy." It is with respect to the systemic advocacy side that I appear today. n3 TAS identifies problems that are harming groups of taxpayers, and we make administrative and legislative recommendations to mitigate those problems. Any person - from inside the
The focus of my 2014 Report to
There are many reasons for the
In other instances, the tax system itself has changed so much that provisions enacted nearly three decades ago no longer fit today's administrative processes. n7 Sometimes, implementation has been delayed or cannot be achieved because of the design of the
Also of note, the three taxpayer rights bills created what I view as important but discrete taxpayer rights. None of the bills established a thematic, principles-based Taxpayer Bill of Rights, modeled on the U.S. Constitution's Bill of Rights. Since 2007, I have been recommending that
In my 2014 report, I followed the Taxpayer Bill of Rights as my "
But the work toward creating a vital system of taxpayer rights with enforceable remedies for violations of those rights is not yet done. In my report, I have described areas where taxpayer rights protections are weak or nonexistent under current law and other areas where the
Passage of a taxpayer rights bill would accomplish several things that are desperately needed in today's environment. First, it would create a vehicle for a meaningful discussion about taxpayer rights, the role they play in promoting voluntary compliance, and what mechanisms exist to instill the protection of taxpayer rights into every nook and cranny of tax administration. Second, by codifying the Taxpayer Bill of Rights and creating enforceable remedies for violations of rights enunciated in the Taxpayer Bill of Rights,
Since I understand the focus of this subcommittee is on government performance rather than the specifics of tax legislation, I will not go into greater detail about the Taxpayer Bill of Rights in this testimony. I note, however, that the
In the remainder of my testimony, I highlight a few areas discussed in my report that I believe warrant close and continued oversight by
I.
In my 2014 Annual Report to
The tax code as it stands today is overwhelming in its complexity and thus poses a significant compliance barrier for taxpayers. Large numbers of taxpayers contact the
For tax year 2013, more than 63 million tax returns, or about 45 percent of the individual tax returns filed, reported incomes below 250 percent of the federal poverty level. n15 This is the level below which
The
By comparison, the
. The
. For taxpayers who have managed to get through, wait times have averaged more than 20 minutes n21 and have run considerably longer during peak periods.
. For the filing season to date, there have been 6.8 million upfront "courtesy disconnects," more than seven times the number at this point last year. n22 This means almost seven million calls were not allowed to enter the phone queue because the
. The
. The
. The
The following chart shows the
Figure 1:
2014 2015 2014 to 2015 Change
Line Net Attempts* Assistor Calls Answered ASA (minutes) CSR LEVEL OF SERVICE Net Attempts* Assistor Calls Answered ASA (minutes) CSR LEVEL OF SERVICE LOS Change (percentage point) ASA Change (minutes)
Accounts Management (AM)-Sum of 29 Lines 39,539,366 8,479,548 14.1 71.2% 42,581,832 6,227,620 23.4 37.6% -33.7% 9.4
Individual Income Tax Line TAX -1040 6,181,160 1,616,173 15.4 74.1% 8,126,217 1,030,189 22.5 25.8% -48.3% 7.0
Refund Hotline (1954) 16,790,374 87,319 18.6 51.7% 14,127,576 66,773 23.1 26.1% -25.7% 4.5
W&I Individual Customer Response Line 1,845,877 588,140 15.8 60.4% 2,274,801 348,135 22.7 26.3% -34.2% 6.9
NTA (4778) 206,621 104,745 5.7 70.8% 307,600 87,052 19.7 38.2% -32.7% 14.0
Practitioner Priority Service (PPS) 492,410 314,851 20.0 74.9% 524,960 198,189 46.7 43.9% -31.0% 26.7
Identity Protection Specialized Unit (IPSU) 747,791 458,101 12.0 82.2% 1,297,000 440,016 25.8 53.7% -28.5% 13.8
Taxpayer Protection Program (TPP) (through
The official measure of
All rows other than the Taxpayer Protection Program row show important telephone lines that are subsets of the Accounts Management total. The TPP information stands alone and is not included in the AM lines. Notably:
. The Taxpayer Protection Program (TPP) is designed to help taxpayers whose returns the
. The Identity Protection Specialized Unit (IPSU) phone lines assist victims with most types of IDT issues, including both tax-related and non-tax-related identity theft. Through
. The Practitioner Priority Service (PPS) phone line is used by tax professionals who are trying to reach the
. The Taxpayer Advocate Service (NTA) phone line, staffed by Wage & Investment (W&I) employees, is used by taxpayers who believe they are experiencing financial or economic burden and seek the assistance of my office. TAS is intended to be the safety net for taxpayers. It adds insult to injury when most calls from taxpayers who have already experienced
The
Figure 2:
Week of
Key AM Programs Total Overage Percentage Overage Total Overage Percentage Overage Overage Change Overage Change (percentage point)
Individual Taxpayer Correspondence 136,192 37,780 27.7% 180,963 78,777 43.5% 40,997 15.8%
Amended Returns/Duplicate Filing 189,467 49,567 26.2% 168,566 57,232 34.0% 7,665 7.8%
In both programs, more than one-third of the inventories are overage (i.e., have not been handled within established timeframes), which represents a substantial increase over last year's already-high levels. These lengthy backlogs often lead to adverse taxpayer impact. For a taxpayer who owes additional tax, interest charges and penalties generally will continue to accrue. For a taxpayer who has overpaid, a delay in processing correspondence may translate into a delay in receiving a refund.
Overall, the decline in the
On the funding side, the
I believe the
The requirement to file a tax return and pay taxes is generally the most significant burden a government imposes on its citizens. The government has a duty to make compliance as simple and painless as possible. I am deeply concerned that the government is largely turning its back on the significant number of taxpayers who require personal assistance to comply with their tax obligations.
I believe that
Recommendations
I recommend that
. Over the short term, carefully monitor taxpayer service trends and ensure that the
. Over the longer term, enact comprehensive tax reform to reduce the complexity of the Internal Revenue Code and reduce compliance burdens on taxpayers and the
II.
Overall, the
The level of service on the ACA telephone hot line (800-919-0452) was over 68 percent this calendar year through the week ending
Taxpayers Potentially Received First-Time Penalty Abatement Relief Rather Than Appropriate Penalty Relief Under Notice 2015-9.
Commendably, the
Lack of Exchange Data Results in Premium Tax Credit Returns Held in Error Resolution System (ERS) Suspense with No Explanations Provided to Taxpayers.
On
Exchanges Made Errors on Forms 1095-A, Leading to
The
III. Accelerated Third-Party Information Reporting and Data Matching Will Reduce Opportunities for Error and Fraud, Including Identity Theft.
Third-party information reporting promotes voluntary tax compliance. n52 It also helps the
In 2009, I recommended that
In addition, accelerated information report processing and upfront matching would substantially improve taxpayer service and reduce taxpayer burden by:
. Providing taxpayers with direct electronic access to the third-party information report data to assist in tax preparation and reduce errors; n56
. Improving taxpayers' ability to answer questions about an underlying economic transaction because the
. Avoiding
. Avoiding the long-term accrual of penalties and interest on unintentionally omitted or under-reported items; and
. Reducing vulnerability to identity-theft related refund fraud. n57
The
Recommendations
I recommend that
. Require the
. Provide taxpayers with electronic access to real-time transcripts of third-party information reporting data to aid in return preparation.
. Provide a platform from which taxpayers and preparers could download third-party data directly into commercial tax return preparation software, Free File, and Free Fillable Forms.
. Develop and implement a one-year pilot to determine if the
. Require all information reports, whether electronically filed or filed on paper, to be due at the end of February and possibly earlier. Because almost 98 percent of all information reports are already electronically filed, eliminate the
. Create a
. Further increase electronic filing by reducing the 250 report threshold in IRC [Sec.] 6011(e) to 50 reports and offer 2D bar code technology for those who cannot e-file.
. Delay issuance of direct deposit and other electronic refunds until
IV.
The 2014 Annual Report to
In our current system, the
Anecdotally, we have heard of organized criminals who have given up drug trafficking to engage in the much easier, safer, and just-as-lucrative endeavor of tax refund fraud. The potential benefits seemingly far outweigh the potential risk, despite the
In addition to accelerating third-party information reporting, another potential solution is to require a second form of authentication when filing a tax return. Today, anyone can, with minimal effort, obtain all of the information required to file a return purporting to be from another person. SSNs are bought, borrowed, and stolen like a commodity. The
The
In the meantime, the
The results of this case review not only confirmed my suspicion that identity theft cases are complex, but also revealed glaring inefficiencies in current
I have recommended that for complex identity theft cases that require the victim to deal with multiple
Another finding from this case review was that the
Recommendations
I recommend that
. Require the
. Assign IDT victims with multiple issues to a sole
. Conduct a comprehensive global account review prior to closing an IDT case to ensure all issues and years relating to identity theft have been fully resolved.
V.
Many taxpayers enlist the aid of paid return preparers to meet their increasingly complex tax filing obligations. n67 Unfortunately, a small percentage of these preparers betray their clients' trust by inflating income, deductions, credits, or withholding without their clients' knowledge or consent. They then pocket the entire refund, or the difference between the revised refund amount and the amount the taxpayer expected, by diverting all or part of the direct deposit refund to a bank account under the preparer's control. Other preparers just outright steal taxpayers' refunds by changing the bank account routing number to an account under the preparer's control.
Even though there is little difference between the plight of identity theft victims and victims of preparer fraud, the
What's frustrating is that return preparer fraud is not a novel issue. The
In
It has now been over a year since the Commissioner made this decision, and the
The
As a result of the
Recommendations
I recommend that
. Require the
VI. In Response to a Congressional Directive, the
Outsourcing payroll and related tax duties to third-party payroll service providers (PSPs) is a common business practice, especially for small business owners. PSPs can help employers meet filing deadlines and deposit requirements by withholding, reporting, and depositing employment taxes with state and federal authorities on behalf of the employer. If a PSP mismanages or embezzles funds that should have been paid to the
For the past decade, including in this year's report, I have recommended numerous administrative and legislative actions to assist victims of payroll service provider (PSP) failures. n69
1. Issue dual address change notices related to an employer making employment tax payments (with one notice sent to both the employer's former and new address); and
2. Give special consideration to an offer in compromise (OIC) request from a victim of fraud by a third-party payroll tax preparer. n70
Dual Address Change Notices Can Alert Employers of Potential PSP Fraud.
Unscrupulous PSPs may change their clients' addresses of record with the
I am pleased that the
As stated above, employers remain liable for unpaid payroll taxes when a PSP diverts employers' funds without paying the
In this year's and several prior annual reports to
During the summer of 2014, TAS worked with the
Notwithstanding this progress, I continue to have concerns about both the substance and implementation of the new guidance, as discussed above. However, I am pleased that the
Recommendations n79
I recommend that
. Require any person who enters into an agreement with an employer to collect, report, and pay any employment taxes to furnish a performance bond that specifically guarantees payment of federal payroll taxes collected, deducted, or withheld by such person from an employer and from wages or compensation paid to employees.
. Amend IRC [Sec.] 3504 to require agents with an approved Form 2678, Employer/Payer Appointment of Agent, to allocate reported and paid employment taxes among their clients using a form prescribed by the
. Amend the U.S. Bankruptcy Code to clarify that IRC [Sec.] 6672 penalties survive bankruptcy in the case of non-individual debtors.
VII. More Can Be Done to Reduce Improper Payments of the Earned Income Tax Credit (EITC) and Other Refundable Credits Without Unduly Burdening Taxpayers and Undermining Taxpayer Rights.
Enacted as a work incentive in the Tax Reduction Act of 1975, n80 the Earned Income Tax Credit (EITC) has become one of the government's largest means-tested anti-poverty programs. The EITC is frequently identified as a significant source of improper payments, with Treasury estimating them as averaging about 25 percent of EITC claims over the last five years. n81 Although the improper payment rate is often presented as a worsening problem, it may actually be less severe than in tax year (TY) 1999. n82 For context, EITC overclaims account for just seven percent of gross individual income tax noncompliance, while business income underreported by individuals accounts for 51.9 percent. n83 Improper EITC payments nonetheless continue to present a problem that cannot be ignored.
Some Improper Payments Result from Structuring the EITC as a Refundable Credit - A Structure That Minimizes Administrative Costs and Maximizes Uptake.
Unlike traditional anti-poverty and welfare programs, the EITC was designed to have an easy "application" process by allowing an individual to claim the benefit on his or her tax return. This approach dramatically lowered administrative costs, since it did not require an infrastructure of caseworkers and local agencies. According to the
It should also be noted that the EITC has a far higher participation rate than most other anti-poverty programs - the percentage of eligible individuals and families who receive the EITC is estimated to be about 79 percent. n84 The following chart (Figure 3: Costs and Benefits of Federal Payment Programs) provides some context for how EITC costs (both program and overclaims) and participation rates compare to other benefits programs.
Figure 3: Costs and Benefits of Federal Payment Programs
Program SNAP WIC SSI TANF HUD CHIP Medicaid School Lunch EITC
Year FY 2013 FY 2010 FY 2012 FY 2011 FY 2013 FY 2012 FY 2013 FY 2013 FY 2014
Number of Recipients 47.6 mil 9.1 mil 8.3 mil 4.6 mil 4.7 mil 8.1 mil 60.1 mil 30.7 mil 27.8 mil
Number of Eligible Persons 51.9 mil 14.6 mil 13.0-14.3 mil 12.2-14.4 mil 9.1 mil 11.8-12.2 mil 76.0-80.6 mil 49.2 mil 22.7 mil
Participation Rate (# of Recipients/ # of Eligible Persons) 79.0% 62.6% 58.0% 32.0% 49.3-51.5% 66.9 - 68.8% 68.2% 54.3-64.3% 78.8%
Year Participation Rate Measured FY 2011 CY 2010 1998 2009 2013 FY 2012 2009 2012 TY 2009
Total Benefits Paid Out
Average Benefit per Recipient
Overhead Costs
Overhead Costs as % of Total Benefits Paid Out 5.1% 41.8% 7.4% 9.7% 13.8% 36.3% 4.7% 10.3% 1.0%
Improper Payments
Improper Payments as a % of Total Benefits Paid 3.4% 1.0% 9.2% 15.0% 4.3% 8.2% 5.8% 15.7% 24.0%
Overhead Costs + Improper Payments
Overhead Costs + Improper Payments as a % of Total 8.5% 42.8% 16.6% 24.7% 18.1% 44.5% 10.5% 26.0% 25.0%
This table demonstrates that for a program of such significant size, administered at a federal level, the EITC reaches an extraordinary number and percentage of eligible taxpayers at a modest cost, when overhead and overclaims are considered together. n85 Assuming we want the intended beneficiaries to receive the benefits enacted by
This is not to say we should just accept the annual issuance of at least
Accelerate information reporting deadlines.
National Research Program (NRP) data show that income misreporting is by far the most common type of EITC error. n87 Sixty-five percent of EITC overclaim returns show some income misreporting, and it is the only error on 50 percent of overclaim returns. The average overclaim on income-error-only returns is
Establish minimum standards of competence for unenrolled preparers.
Return preparers play a significant role in EITC compliance, and can facilitate either compliant or noncompliant taxpayer behavior. n89
Figure 4: Taxpayers Claiming Refundable Credits, Claim Amounts, and Preparer Usage, Tax Years 2010-2013 n91
Tax Credit Tax year Number of Taxpayers Average Claim Total Claims (in thousands) Preparer Returns
Earned Income Tax Credit 2013 27,829,617
Additional Child Tax Credit 2013 20,026,251
First Time Homebuyer Credit 2010 373,880
Adoption Credit 2013 50,871
Making Work Pay Credit 2010 106,381,764
American Opportunity Tax Credit 2013 10,106,303
Unenrolled preparers - who are not attorneys, certified public accountants, or enrolled agents - account for more than three-fourths of EITC returns handled by a paid preparer. This figure is conservative, given significant anecdotal evidence that some paid preparers do not sign the returns they prepare (despite a statutory requirement to do so) and thus are not visible to the
Moreover, the NRP Compliance Study found 68 percent of returns claiming the EITC showed the involvement of a preparer, compared to 55 percent of individual returns not claiming the EITC. n92
Figure 5: Preparation of EITC Claims by Unenrolled Preparers in TY 201013 n93
Tax Year EITC Paid Count Total Preparers Unenrolled Preparers Percent Unenrolled
2010
2011
2012
2013
The NRP Compliance Study found 68 percent of returns claiming the EITC showed the involvement of a preparer, compared to 55 percent of individual returns not claiming the EITC. n94
EITC returns also differ from non-EITC individual returns in the type of preparer. As the graphic below shows, unaffiliated unenrolled preparers and those in national tax preparation firms are disproportionately active in EITC returns, in contrast with non-EITC returns.
Figure 6: Types of Preparers Handling EITC and Non-EITC Returns n95
Interestingly, the NRP Compliance Study found no statistically significant difference between all self-prepared returns and all paid-preparer returns in terms of the likelihood or magnitude of EITC error. However, variation does exist within preparer types. Unaffiliated unenrolled preparers (i.e., unenrolled preparers who are not affiliated with a national tax preparation firm) are most prone to error, and the difference is statistically significant in some comparisons. Specifically, 49 percent of the EITC returns prepared by unaffiliated unenrolled preparers contain overclaims averaging 33 percent of the amount claimed. n96
Simply stated, unenrolled preparers of EITC returns, especially those who are unaffiliated with national tax preparation firms, are the make-and-break point for all EITC compliance strategies. Preparers account for the majority of returns submitted to the
The recently strengthened regulations and increased EITC due diligence penalty under IRC [Sec.] 6695(g), coupled with a robust preparer compliance initiative and vigorous preparer prosecutions, should shift some preparer compliance behavior. But so long as anyone can purchase off-the-shelf software and hang out a shingle declaring himself or herself a return preparer without any demonstration of competency or any set of ethical rules to adhere to, we will not bring about significant change in EITC compliance.
The low income population is particularly vulnerable to unskilled and unethical preparers. The size of the refund is attractive to payday lenders and others interested only in what fees they can charge, not to mention criminal opportunists. Preparers in this category have no professional responsibility to the tax system. Yet, as numerous studies have shown, they operate in the areas and communities where low income persons reside. n97
The single most useful step
I have been recommending such a system beginning with my 2002 Annual Report to
Recommendations
I recommend that
. Authorize the
. Require the
Simplify the EITC by separating work and family credits.
The EITC is determined based on a combination of family size and income. Other tax provisions also depend on family size, including filing status, dependency exemptions, the child tax credit, and the child care credit. I have recommended separating the worker portion of the EITC from the portion of the EITC attributable to family size, and then consolidating all family-related benefits. n100 The earnings component of a worker's credit could be more easily verified through income reporting, leaving the more difficult family status eligibility verification to an isolated family credit. A refundable family credit would be available to all taxpayers, not just low income ones, thereby eliminating the relatively discriminatory audit focus on low income taxpayers that exists today, where taxpayers claiming the EITC are about twice as likely to face audits as non-EITC taxpayers.
Recommendation
I recommend that
. Simplify the EITC by separating the worker portion of the EITC from the portion of the EITC attributable to family size, and then consolidating all family-related tax benefits. n101
Redistribute the Responsibility for Administering the EITC Between Agencies: A Modest Proposal.
As noted above, one of the reasons the EITC is successful in delivering benefits to the eligible populations is that the application process is via the income tax return. This approach eliminates the stigma associated with applying for traditional welfare or income-support programs. Moreover, the
The relative ease of the EITC's application process, however, is also its downside. Anyone can apply, which puts the burden on the
In 2000,
Claimants can apply for the benefit through the ATO at neighborhood offices of the
The tax office makes available all FAO forms and receives and processes all FAO claim forms, including the end-of-year reconciliation for advance payments. ATO then submits claim form data, including claimant and spousal income, to Centrelink. ATO also makes additional payments (where the benefit was underclaimed during the year) and recovers overpayments through the income tax system.
However, Centrelink personnel are responsible for determining eligibility for and the correct amount of the FTB entitlement, and they handle all FTB disputes. That is, Centrelink, not the tax agency, makes all substantive decisions about a claimant's eligibility for the FTB.
The
VIII. Delegating Authority to the
While I have offered many proposals to minimize improper payments, I believe
1. The information provided by the taxpayer does not match the information in government databases;
2. The taxpayer has exceeded the lifetime limit for claiming a deduction or credit; or
3. The taxpayer has failed to include with his or her return documentation that is required by statute. n106
I have expressed my concerns about the
In my opinion, summary assessment authority is appropriate in only one of the instances described above; namely, where there can be no doubt that the taxpayer has claimed amounts in excess of a lifetime limitation, income cap, or age requirement. n108 For example, in cases where it is clear on the face of the return that a taxpayer has claimed a credit in excess of a statutory limit, such as overclaiming the American Opportunity Tax Credit (AOTC), then the summary assessment process may be appropriate. The AOTC is a partially-refundable credit for qualified post-secondary education expenditures that is available only for the first four years of a student's post-secondary education. n109 Because the number of years claimed for each student is apparent on the face of current and past income tax returns, allowing the
Without adequate safeguards and congressional oversight, however, significant expansion of the
The Right to Judicial Review Before Paying an Audit Assessment is the Cornerstone of Due Process in the U.S. Tax System.
Under current law, if the
Empowering taxpayers to seek judicial review in a prepayment forum (i.e., before they pay) protects them from arbitrary administrative actions by the
IRC [Subsec.] 6213(b) and (g) authorize the
Math Error Adjustments Are Intended to Allow Correction of Unambiguous Errors That Are Easy to Explain.
As I noted in my 2014 report,
In legislative history,
Example from Legislative History: You entered six dependents on line x but listed a total of seven dependents on line y. We are using six. If there is one more, please provide corrected information. n120
Although the
Current Math Error Notice: "We changed your total exemption amount on page 2 of your tax return because there was an error in the number of exemptions provided on lines 6a, 6d, and/or computation of your total exemption amount." n121
Other math error notices are inscrutable. The
The Sufficiency of Documentation Can Be Ambiguous and Difficult to Explain.
The "correctable error" proposal contains a broad grant of authority to the
A recent example illustrates why this distinction matters.
A related problem arises from the differences between e-filed returns and paper returns. Running counter to
Recommendations
I recommend that
. Decline to authorize the
. Appropriate funds and establish deadlines for the
Government Databases Can Be Unreliable for Tax Purposes, Such That Accurate Returns May Appear Inconsistent with Third-Party Data.
I have recommended the
Moreover, applying data collected for nontax purposes to tax claims is akin to relying on the addresses shown in a telephone directory to deny the home mortgage interest deduction. Even if virtually all of the entries in a directory were accurate, they were compiled for a different purpose, do not disprove eligibility under the tax law, were compiled at a prior date and may not be current, and should not deprive a taxpayer of a due process right to present his or her own facts.
As another example of inconclusive data that the
In my 2014 report, I note that as long as this is true, it would be problematic for the
The definition of what constitutes a "government database" is itself problematic. The "correctible error" proposal has been touted as reducing EITC improper payments, but it is unclear to me how it can do that unless "government databases" include the
The DDb has value -- it is a collection of circumstances from which the
My concerns about the unreliability of
For these reasons, I recommended in 2011, and again in my 2104 report, n134 that
Recommendations
I recommend that
. Before allowing the
Not every return that contains a typo or similar error contains an understatement. For example, the
TAS studied a statistically valid sample of tax year 2009 accounts in which the
Based on this study, I recommended that even if it finds a mismatch between the return and a reliable database, the
Recommendation
I recommend that
. Require the
IX.
The best way for
I believe it would be helpful for
The
Recommendation
I recommend that
. Reinstate joint oversight hearings to review the
X. Conclusion
The Federal government is currently failing badly to meet the service needs of its taxpayers. To address this problem, the
To be blunt, several incidents over the last few years have reduced the confidence of many Members of
n1 The views expressed herein are solely those of the
n2 IRC [Sec.] 7803(c)(2)(B)(ii).
n3 On the case advocacy side, TAS is charged with helping taxpayers resolve their problems with the
n4 Taxpayers and other stakeholders can submit issues at irs.gov/sams.
n5 See Technical and Miscellaneous Revenue Act, Pub. L. No. 100-647, [Sec.] 6226, 102 Stat. 3342, 3730 (1988) (containing the "Omnibus Taxpayer Bill of Rights," also known as TBOR 1); Taxpayer Bill of Rights 2, Pub. L. No. 104-168, 110 Stat. 1452 (1996) (also known as TBOR 2); Internal Revenue Service Restructuring and Reform Act, Pub. L. No. 105-206, 112 Stat. 685 (1998) (Title III is known as "Taxpayer Bill of Rights 3" or TBOR 3).
n6 See, e.g., the following most serious problems discussed my report: Audit Notices: The
n7 See, e.g., Most Serious Problem: Access to the
n8 See, e.g., Most Serious Problem: Virtual Service Delivery: Despite a Congressional Directive, the
n9
n10 For a summary of these legislative proposals aligned with the rights they protect, see
n11 See Taxpayer Bill of Rights Act of 2015, H.R. 1058,114th Cong. (2015) (as amended by H. Comm. on Ways & Means,
n12
n13
n14 IRS Wage & Investment Division, Business Performance Review 7 (4th Quarter - FY 2014,
n15
n16
n17
n18 This data was provided to TAS by the IRS Wage & Investment Division in connection with the
n19
n20
n21 Id.
n22
n23
n24 Id.
n25
n26
n27 The percentage of calls answered from taxpayers who choose phone tree prompts that put them in the queue to speak with a customer service representative is referred to as the Customer Service Representative Level of Service, which is abbreviated as "CSR LEVEL OF SERVICE" on the above chart. The wait time for callers who get through to a customer service representative is referred to as the Average Speed of Answer, which is abbreviated as "ASA (minutes)" on the above chart. In both cases, we have rounded to the nearest whole numbers, but the LOS change and ASA change columns were computed using decimals and therefore do not all total exactly.
n28
n29
n30
n31
n32 Id.
n33 The majority of the additional calls were handled by automation. The increase in calls seeking to speak with a customer service representative was 23 percent. See
n34 Pub. L. No. 111-148, 124 Stat. 119 (2010).
n35 In FY 2010, the agency's appropriated budget stood at
n36
n37 Email from Commissioner Koskinen to All Employees, Fiscal Year 2015 Funding (
n38 See, e.g.,
n39 Patient Protection and Affordable Care Act of 2009, Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and Education Reconciliation Act of 2010 (HERCA), Pub. L. No. 111-152, 124 Stat. 1029 (2010);
n40 IRC [Sec.] 5000A. Taxpayers filing tax year (TY) 2014 federal income tax returns were required to report that they have "minimum essential coverage" or were exempt from the responsibility to have the required coverage. If the taxpayer did not have coverage and was not exempt, he or she was required to make a shared responsibility payment (SRP) when filing a return.
n41 The Premium Tax Credit is a refundable tax credit paid either in advance or at return filing to help taxpayers with low to moderate income purchase health insurance through the marketplace. IRC [Sec.] 36B. The amount of the credit paid in advance is based on projected income, while the amount a taxpayer is actually eligible for is based on actual income. Many taxpayers were required to reconcile the Premium Tax Credit (PTC) amounts they received in advance with the amounts to which they were actually entitled.
n42
n43 The AM level of service of approximately 37 percent is a combined figure representing 29 customer service lines. The ACA LOS may be due, in part, to the fact that demand in the ACA hotline was significantly less than the
n44
n45 First-time abatement applies if the taxpayer does not have a failure to pay, failure to file, or failure to deposit penalty in the prior three years of the assessment year. For more information on the first-time abatement administrative waiver, see IRM 20.1.1.3.6.1, First Time Abate (FTA) (
n46 Specifically, the
n47
n48 SERP Alert 15A0171, Taxpayer Refund Inquiries with ERS Status Code 249, 349, or 449 (
n49 CMS, What Consumers Need to Know About Corrected Form 1095-As (
n50 SERP Alert 15A0147, Responding to Taxpayer Inquiries about Corrected Forms 1095-A, Health Insurance Marketplace Statements (
<p>n51
n52 For example, workers who are classified as employees have little opportunity to underreport their earned income because it is subject to both information reporting on Forms W-2 and tax withholding.
n53 For a more detailed discussion of the
n54
n55
n56 For more information on the benefits of electronic access to third-party data and the experience of international tax administrations, see
n57 See
n58 For written and oral statements of panelists at the two
n59
n60 IRS Pub. 6961, 2014 Update: Calendar Year Projections of Information and Withholding Documents for
n61
n62
n63
n64 See id.
n65
n66 See id. at 53.
n67 I discuss this issue in the Case Advocacy section of my 2014 Annual Report to
n68 Field Service Advice 200038005 (
n69
n70 See Consolidated Appropriations Act, 2014, Pub. L. No. 113-76, Division E, Title I, [Sec.] 106, 128 Stat. 5, 190 (2014) and Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113-235, Division E, Title I, [Sec.] 106, 128 Stat. 2130, 2338 (2014).
n71
n72
n73 Certain taxpayers who should have received CP 148A and CP 148B notices in English instead receive Spanish version CP 848A and/or CP 848B notices.
n74 Offers in compromise based on ETA provide the
n75
n76 See
n77 Memorandum from
n78
n79 For additional information, see
n80
n81
n82
n83
n84
n85 Unless otherwise noted, the amount of benefits is taken directly from or imputed from the federal government's improper payment website (see endnotes). Administrative costs were often difficult to determine, and it is not clear that they are computed uniformly by each agency. The figures in the chart were computed by
n86 For further explanation of these recommendations, see, e.g., Hearing before the Subcomm. on Oversight of the H. Comm. on Ways and Means, Improper Payments in the
n87 The
n88
n89
n90 IRC [Sec.] 6695(g). This duty also extends to determining the correct amount of credit allowed. Id.
n91
n92
n93
n94
n95 Totals do not always add to 100 percent due to rounding.
n96
n97 For a chilling inventory of studies showing the predatory practices and abuses in this area, see Brief of Amici Curiae,
n98 Support for preparer regulation as a means both to protect consumers and to improve return accuracy has been broad and bipartisan. The
n99
n100
n101
n102 This discussion is based on briefings for the
n103
n104 Hearing Before the
n105 See IRC [Sec.] 6213(b), (g).
n106
n107 For a discussion of significant problems with the
n108
n109 See IRC [Sec.] 25A(i).
n110 See Improper Payments in the
n111 Prior to the issuance of the SNOD, the
n112 IRC [Sec.] 6213. The 90-day period becomes 150 days if the notice is mailed to a person outside of
n113 IRC [Subsec.] 6511, 6532, 7422. For a discussion of the resulting burdens, see, e.g.,
n114 A 2007 TAS study found a discrepancy between actual EITC ineligibility and "flunking" an
Overall, more than one-quarter of taxpayers receiving an [EITC] audit notice did not understand that the
n115
n116 Pub. L. No. 94-455, [Sec.] 1206(b) (1976), enacting IRC [Sec.] 6213(f)(2).
n117 IRC [Sec.] 6213(g).
n118 JCS 33-76, at 372 (1976) (Assessments in Case of Mathematical or Clerical Errors, sec. 1206 of the Act and sec. 6213 of the Code). See also H.R. Rep. No. 94-658, at 289 and S. Rep. No. 94-938(I), at 375 (1976). Although the
n119 Pub. L. No. 94-455, [Sec.] 1206(a), 90 Stat. 1520 (1976).
n120 See H.R. Rep. No. 94-658, at 289 (1976); S. Rep. No. 94-938(I), at 375 (1976). See also JCS-33-76, at 372 (1976). (Assessments in Case of Mathematical or Clerical Errors sec. 1206 of the Act and sec. 6213 of the Code).
n121
n122 See, e.g.,
n123 See Worker, Homeownership, and Business Assistance Act of 2009, Pub. L. No. 111-92, [Sec.] 11, 123 Stat. 2984, 2989 (2009), amending IRC [Sec.] 36(d); IRC [Sec.] 6213(g)(2)(P)(iii).
n124 The
n125
n126 IRC [Sec.] 6213(g)(2)(M). For parents filing separately, only the parent with whom the child resides could claim the child. IRC [Subsec.] 32(c)(3), 152(c).
n127
n128 Notice 2013-45, 2013-31 I.R.B. 116; T.D. 9660, 2014-13 I.R.B. 842 (
n129
n130
n131 The Dependent Database (DEPDB) addresses non-compliance relevant to the Earned Income Tax Credit (EITC) and other tax benefits related to the dependency and residency of children. DEPDB consistently applies the tax laws to a return claiming EITC as other tax issues, such as dependent exemptions, filing status, Child and Dependent Care Credit, Child Tax Credit, and education benefits, are addressed concurrently. DEPDB is a 'Rules Based' system that examines EITC tax returns and applies a set of rules and SRA Model to determine residency and relationship issues. Tax returns are examined in a pre-refund environment stopping money before the refund is sent. The DEPDB system incorporates data (
n132
n133
n134
n135
n136 GAO, Enhanced Prerefund Compliance Checks Could Yield Significant Benefits, GAO-11-691T 9 (
n137
n138
n139 See, e.g.,
n140
n141
Read this original document at: http://oversight.house.gov/wp-content/uploads/2015/04/4-15-2015-Gov-Ops-Hearing-on-Tax-Advocate-Report-Testimony-Olson.pdf
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