updated 2:28 PM CEST, May 24, 2023

Acting National Taxpayer Advocate calls for IRS 'culture shift' as annual report released

In her 2019 Annual Report to Congress, acting National Taxpayer Advocate Bridget Roberts said the U.S. IRS needed to significantly raise its game with respect to the way it carries out its role as the nation's tax collecting agency.

But to "truly transform the organization" – which, she noted in a  five-page preface to this year's NTA report, Congress effectively called on it to do last year when it passed the so-called Taxpayer First Act – the IRS "needs to rethink the way it operates", starting with "a culture shift".

Such a needed culture shift might have been more likely to develop going forward, Roberts went on, had the IRS leadership not "declined to include a representative from [the Taxpayer Advocate Service]" among the Taxpayer First Act Office's staff.

"I find this deeply concerning," Roberts continued in her introductory remarks, referring to the failure of to include a TAS representative in the TFAO.

"Congress created the Office of the Taxpayer Advocate to serve as the statutory voice of the taxpayer within the IRS.

"No one has a better view into the problems that taxpayers and practitioners face day-to-day when working with the IRS than TAS.

"Over the last 20 years, TAS has worked more than 4.4 million cases resulting from problems with IRS systems or processes.

"That history with individual and business taxpayers’ problems gives TAS unique insight, perspective, and information that could be a key resource for identifying areas in need of improvement as the IRS develops a comprehensive customer service strategy.

"As the IRS decides how to implement the aptly-named 'Taxpayer First Act,' I believe TAS should have a seat at the table, to the same extent as key IRS operating divisions, particularly for purposes of implementing the act's requirements that the IRS develop a comprehensive customer service strategy, modernize its organizational structure, creating online taxpayer accounts, and develop a comprehensive employee training strategy that includes taxpayer rights." 

Laura Snyder, the sole overseas member of the Taxpayer Advocacy Panel (TAP) a federal advisory committee to the IRS and part of the Systemic Advocacy arm of the National Taxpayer Advocate, told the American Expat Financial News Journal  that she fully shares the acting NTA’s concerns about the IRS’s failure to include a representative of TAS as a member of the TFAO.

“And I would go further than that – I'm disappointed that the membership of TAP was not consulted sooner or in greater depth during the TFAO's consulting process,” she added.

“This type of consultation falls squarely within the mission of the Taxpayer Advocacy Panel. The very job of TAP members is to identify taxpayer issues and make recommendations to the IRS on that basis."

What's more, she added, as she explained here last month, in an article about how taxpayers were being given a limited-time opportunity to tell the TFAO in their own words what they think the IRS needs to do to improve its service offering, the TFAO has stated it that is particularly interested in addressing the concerns of three specific hard-to-serve customer groups: those with limited English proficiency, those on low incomes, and those in the international space. 

'Most comprehensive revisions
to IRS procedures since 1998'

Even without representation from the the National Taxpayer Advocate's office, the Taxpayer First Act has already made what the NTA says have been "the most comprehensive revisions to IRS procedures since the IRS Restructuring and Reform Act of 1998, including some 23 provisions previously recommended by the National Taxpayer Advocate" since the act came into force in July.

The National Taxpayer Advocate heads up the IRS's so-called Taxpayer Advocate Service (TAS), the IRS's official in-house ombudsman's office, and issues a major report to Congress on the IRS every year, usually in January.  As reported, Nina Olson, who had been NTA for 18 years, retired at the end of July, and her duties are currently being carried out by Roberts.

As in previous years, the NTA's annual report is actually a series of documents, including, this year, in addition to Roberts's introductory remarks, the 380-page 2019 report itself, and a 40-page Executive Summary, five individual reports on what her office deems to be the IRS's "most serious problems"; and a 132-page "Purple Book"  containing some 58 legislative recommendations that are said to be aimed strengthening U.S. taxpayers' rights and improving tax administration. 

There's even a 1 minute, 20-second YouTube video on the report. 

As was the case last year, this year's report doesn't make many recommendations specifically on behalf of expat American taxpayers, although such expats would clearly benefit from the adoption of many of the National Taxpayer Advocate's recommendations, such as a dramatic improvement in the IRS's standard of customer services.

One recommendation does, though, specifically call for the harmonization of reporting requirements "for taxpayers subject to both the Report of Foreign Bank and Financial Accounts [FBARs] and the Foreign Account Tax Compliance Act by eliminating duplication, and excluding accounts [that] a U.S. person maintains in the country where he or she is a bonda fide resident". 

Such a "same country exemption" has been advocated by many expat groups in the past, including the American Citizens Abroad.

Another recommendation urges that a "period of notice and comment" be introduced on any new inter-governmental agreements (IGAs) involving the U.S. and foreign countries in which Americans live, and a requirement "that the IRS notify taxpayers before their data is transferred to a foreign jurisdiction". 

One of the National Taxpayer Advocate report's main points this year that some expat American taxpayers may recognize, though, is an emphasis on the need to improve taxpayer services alongside of any increase in enforcement activities. 

Said Roberts, again in her introductory remarks: "If the IRS is going to go out into communities to talk to taxpayers who owe back taxes, then those same taxpayers need to be able to get answers to their questions when they call the IRS, or have an indicator placed on their account to designate when they might be at risk of economic hardship before they set up a payment plan.

"To do otherwise will cause harm to those who can least afford it."

Roberts wound up her introductory remarks by stressing the "critical" need to install a permanent replacement for Olson, who, she noted, had now been retired for five months. 

"While I am honored to serve as the Acting National Taxpayer Advocate, and will continue to serve in this capacity for as long as necessary, the Office of the Taxpayer Advocate — and taxpayers — deserve a permanent appointee," she said.

"Given the current crossroads at which the IRS finds itself, it is critical that a permanent National Taxpayer Advocate be appointed as quickly as possible to help ensure the IRS protects taxpayer rights and meets its obligations to taxpayers."

Among this year's report's other key recommendations: 

Congress needs to address the IRS's lack of adequate funding (variations on this theme run throughout this year's NTA's report). 

The IRS must develop a "comprehensive customer service strategy that puts taxpayers first, incorporates research on customer needs and preferences, and focuses on measurable results."

The IRS needs to modernize its information technology systems, and that Congress provide it "with additional dedicated, multi-year funding to replace its aging systems, pursuant to a plan that sets forth specific goals and metrics and is evaluated annually by an independent third party." 

Congress needs to allocate more money to the IRS, which, due to antiquated technology, a smaller workforce, and an increasing workload, will be otherwise unable to improve its services. (Between fiscal years 2010 and 2019, when the number of income tax returns received by the IRS increased by about 9%, the IRS’s appropriation (after adjusting for inflation) and number of employees declined by more than 20%; "as a result, in fiscal year 2019, telephone assistors answered only about 29% of the calls the IRS received," the National Taxpayer Advocate's report notes.

The IRS cannot and should not ramp up its enforcement efforts without additional funding for service and operations support... "Enforcement actions like levies and liens can cause severe economic hardship for some taxpayers, so when the IRS takes these actions, it is critical that it have the resources to assist taxpayers who call or visit the IRS"

The IRS should make it possible for those taxpayers "with limited English proficiency" to request to receive more IRS notices in their preferred languages than is currently now possible.  Currently, "even when the IRS has a notice already translated into Spanish, taxpayers often have no simple way to request it or notate their accounts to reflect their preference"; of the five most commonly-issued versions of the statutory notice of deficiency, "only two are available in Spanish and none in any languages other than English or Spanish". 

With respect to the issue of U.S. taxpayers with limited English proficiency, Taxpayer Advocacy Panel representative Snyder noted that this was another reason that the TFAO needed to "reach out to organizations that advocate for Americans overseas with respect to tax issues – such as AARO or ACA –  [as well as] overseas taxpayers themselves, including those who do not speak English – to understand their issues and proposed solutions directly from them."

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