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2/21/08: National Taxpayer Advocate Delivers Report to Congress |
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National Taxpayer Advocate Delivers Report to Congress
Message includes issues of concern to small business owners
National Taxpayer Advocate Nina E. Olson recently released her annual report to Congress. The report concentrated on the consequences of tax code changes that were enacted in late 2007 and called for the enactment of a Taxpayer Bill of Rights. Several of her observations held implications for small businesses.
Impact of Late-Year Tax Code Changes on Taxpayers
The report asserts that the frequency and magnitude of late-year tax code changes is the most serious problem taxpayers face. During December of the last two years, Congress has provided tax benefits with retroactive effect for the full year. In 2006, Congress extended several popular tax deductions. In 2007, Congress provided an Alternative Minimum Tax “patch” to protect approximately 20 million additional taxpayers from the AMT. The report notes that late action causes a variety of problems:
• More than a million taxpayers may not have claimed tax deductions to which they were entitled for 2006 simply because they did not know about them. The IRS publishes Form 1040 and its accompanying instructions in early November, and tax software companies finalize their shrink-wrapped software products around the same time. In 2006, Congress reauthorized deductions for state and local sales taxes, educator expenses, and post-secondary tuition and fees in December, and taxpayers made an estimated 1.4 million fewer claims for these benefits in 2006 than in 2005. The only discernable difference between the two years was that the benefits for 2006 were not included in the Form 1040 package or shrink-wrapped software.
• The filing season normally starts around January 15, but the IRS had to delay the start of the filing season last year by three weeks for millions of taxpayers to enable it to reprogram its computer systems to reflect the changes in law. As a consequence, the affected taxpayers had to wait an additional three weeks to receive their refunds. The IRS recently stated that more than 13 million taxpayers may have to wait to file their returns until February 11 this year to allow the IRS to fully implement the changes Congress enacted last month.
The report recommends that the Treasury Department and the tax-writing committees create a process the IRS can use to identify and estimate the filing-season impact of significant tax legislation – particularly provisions extending existing benefits – and transmit them to the tax-writing committees at several points during the year.
The report urges Congress to enact a comprehensive Taxpayer Bill of Rights and to authorize “apology payments” in cases where the IRS excessively burdens or harms taxpayers.
Overall, the report discusses 29 problems facing taxpayers, makes dozens of recommendations for administrative change, proposes 11 recommendations for legislative change, and discusses the 10 tax issues most frequently litigated in the federal courts during the preceding fiscal year.
The Taxpayer Advocate Service is an independent organization within the IRS that assists taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. Taxpayers may be eligible for assistance if:
Taxpayers can contact the Taxpayer Advocate Service by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TTD 1-800-829-4059 to determine whether they are eligible for assistance.
Click here to read the full report.
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