Thursday, March 27, 2014

The real scandal at the IRS -- March 27, 2014 column


If you’re struggling with your taxes, this won’t come as a surprise:  The IRS is a mess.

I’m not referring to the scandal involving the Internal Revenue Service’s handling of applications from groups seeking tax-exempt status. Congressional Republicans won’t let it go, but the scandal is just one of the agency’s problems.

Our tax system is built on trust, and we all have a stake in a fair, helpful, functioning IRS. Nobody loves paying taxes, but about 98 percent of the money the IRS collects comes in on time and voluntarily. Only 2 percent is from “enforcement actions.”

For the system to keep working, though, taxpayers must be able to rely on the IRS to be impartial and to answer questions and provide sound advice.  Impartiality came into question with reports last year that the IRS subjected tea party and other conservative groups to extra scrutiny. The agency has a new commissioner and new rules and is working to repair its image.

For all the attention the scandal has gotten on Capitol Hill – 15 hearings and counting – you’d think every American wants to start a 501(c)(4) organization. Most Americans just want to file their taxes correctly.

Once upon a time, people could walk into an IRS office, sit down and get help filling out their returns. 

Today, most people have to pay a professional or buy software. Americans spent 6.1 billion hours and $168 billion on tax preparation in 2012.

As if that weren’t enough, taxpayers must guard against getting fleeced by unscrupulous and incompetent preparers, identity thieves posing on the phone and in emails as the IRS, and other scams.

Every year more than 100 million taxpayers call the IRS for help and millions more write or visit IRS walk-in-sites. This year, though, IRS projects it will be able to answer only six in 10 of the calls it receives. A decade ago, it answered nearly nine in 10, according to the latest annual report to Congress by National Taxpayer Advocate Nina E. Olson.

Olson is an independent voice for taxpayers in the IRS.  Her 2013 report, released in January, warns that IRS taxpayer service has dropped to unacceptable levels and could hurt voluntary compliance.  

For example, taxpayers lucky enough to get through by phone stay on hold for almost 20 minutes before they speak to a human.  

IRS now answers only “basic” tax law questions and won’t answer any questions after the April 15th deadline, even from taxpayers who get filing extensions and complete their returns later in the year.

“It is a sad state of affairs when the government writes tax laws as complex as ours – and then is unable to answer any questions beyond ‘basic’ ones from baffled citizens who are doing their best to comply,” Olson wrote. 

How did we get into this fix? Ask Congress .

Congress has cut the IRS budget and staff 8 percent since fiscal year 2010 as the IRS workload has increased. The workload will get heavier as the IRS takes responsibility for the Affordable Care Act’s tax penalty for people who don’t buy health insurance. 

Training at the IRS has taken a hit from $172 million to $22 million since 2010, the report says. Is it a surprise, then, that customer service reps give incorrect or no answers?

Congress has also placed many demands on the IRS during its investigations of the tax-exempt organizations scandal. Over the last 15 months, 250 IRS staffers have spent 100,000 hours to responding to congressional requests and have produced more than a million pages of redacted documents, IRS Commissioner John Koskinen said Wednesday at a hearing.

All this comes at a cost-- $8 million to comply with congressional requests and another $6 million to $8 million to upgrade information technology to be responsive, he said. The meter is still running.

Taxpayers need to know that the IRS isn’t targeting people for their political, religious or other views.  They also need to know that they can get timely, credible information from the IRS. Everybody talks about reforming the tax code. Let’s start with making tax time a little easier for the hard-working taxpayer. 

 © 2014 Marsha Mercer. All rights reserved.

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