Every year, by law, the National Taxpayer Advocate, “an independent voice for the taxpayer within the IRS,” issues a report to Congress. For 15 years, the National Taxpayer Advocate has been Nina E. Olson. She knows her stuff.
Issued last week, the 2016 report is about 965 pages, give or take a page or two. The executive summary alone is 95 pages long. The IRS ignores the National Taxpayer Advocate at its peril. The new Congress and the new President would be wise to heed her advice, too.
The 2016 report includes a lot of good ideas, observations, complaints, and suggestions. I may come back to some additional items in future blogs. In this blog I focus on three “foundational themes” that she identifies as core to improving the IRS and its operations.
- “Simplify the Internal Revenue Code Now.” Of course, the IRS does not write the tax laws; Congress does. Nevertheless, the IRS’ job revolves around this massive, complicated and confusing document. Olson points out that the Internal Revenue Code consists of four million words. She estimates that taxpayers spend six billion hours in order to meet filing requirements. (Based on the way the number is calculated, that may include some or all of tax preparers’ time. She admits that it’s a rough estimate.)
- “The IRS needs to talk to the taxpayer. IRS must present a human side to the agency to foster and keep voluntary compliance.” While self-service assistance has its beneficial attributes, she points out that behavioral science studies confirm the human voice is quite soothing to someone who is stressed and anxious. Indeed, she cites a number of behavioral science lessons that may be applicable to taxpayer compliance.
- There is a “need for establishing minimum standards of and testing for competency of Federal tax return preparers.” She is not worried about CPAs, attorneys, and enrolled agents. However, there are a lot of tax return shops that don’t have any real proficiency standards and sometimes have no scruples. Consider the guy standing on the side of the road at the strip shopping center dressed as the Statue of Liberty; when somebody parks and walks into his storefront, he takes off his costume and prepares a tax return. It might be good to check his credentials.