THE TAXPAYER ADVOCATE SAYS THAT THE IRS IS UNDERMINING TAX COMPLIANCE

The office of the National Taxpayer Advocate, an independent government watchdog over the Internal Revenue Service, has issued its 2010 mid-year report evaluating the Internal Revenue Service’s practices. The overall theme of this report (as in prior reports) is that the IRS’s collection practices are in grave need of overhaul.

Some of the highlights of the report include the following comments concerning the particularly onerous collection practices of the IRS:

It is increasingly difficult for taxpayers whose circumstances do not fit into checklist parameters to find someone able to address their problems.

The IRS is failing to address the needs of taxpayers who are experiencing economic difficulties and has not revised collection policies that harm taxpayers, thereby undermining its goal of increasing voluntary compliance.

The IRS has failed to utilize the significant collection alternatives available to it to resolve taxpayer debts, thus, leading to increasing accounts receivable on the IRS books, while taxpayers face staggering accruals of penalties and interest that impact their future compliance.

There is a general and extremely unfortunate perception in parts of the IRS that taxpayers who fall behind on their tax payments are “bad” taxpayers who deserve what they get.

What do these comments mean? They mean that the National Taxpayer Advocate, charged with oversight of the IRS, has observed the same thing that taxpayers across the country have experienced first hand.

What else does this mean? Probably very little. The onerous collection practices of the IRS and the failure to adequately consider collection alternatives based on a taxpayer’s circumstances, is something that has been reported in several of the reports. Until we see corrective action by the IRS or mandated by Congress, we have to consider that the tax authority will conduct “business as usual.” We should expect the IRS will do so in spite of these observations by the Taxpayer Advocate. This will likely result in additional unpaid taxes and greater non-compliance by the American public.