New Report Recommends IRS Focus on Taxpayer Service, Not Enforcement

A new government report suggests that the Internal Revenue Service (IRS) should begin to shift its focus away from tax enforcement and move toward putting taxpayer service first. The taxpayer-centric strategy is being considered in an effort to encourage compliance by building trust and confidence between taxpayers and our nation’s tax agency.

According to the most recent annual report by National Taxpayer Advocate Nina Olson, the IRS currently spends almost half of its entire $11.2 billion budget on tax audit and enforcement cases. On the other hand, less than 6% of the budget is spent on taxpayer outreach and education. The report also states that significant IRS budget cuts since fiscal year 2010 have limited the ability of the IRS to improve its technology systems and meet taxpayers’ needs.

The IRS has also emphasized on-line services in recent years, which Olson warned may alienate millions of taxpayers who rely on telephone or in person assistance. In fact, the report said that IRS employees were only able to answer 38% of taxpayer phone calls during the 2015 fiscal year and 53% in 2016. Taxpayers that were able to speak to a representative waited on hold for an average of 30 minutes in 2015 and 18 minutes last year.

Additionally, after the Taxpayer Advocate Service analyzed IRS data, it was determined that individuals and businesses spend about six billion hours a year complying with the code’s filing requirements. This doesn’t include the millions of additional hours spent responding to IRS audits or notices or consulting with a tax lawyer. The report stated, “If tax compliance were an industry, it would be one of the largest in the United States.”

Her report recommends that Congress provide the IRS with additional funding as well as an oversight plan that assures that the funding is spent appropriately. It also discusses several of the most serious problems taxpayers faced in 2016, including inadequate Taxpayer Bill of Rights education for IRS employees and imprecise fraud detection filters that cause substantial refund delays and unfairly dole out tax penalties.

Olson, who heads the independent IRS Taxpayer Advocate Service, presented this information to Congress while advocating for tax systems that are designed around taxpayers who are trying to comply, instead of focusing on those who are actively evading tax.

Olson’s recommendations are based in part on taxpayer feedback and data gathered during 12 public forums her office held around the country in 2016, in addition to several focus group interviews with tax lawyers and other tax professionals. Her urges for a mission overhaul and emphasis on simplification of the tax code could make a major impact with the start of a new White House administration and an upcoming congressional session expected to focus on tax reform and other issues involving the IRS.

As the report stated, “In an enforcement-oriented tax agency, if taxpayers don’t get the help they need to comply and they make a mistake, they are treated as if they are tax evaders. This treatment in turn breeds resentment and increases the risk that the taxpayer who was willing to comply is no longer willing to do so.”