Taxpayer Advocacy Panel Town Hall Meeting
May 6, 2008, 6:30 to 8:30 p.m.
Trutter Center, Lincoln Land Community College
Springfield, IL 

Approximately 60 in attendance (not including IRS staff)

Nina Olson, NTA
Bernie Coston, Director, TAP
Panel Members in Attendance:  Kelly Wingard, Ann Spiotto, Ray Buschmann Ken Wright

Opening remarks, Dr. Judy Jozaitis, Vice President, Workforce Development and Community Education, at Lincoln Land Community College

Our speaker tonight is the National Taxpayer Advocate Nina Olson.  She is recognized in the top 100 accountants in United States.  She is a tax attorney and the only IRS employee able to elevate legislative issues directly to Congress. 

Kelly Wingard – local Taxpayer Advocacy Panel (TAP) member from Decatur, IL.  This is the final town hall meeting in 2008.  Thanked Dr. Charlotte Warren and Laurie Smith for their help in holding this meeting at the Trutter Center.  She gave an overview of what TAP does and how issues are identified, researched, analyzed, and finally elevated. 

Ann Spiotto – first year member; Lincolnwood, IL.  Spiotto said she applied just to see how a major government agency operated. 
Ken Wright – second year on TAP, St. Louis, MO.  Wright talked about successes TAP has had.  He thinks the very existence of TAP is a success in and of itself.  TAP works to help improve taxpayer services.  They have improved taxpayer accessibility to Earned Income Tax Credit (EITC).  They are responsible for the elimination of the double extension of filed returns – now you just have to do one single extension.  The Notices Committee was cited by IRS for improving readability of notices.  They developed a tool to score notices and then made change recommendations.  The Forms and Publications Committee reviews forms and publications for the IRS and has had a great impact. TAP is an advisory committee which has proven to be a vital partner with the IRS.

Ray Buschmann – first year member, Lake Forest, IL.  Buschmann talked about the Taxpayer Advocate Service (TAS) – who assists taxpayers with problems they cannot get resolved within normal channels of the IRS. 

Nina Olson, as the National Taxpayer Advocate, is an IRS employee, and is mandated by Congress to be the advocate to reduce burden on taxpayers.

Nina Olson:
This is the third TAP town hall meeting this year.  It is the thirteenth overall in the last three years, all over the United States.  TAP members are very generous with their time and efforts.  But she said she is here to hear directly from you as to what problems taxpayers are having.  The NTA is actually described in the Internal Revenue Code.  The law says the person who holds this job cannot be chosen if they are an employee of the IRS, and cannot work as an IRS employee for five years after they leave as the NTA.  Olson is responsible for delivering an annual report to Congress in which she identifies the top 20 most serious problems being experienced by taxpayers.  The NTA is able to make both administrative and legislative recommendations.  The report goes to Congress before any IRS employees see it and even before the IRS Commissioner or the Secretary of Treasury sees it.  It is a clear independent voice for the taxpayers.  The report is balanced as we give the IRS descriptions of the problems and ask them to respond and tell us what initiatives they are working to solve the problems.  A lot of what we do is to ensure these issues do see the light of day and gives Congress a chance to make these changes.  We track the IRS responses and implementation and hold them responsible.  The Annual Report to Congress is available on the internet. 

This year we identified the number one problem is that Congress makes changes in the laws so late in the year; this year it was the last two weeks in December.  The IRS has to print their new forms (with the changes made by Congress), have them packaged and sent out in time for the filing season.  The software vendors need to make their changes too.  For the last two years, the filing season was delayed due to these last minute changes in laws.  It was delayed until February  this year because of the Alternative Minimum Tax (AMT).  We cannot ever assume what we think Congress is going to do.  There are normally over 13 million refunds issues between January and February, but this year these early filers could not file due to the AMT law change.  This is a disruption in their lives.  Many of them need this money. 

The following are some of the laws that expired and were not renewed:  educators’ expense; the state and local sales tax deduction; the tuition and fees for higher education.  Once they were renewed, we tried to get press releases out to let people know how to claim them.  For 2005 and 2006, over 1.4 million fewer taxpayers claimed these deductions because the forms and publications did not include the items.  Congress is actively harming taxpayers by passing these laws so late.  We recommended the IRS meet early in the year to indicate to Congress what the impact will be on taxpayers when they don’t get their job done.  The Local Taxpayer Advocates (LTAs) went on the Hill this fall to talk to their representatives about this issue and to present the Annual Report to Congress.  There were many people interested and Senators Bacchus and Grassley introduced a bill about this issue. 

Taxpayer:  This issue also has a tremendous impact on preparers.

Olson said she wanted to talk about private debt collectors. The IRS is using them now and they are actively collecting the money owed – the tax gap.  In Italy, they actually shut businesses down when they do an audit.   About 83% of taxpayers voluntarily pay taxes in the United States.  How do you feel about private debt collectors?

Taxpayer:  Indicated he had a problem with the State of Illinois.  Another said he had a problem when a client was approached by a private debt collector.  They have no information and they tell you to go back to the IRS.  This raises a concern about identity theft. 

Taxpayer:  Said her brother-in-law had his identity stolen and someone filed using his Social Security Number (SSN) and consequently his refund is being held up until they can clear this up. 

Olson said the IRS has seen a great increase in these cases.  There really isn’t a centralized function that deals with identity theft.  Identification can be stolen two ways.  First way is an individual who is an undocumented worker he/she files with a W-2 with a SSN that doesn’t belong to them.  The real owner of the number has to correspond with IRS that the income does not belong to them but to the undocumented worker.  IRS tells the rightful owner to not use the number until IRS figures it out.

The other instance is when someone steals your whole identity to get a refund. They file the return before you do and the IRS has to try to figure out who is the real owner.  This is a burden on the real taxpayer.  Until recently, the IRS did not have any way to mark an account to flag the return and the taxpayer had to prove they were the right person each year.  We recommended the IRS have a marker to indicate that this person’s identity has been stolen.  We also recommended the IRS have a centralized area where they work these cases.  The Commissioner said there will be a special unit by September to work these cases.  Right now we are wrestling with the fact that taxpayer information is confidential.  The problem is when we know two people are using the same number; can we notify the SSN owner without disclosure?  This is sharing tax account information. 

Taxpayer:  She pointed out that the IRS does disclose this kind of tax information now when two people claim the same child; if an ex-spouse has already claimed the children.  Taxpayer has to prove every year that they qualify for EITC.  Why can’t IRS mark these returns as well? 

Olson said it is made more difficult because family affairs change so much and each year stands alone.  We did a test of pre-certification for EITC one year.  Sometimes the parents alternate claiming the child from year to year.  Family issues are very difficult to resolve.  We are going back to federal tax law that the taxpayer, who is the custodial parent for more than half a year, can claim the child unless they give that up to the non-custodial parent.  However this can cause an issue with the state law.  The federal tax law trumps the state law.  We do not want to get involved in custody battles.

Taxpayer:  What is the IRS position about penalties? 

Olson said there are a fair number of penalties for preparers as they are held to a higher standard than taxpayers.  That can be a problem because the taxpayer holds a lot of information in their hands and sometimes they don’t divulge all of it.  Congress has a roll in deciding about penalizing certain behaviors.  We are recommending that Congress go back and review all the penalties again and decide what behaviors they are really worried about.  Olson thinks Congress needs to look at the imbalance in the current penalties. 

Taxpayer:  He has had experience with a couple very zealous tax collectors.  He was directed to speak to his LTA.  He said this goes to the point of the uneven application of the law.  Another said the campuses are getting involved in very complicated audits and should not be handling them by correspondence.

Taxpayer:  It seems that no one has a handle on some of these agents.

Olson said there should be many more office audits.  The IRS sends a notice, the taxpayer mails something back and theses things never catch up.  IRS never tells the taxpayer why what they sent is not adequate and a notice of deficiency goes out and soon the taxpayer is in tax court.  Campus exam should be limited to Automated Under Reporter (AUR) and that kind of income mistake.  Other exams are better done when you have a person to work with. 

Taxpayer:  We are in a locality where we have to travel a good distance when a taxpayer gets audited.  We have to travel all over to represent them. 

Olson said the IRS is shrinking and not available in locations like they used to be, and this results in increased cost being incurred by the taxpayers who need representation.  However please use your judgment before bringing this case to TAS.  If it is causing real problems for your client, then absolutely take it to your LTA. 

Taxpayer:  Said he would like to see a simplification of the Offer-in-Compromise (OIC).  He experienced a case where it was being worked in San Diego, CA.  Not only is it complicated, but it is hard to communicate with a distant office.  By the time we could get the requested information to the IRS, the time limit had expired and our case was denied.  They requested copies of everything.  There needs to be some reduction of detail; maybe a credit report, balance sheet asset investigation then get on with it.  It is a very burdensome process right now and taxpayers need to get a decision quicker. 

Olson said this is a statutory issue.  The Commissioner and Secretary of Treasury have authority to forgive a debt in three instances; doubt as to collectability, doubt as to liability, effective tax administration.  An OIC is public so the public can see what is happening. IRS is concerned that compromising tax shows all taxpayers you can pay just pay what you feel like paying. Research shows that after a debt is over two years old, the IRS generally doesn’t collect on it.  Generally the IRS collects .17 cents on the dollar for an OIC.  IRS data also shows that 43% of the taxpayers with denied offers become currently not collectable (CNC) accounts.  IRS has access to some information about peoples’ assets and can build cases internally, but will probably never get away from requesting bank statements.  There has to be mind shift by the IRS that an OIC is a viable collection tool.  The OIC requires a taxpayer to be in compliance five years or the full debt returns.  In most instances, the taxpayer can pay something and the OIC can put a taxpayer back in compliance.  We have turned a non compliant taxpayer into a compliant one.  Congress passed a law that says if the IRS does not process an offer within 24 months, it is deemed accepted.  So you may see the IRS reject your offer when you are closing in on that timeline.  If you feel the appeals person is not listening, please go to your TAS office.  But make sure you go thru your normal channels first.

Taxpayer:  Said he had not filed since the 1980s and when he finally filed, he had a very bad experience.  The IRS keeps saying he owes more and more every year.  He has felt like an outlaw for 20 years.  Has tried to hire a professional to help.

Olson recommended he go to Low Income Tax Clinic (LITC) and they will help with the returns and will help work out an installment agreement or an OIC.  If you go in voluntarily, the IRS will only go back six years. 

Taxpayer:  Something should be done to help the self employed.  They should have some kind of tax withholding.  In many instances, when they get the money, it gets spent with out regard to the tax that will be due.
Olson shared that has been one of her legislative proposals that Congress look at a withholding system for persons receiving Forms 1099.

Taxpayer:  What is the TAS position on the removal of the debt indicator and information sharing with lending institutions? 
Olson said the debt indicator is used if you file electronically.  The preparer may be notified that your refund will be held for prior debts collectible by the IRS.  This is what enables refund anticipation loans (RAL).  It eliminates some of the risk with a RAL and to eliminate it can harm some taxpayers.  She would like to see the debt indicator moved back so we aren’t telling people they are going to get a refund and then we end up freezing their return.  She has suggested moving the debt indicator back and that will make RAL banks more reticent about giving out these loans.  If debt indicator gets moved back behind the IRS processing, there will be less RALs.  As more returns to move to the new CADE system, refunds will be issued in four days and then RALs won’t make much sense.  We are also actively working on getting a Treasury debit card for those who are un-banked.  The Social Security Association issues debit cards now.  If they can do it, there is no reason why the IRS can’t.

Taxpayer:  One software company would charge an extra $3,500 if you did not do a certain number of RALs when using their software.  She has discontinued using that software. 

Taxpayer:  Over that past year, the number of returns done by Volunteer Income Tax Assistance (VITA) has been increasing.  Is anything being done to help assist these sites?

Olson said the grant program is a Wage and Investment (W&I) initiative.  TAS has been trying to help them with this.  They will be looking at demographics, the experience of site, and what each site is proposing to do with the money.  You need to indicate there are unmet needs and that the population is growing.  We are trying to serve that population in the rural areas.  This is a federal grant program and Congress has approved the funding.  We are encouraging people to band together to request one grant for a certain area as the paper work is extensive and expensive to do.  This will be much more cost effective for everyone.  The funding is for better training and for someone to oversee operations. 

Taxpayer:  What about the tax simplification? 
Olson said she thinks it is going to happen, but it s a function of political will.  The AMT is driving this issue.  More and more people are being drawn into AMT.

In 2012, it will cost more to repeal the AMT than it will to repeal the regular income tax.  That will drive the fundamental tax simplification.  She sent forward ten principles of tax reform two years ago and this will be the number one issue in her next report to Congress.

Olson told everyone they could go to IRS.gov and put their issues in the SAMS system.  TAS uses these issues to come up with recommendations.  You can also look at her Annual Report to Congress and write your Congressman to tell them to address these issues.   

You can also go to www.improveirs.org to submit suggestions and issues to TAP. 

Kelly thanked everyone for attending this meeting. 

Springfield Focus Group
May 6, 2008

Nine people participated.  All were practitioners
Group was led by Kelly Wingard and Ann Spiotto.

Should the IRS dispense tax law information?
Everybody in the group said yes, IRS should provide tax law information.  One individual did raise concerns about the reports of calling IRS several times and getting conflicting answers to your questions.

Is IRS competing with your business when they file returns for free?
Is not fair that those returns do not get audited.  We have to suffer through

With the limit on the income level that IRS will prepare for, doesn’t compete with practice.

Practice does many Schedule Cs and farm returns, so do not really compete with my business

Should e-filing be free for everyone?
Never tried the e-filing on line with IRS.  IRS outsourcers all of that so they do not really sponsor that. 

Not really ever free as people still get charged for the state return.

Should Refund Anticipation Loans be allowed to continue?
People want their money immediately.  If you are so broke that you need a loan, you will pay for it.  People need the money now and can’t wait the 10 days.  They are just completely broke.  People are willing to pay and don’t want to wait the 10-14 days.

How will practitioners collect their fees without the RAL.  People do not have the money to pay to get their returns done.  The RAL is  the only way they can pay for help. 

The first e-filed return I did this season, the taxpayer received their refund in six days.  It is improving with the new system.  If people can get their money in six days, the RAL will go away.

I don’t think it will ever really go away totally because of people who are “unbanked” or “unbankable.”  There will always be people like that who can’t wait.  If you can do the debit card, do it. 

How did Congressional delays effect your practice?
Really not that much.  Prepared the returns and then just held them and then sent on later.

Need to do something with the deadline.  Move it or make it a rolling deadline.  Maybe the taxpayer’s birthday or something other than all the returns need to be done 3 ½ months.

Really the bigger problem is the due dates.  Have to do corporations by March 15 and then the flow trough to the 1040s with the K-1s.  The late arriving tax packages just about put me over the edge.

Larger problem was the farm credit not processing until March 13th and so returns were late since they were due March 1st.  Were late no matter what you did.

Really felt the impact of ads running about to getting returns filed early for the Economic Stimulus Payment.  Could not talk people into the extension this year because they wanted their stimulus payment.

Do you have any problem or frustrations in being the one to distribute EITC?
No negative comments.  Most voiced EITC was a good program.

Do you think practitioners should be licensed?
It is really a concern that Enrolled Agents and Certified Public Accountants are held to a different standard, a higher standard.  That is a problem.  They are held more accountable than an un-enrolled practitioner.

One has to ask why be enrolled and be subject to the all the ethics.  What is the reward?  But will licensing fix the entire problem?

Licensing is a barrier to free trade.  The market place should take care of the poor ones.  People will not go back.

Open discussion

Should be more use of email by the service.  Practitioners need to communicate with auditors and collectors by using email.  IRS wastes too much postage writing back and forth.

Need to look at the dollar figure for mandatory use of the collection statement.  It has been $25,000 for years and years.  With inflation, should raise that limit to a higher dollar figure.

IRS uses the $5000 tax due as the level for filing liens.  That should be raised also.  Just impedes people from getting a small loan to pay the tax bill.  Complicates things for them and makes it harder for them to pay. 

Need more coordination with the states.  You need a separate POA for both the state and federal government.  Need to have someway to do one report for both to access everything.

Practitioners need a better way to verify SSNs.  Need to be able to do more easily.
                               
The Form 1040X should be able to be e-filed.

Practitioners should be able to get their PTIN numbers instantly.  Have a large practice and takes too long to get the numbers for new preparers.

Their must be an easier way to get information on clients.  Too much back and forth with IRS.  Just went through a three year audit and with too many offices and too many employees.  IRS took a year to get back to the taxpayer on the first go around.  Should be the reverse situation.  If taxpayer has to respond quickly, IRS should be accountable too. IRS should give the taxpayer what the status is.  How many days until it concludes.

E-services is just too clunky.  We actually use a service and pay for someone to do it for us.

Since you can direct debit your balance due with your 1040, why not let people schedule their 1040ES payments as direct debt with the 1040 return.  It would be easier than sending them to use EFTPS.

Let people check estimated tax payments on-line like the State of IL.  Should also be able to check payroll deposits.  Need to see the wrong the deposit amount for the return and need this information electronically.

It is very difficult that refund checks come without a letter explaining the changes.  People need to know why the money is coming to know if they are entitled to it.  Had a problem with some Schedule J calculation errors.  The farmer has now spent the money and IRS can’t get it back.

Concerned over the Form 944.  I received a letter I was a 944 filer and so made 944 deposits.  Now the IRS tells me I am a 941 filer and now I owe money.  So when I got the letter that I was a 941 filer, it was September and my deposits were late and all sitting on the 944. 

I would rather file the 941 for clients as opposed to the 944.  Let people choose what they want to file.  Clients do not know what to do and how to file.  Most people need to make those deposits all through the year.  They don’t have the money to pay at the end of the year.  If you use EDS, they don’t have make 944 deposits.  They are not compliant with the 944.