Taxpayer Advocate Cites IRS Failures

TAXPAYER ADVOCATE CITES IRS FAILURES

            In her mid-year report to Congress on the comings and goings of the IRS for the last several months, Taxpayer Advocate Nina Olson chides the Revenooers for a bit of – shall we say – lackluster performance.

            The report notes that the IRS created a five-year strategic plan for taxpayer service (known as the Taxpayer Assistance Blueprint, or “TAB”), at the behest of Congress in 2006.  The directive was originally motivated by concern that IRS taxpayer “services” were not sufficiently coordinated.  The Advocate’s report expresses concern that the momentum to implement and refine the TAB recommendations has abated, and suggests the IRS “reinvigorate” its efforts to improve.

            Indeed.

            The report also expresses concern about the impact on taxpayers of the IRS’ sharp decline in telephone “service.”  No surprise to us.

            The “Level of Service” on IRS toll-free assistor lines (reflective of the percentage of taxpayers who actually speak with a telephone assister among all callers seeking to do so) peaked at 87% in fiscal year 2004, but sagged to 53% in fiscal year 2008. 

            And if you’re after the California new home tax credit, get on the ball–we hear that as of mid June, the FTB had already received more than 9,800 applications claiming nearly $95 million under these credit provisions.  Recall that only about $100 million has been allocated for this program, so if you’re not one of the first 12,000 or so to apply, fuggetaboutit!

            And recognizing that California is awash in red ink, handing out IOUs right and left to tide over state creditors, what’s going to happen on the FTB front relative to the recently enacted “Cash for Clunkers” law, under which participating auto dealers will be doling out “vouchers” worth 3 or 4 thousand bucks to purchasers of new vehicles whose fuel efficiency is better than the old trade in?  The Federal legislation is effective now, but California has not conformed (as they typically don’t–at least right away).  So could the golden state deem receipt of such a voucher as gross income–subject to taxation?  Stay tuned.

            Which brings us back to the Taxpayer Advocate’s report–which cites another concern surrounding some of the recent Federal handouts in the form of various tax credits.  The American Recovery and Reinvestment Act of 2009 (the notorious “stimulus package”) temporarily increased the refundable portions of the Earned Income Tax Credit (EITC) and the child tax credit and authorized some new refundable credits, notably the “Making Work Pay” credit, the “American Opportunity” education tax credit, the first-time home buyer credit and a credit for certain federal and state pensioners.  Seems the Advocate is worried that refundable credits may present an increased risk of fraud and that IRS will thus have to balance fraud prevention with the timely delivery of refunds.  “On the one hand, if the IRS does not do enough to detect and prevent fraud, it may pay out billions of dollars as a result of false and fraudulent claims.  On the other hand, if the IRS clamps down too tightly, hundreds of thousands and potentially millions of predominantly low income taxpayers will not receive timely refunds,” quoth Advocate Olson.

            Not to worry – the Advocate will continue to monitor the situation.

            Thank goodness for small blessings!

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

            Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He is also a contributor to the recently published twelfth edition of Tax Savvy for Small Business, published by Nolo.  He can be reached at 831-7288, and welcomes comments at jquinn@ashleyquinncpas.com.

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