Taxpayer Advocate Does NOT Like User Fees. Neither Should You!

by Tom Buck

You may or may not know that the government has a position known as “Taxpayer Advocate”. This person is charged with helping taxpayers with some, not all, needs when having a dispute with the IRS. We tax professionals sometimes resort to using their help when the normal channels have stopped working.

They can be very useful in getting certain problems solved. However, we frequently hear from them that they have no authority over certain issues, so they are not a panacea.

In addition, the Taxpayer Advocate, Nina Olson, is required to identify, in a report to Congress, the twenty (or more) “most serious problems” encountered each year by taxpayers and to make administrative and legislative recommendations.

Before she reports to Congress, she provides her report to the IRS for their comments which are included at the conclusion of each item in her report. The IRS is supposed to have no input on how this advocate runs her operation or what she reports on.

Ms. Olson recently released a report in which she discussed IRS user fees. In her report she highlights what she refers to as a “pay to play” plan. Olson notes 1) the expansion of user fees and 2) a reduction in personal service as creating this “pay to play” plan in which service will continue to decline, in general, and personal service may become a thing of the past.

Under this system, IRS will substantially reduce telephone and face-to-face interaction with taxpayers (to be reduced even below the miserably low levels achieved in recent years). Under what the Advocate terms “The Future State Plan” the IRS will seek to expand the role of tax return professionals to provide the assistance needed by the taxpayer.

This is service the public used to receive for free, but will likely be paying for in the future. As part of the Plan, the IRS plans to expand the use of online availability to help taxpayers resolve IRS issues.  She observes that millions of taxpayers do not have internet access and millions more do not feel comfortable trying to resolve financial matters over the internet. This approach might just cause more problems than it resolves.

Another issue is that many taxpayer problems are not “cookie cutter”. In my practice of helping our fellow citizens with IRS problems, we frequently need to speak with a real, live person (sometimes several times) in order to get a problem resolved.

As things stand now, all too often the taxpayer is left out in the cold, not able to resolve a problem because the IRS bureaucracy does not permit speaking directly with an agent. This, of course, will increase the cost to the public because of an increased need for professional assistance.

To expand on this a bit, another significant hang-up in getting IRS issues resolved is that most of the time you don’t get to speak with the same agent twice (even if you are able to get through). This necessitates educating a different agent each time you try to make contact. More time involved and more cost to the taxpayer.

Ms. Olson points to an increase in user fees as another aspect of the “pay to play” game being rolled out by the IRS. The Future State Plan incorporates fees for services not charged for in the past. On top of that, in charging these fees, the actual effect is to deter taxpayers from using services that promote compliance (e.g. charging a fee to set up an installment payment plan). This reduces voluntary compliance and it costs the government more in lost tax collections then it gains in user fees.

In speaking of the IRS’ budget, she observes that between 2010 and 2015 the appropriation has declined by about  10 %. However, the IRS’s user fee revenue increased by 34%. It’s interesting to note that in the past the IRS tried to avoid imposing fees that would impair its mission. However, once it was authorized to retain fee revenue, new fees were imposed and the cost of these fees goes up regularly.

Let’s talk a bit about IRS penalties. Not too many years ago there were only two IRS penalties on the books. Now there are some 170. Not only has there been a great proliferation in the number of things we can be penalized for, but these fees also rise on a regular basis.

So whether we are talking user fees or penalties, the government has found many new ways of getting into our pockets. As you probably know, many governmental agencies now charge fees for services that were free in the past. We not only get our taxes raised, but we are charged for what used to be free. Even so, the national debt keeps spiraling upward. Go figure.

Remember us if you run across someone with IRS problems. We defend our fellow citizens against their government by making sure the IRS obeys the rules.