IRS Issues

IRS Services

IRS Comments on Tax Season Delay Impact for Community VITA
David Williams, Director of Electronic Tax Administration, IRS, participated in a conference call hosted by NCTC on 12/19/07. Read notes from the call, the IRS press release on the AMT patch, and the AMT legislation. [posted 12/20/07]

2007 TIGTA report notes improvements

In an August 29, 2007 audit, the  Treasury Inspector General for Tax Administration said in a report that "although accuracy rates have been increasing, volunteers continue to not follow procedures that assist in the accurate preparation of tax returns.  To ensure the continued success of the Volunteer Program, the IRS must focus its oversight on holding volunteers accountable." The Center for Economic Progress issued a press release lauding the improvement in quality. [posted 9/18/07]

Installment Agreement Fees revised [posted 1/12/07]

The IRS announced on December 28, 2006 that it will increase Installment Agreement Fees for all groups, except for low-income taxpayers. Read the NCTC letter sent to IRS on November 6, 2006 opposing a fee hike for low-income taxpayers.

IRS National Public Liaison Meeting [posted 7/10/06]

a. Met with Commissioner Everson about the tax gap. The good news is that Commissioner Everson did not mention EITC audits as a major priority. The bad news is that his emphasis is clearly on enforcement rather than increasing services. We will be submitting questions for a hearing in June on the Senate Finance Committee.

b. Met with Peg Connell, who is the lead for the Taxpayer Assistance Blueprint, the IRS' 5-year service plan. This is a crucial document as Congress will base their funding for IRS services on it.

c. Met with Lisa McLane, who oversees the Innocent Spouse Form Redesign and shared our concerns, especially regarding information sharing and protecting the privacy of victims of domestic violence.

d. Met with Floyd Williams, Director, Legislative Affairs, who outlined what happened in the 12 or so Congressional hearings already held with the IRS this year, and three more to come. Good news: the House is becoming less rabid about attacking the EITC.

IRS Commissioner Testifies before the House Ways and Means Committee on the 2006 Income Tax Filing Season and discusses Free File Alliance Agreement [posted 5/4/06]

Mark Everson reflected on the advantages of the free file system that makes tax filing easier and reduces the burden on taxpayers. However, he also acknowledged the concerns critics have raised regarding the aggressive marketing of RALs by some Free File Alliance members. Read his testimony.

Debate brewing in Congress over Free Internet e-Filing [posted 5/4/06]

Sens. Akaka and Bingaman have co-sponsored a bill, S. 2550, supported by consumer groups that would provide taxpayers with free direct electronic filing through the IRS website without involving a third party intermediary. Currently, taxpayers must go through a commercial third party website in order to file electronically. Some taxpayers can use the IRS-established Free File program to file electronically for free, but at the cost of being pitched various paid products such as state tax return preparation and review by a tax “professional.” Certain members of the House, led by Republican Congresswoman Melissa Hart (PA-4) and supported by the tax preparation and computer industries, are promoting a bill to explicitly prevent just such services. (For full text of these two bills go to http://thomas.loc.gov/ and type in the bill number, as in “S. 2550” or “H.R. 5114”.) Several national consumer groups have sent a letter of support for the Akaka/Bingaman bill and issued a press statement about their support plus criticism of HR 5114.

Center for Economic Progress participates in Treasury Inspector General for Tax Administration (TIGTA) audit of IRS services [posted 4/6/06]

Click here for the Center for Economic Progress' response to the audit. The section on SPEC services to VITA was written with extensive input from National Community Tax Coalition Steering Committee members and affiliates. Several Coalition affiliates also responded to the opportunity to participate in the audit which the National Community Tax Coaltion announced on our Tax Roundtable listserv. Click here to join the listserv.

 

National Community Tax Coalition requests input into Congressionally Mandated Refund Anticipation Loan (RAL) Study [posted 4/6/06]

The Coalition and national partners led by the National Consumer Law Center and Consumer Federation of America wrote to Treasury Secretary Snow and IRS Commissioner Everson to request that groups that have done extensive research and have been working on the issue directly are consulted as a part of the development of the study. The Coalition received a response from the IRS stating it was too late for consultation for the June 30 report. Click here to view the letter.

IRS Commissioner praises VITA [PDF, 18KB, posted 3/10/06]

Commissioner Everson said he expects to rely heavily on Volunteer Income Tax Assistance (VITA) programs to improve services. "That is the future," he said. "The footprint of our walk-in centers is not going to grow." Click here for a report of his remarks.

National Community Tax Coalition Requests Congressional RAL Study be vigorous [posted 2/28/06]

The National Community Tax signed on to a letter with the National Consumer Law Center, the Consumer Federation of America, the Consumers Union, U.S. PIRG, and the Children’s Defense Fund requesting that a study of Refund Anticipation Loans (RALs) commissioned by Congress address serious questions about the IRS role in facilitating RALs and the level of hardship and abuses created by RALs. Click here for a copy of the letter.

IRS Spared Cuts in President’s Budget [posted 2/7/06]

The IRS should not need to carry out major service cuts, as their overall budget remained the same in the President’s proposal. Read more details in the Treasury news release and the FY 2007 Budget in Brief.

Ensign Amendment Dropped from Treasury Appropriations Bill in Conference [posted 12/2/05]

Congress has passed its funding bill for the Department of Treasury and the Internal Revenue Service without a provision that would have prohibited the IRS from developing its own on-line tax preparation services. The National Taxpayer Advocate opposed this provision, pointing out that it would have made IRS negotiations with professional tax software companies involved with the IRS' free-file program difficult. For more background on the amendment, known as the Ensign Amendment, click here.

Status of Taxpayer Assistance Center (TAC) Closures   [posted 12/30/05]

National Community Tax Coalition affiliates have participated extensively in the Treasury Inspector General's studies on the possible impact of TAC closures. This study was required by Congress before any TACs could be closed. After the study, input from stakeholders, including the Coalition and our affiliates, will be required by the IRS. The National Community Tax Coalition met with representatives of the IRS in a meeting open to the Coalition's affiliates.

 

IRS Tax Enforcement

“War on Poverty, Redefined.” [posted 4/6/06]

In this column in The American Prospect, John Alexander Burton criticizes the unfair treatment EITC recipients face. Low-income taxpayers are not only more likely to be audited, but the criminal enforcement wing of the IRS also denied their basic rights by neglecting to give them an advanced notice before taking action. Click here for the full article. For the position of the National Community Tax Coalition on the targeted crackdown on EITC recipients, click here.

Coalition opposes IRS refund freezes [posted 2/28/06]

The National Community Tax Coalition strongly opposes the IRS Refund Freezes revealed in the National Taxpayer Advocate’s report and subsequently in the national media last month.

IRS Commissioner Everson recently announced changes to the program, including notification of taxpayers that their refunds are frozen and speeding up processing times. He did not, however, address the overtargeting of EITC taxpayers for refund freezes.

Click here to find the Coalition's estimates of EITC refund freezes in your state and here for the Coalition's position on refund freezes.

IRS to Change Refund Fraud Program [posted 2/7/06]

The Internal Revenue Service will revamp a fraud detection program and start notifying taxpayers this spring when freezing their refunds for further examination, the nation's tax collectors announced Monday.

The changes address criticism that the agency's Questionable Refund Program deemed thousands of refunds fraudulent and withheld the money without telling taxpayers. The IRS said taxpayers can expect to get notification as quickly as they would have expected to receive the refund.

IRS Refund Freezes [posted 2/6/06]

When the IRS proposed a “precertification” audit initiative of 1-2 million taxpayers per year three years ago, members of the public and Congress strongly objected and the program was scaled back to 25,000 audit “tests”. It seems the IRS has developed a back-door mechanism to audit this many EITC taxpayers – thus thwarting the intent of Congress to prevent such targeting.

Seventy-five percent of the estimated1.6 million Americans who had their refunds secretly over the last five years (as reported in January by the National Taxpayer Advocate) were EITC taxpayers; the median income of all those targeted was $13,330 and their median refund was $3,519. The hundreds of thousands of secret refund of EITC freezes annually are in addition to nearly half a million audits of EITC taxpayers by the Wages &Investment examination unit, 300,000 “automated underreporting of income” audits, and 60,000 special EITC audit “tests”. Thus the number of annual EITC audits is likely over 1,000,000 per year.

The Center for Economic Progress is strongly opposing the refund freeze program, with the following talking points:

• The program is abusive towards taxpayers and should be immediately suspended.
• This constitutes something akin to racial profiling, what we’d call income profiling.
• The program as it is should be ended and any refund freeze function should be moved into Examinations. Criminal Investigation should not be freezing refunds.

We’ll be sending more information about what you can do, and state-by-state data on the refund freezes later this week. For an excellent mention of this issue in a recent speech by John Edwards, click here.

If you wish to join a new administrative advocacy mailing group, please email Don Wedd.

Senate proposes changes to Offers-In-Compromise rules [posted 12/14/05]

The Senate passed its Tax Reconciliation package with an item (Section 523) that would significantly change the way the IRS accepts Offers-In-Compromise for taxpayers who have controversy with their taxes.  Passed as a revenue-generating measure, Section 523 proposes adding a 20-percent down payment requirement to lump-sum offers-in-compromise. It is apparently intended that the lump-sum down payment would be nonrefundable and retained by the IRS if the offer is rejected. We have serious concerns about this proposal. A successful offer-in-compromise program raises revenue both from the offer and by bringing taxpayers back into the system. Because the 20-percent nonrefundable down payment requirement could dramatically reduce available outside funding for potential offers, there is a significant risk that the proposal could decrease the number of legitimate offers submitted, the number of offers accepted and the number of individuals reentering the tax system.

The measure still has to survive the conferencing of House and Senate versions of the tax bill to become law.  To view section 523, click here and search for s.2020.PCS, then scroll to Section 523.

Privacy and Confidentiality

Lawmakers grill Mark Everson on proposed disclosure regulations, privatization of collections, and EITC audits and refund freezes [posted 5/4/06]

On March 29 lawmakers questioned IRS Commissioner Mark Everson about proposed return disclosure regulations which would allow tax preparers to sell taxpayer information to third parties, and about the use of private debt collectors, who will track down taxpayers who agree they owe taxes but have not paid. According to Dustin Stamper of Tax Analysts, Representative Olver (D-MA), minority leader of the House Appropriations Subcommittee on Transportation, Treasury, HUD, Judiciary and District of Columbia, “criticized Everson for spending too much time going after low-income taxpayers who claim the Earned Income Tax Credit, arguing that the big money is elsewhere.” The complete transcript of the hearing is yet to be released.

Confidentiality of Taxpayer Information is Eroded to Benefit Private Industry [posted 4/6/06]

National Community Tax Coalition Opposes IRS Outsourcing of Debt Collection, and IRS Allowing Paid Preparers to Sell Taxpayer Information

See an excellent New York Times Editorial on both of these issues. The erosion of confidentiality of taxpayer information will only worsen if provisions in the House Immigration bill (HR 4437) become law, requiring the IRS to work with DHS (formerly INS) to help identify undocumented immigrants.

Coalition affiliates express concern over IRS and DHS (formerly INS) sharing data [posted 2/28/06]

Members of the National Community Tax Coalition’s Immigrant Taxpayer Working Group sent a letter February 15 to the House Ways and Means Committee's Oversight and Social Security subcommittees. The groups expressed opposition to proposals that would allow the IRS and the Department of Homeland Security (formerly INS) to share confidential information about immigrant taxpayers. The letter, coordinated by the Consumer Federation of America, was signed by representatives of:

• Center for Economic Progress
• Consumer Federation of America
• Consumers Union
• National Consumer Law Center
• National Council of La Raza
• National Employment Law Project
• National Immigration Law Center

Click here for a copy of the letter.

 

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