Taxpayer Advocate Could Be Vital Element of Service-First IRS

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By Colleen Murphy

The Internal Revenue Service’s biggest warrior for taxpayers was left out of a congressional outline for a service-centered agency overhaul.

But that exclusion doesn’t worry National Taxpayer Advocate Nina E. Olson. Olson, who has held the position for 15 years, told Bloomberg BNA she is ready to defend her office and its role of defending taxpayers in conversations with lawmakers in the coming months.

“Part of the conversation will be ‘what more do you see for us?' ” Olson said Dec 15. “I view this as a positive thing if it’s conducted in a way that’s not beating up the IRS, but ‘We want to work together to get to the right thing.’”

Members of the House Ways and Means Committee have been preparing to push sweeping tax changes next session and have been rallying behind the GOP tax overhaul blueprint that was released in June. The document lays out high-level priorities such as forcing the IRS to focus on helping taxpayers, busting up the agency’s current structure and potentially striking its criminal investigative powers.

Room for Growth

More power for the Taxpayer Advocate Service could be one result of a service-focused agency, though any changes would need to be balanced with the fact that the IRS commissioner should remain the top decision-maker, practitioners specializing in tax administration told Bloomberg BNA.

While lawmakers are just beginning to turn the blueprint into legislative language, and haven’t addressed their goals for the office, practitioners floated several ideas for changes: authority to counter IRS decisions in the appeals process, freedom to submit budgets to Congress independent of the IRS and leeway to help taxpayers other than those experiencing economic hardship.

“I do think the Taxpayer Advocate Service and the Taxpayer Advocate Nina Olson have done a fantastic job, and I think the consensus is she and they are doing a good job and no one wants to change that. The issue is can they play an enhanced role in the customer service area,” said Jason J. Fichtner, a senior research fellow at the Mercatus Center at George Mason University.

The office will still have a vital role to play in the future of the IRS, even if Congress doesn’t give it more power, said George A. Hani, chair of the tax department at Miller & Chevalier Chartered in Washington. If lawmakers move forward with the simpler tax code and three-prong IRS they have proposed in the plan, the office’s role as an “uber commentator” will become all the more important, he said.

“The more things change the more there will be for that office to comment on. If there are dramatic changes, you’ll want to make sure they’re done correctly otherwise the role you’re seeking to change may fall short,” Hani said Dec. 19.

On the Same Page

Conversations with Congress won’t be about a power grab for Olson, who said the role of her office is already strong because “we don’t have to follow in our persuasion what the IRS has already set down as rules—we can argue case by case and issue by issue for changes in those rules.” The office already does important work to help taxpayers and the IRS usually agrees to about half of the recommendations Olson puts forth in her annual report to Congress, she said.

Olson said she would like to have a separately stated budget and authority to issue apology payments to taxpayers whom the agency has wronged. She also plans to talk with lawmakers about the importance of getting access to all taxpayer information needed for cases and being involved in discussions about a new small claims court—an element of the blueprint.

Olson’s next annual report will be a starting point for conversations with lawmakers and staffs when they return for the next session of Congress. The report, set to be released Jan. 11, will include Olson’s vision for the future of the IRS, which will likely align with what lawmakers are seeking in the blueprint, she said.

“It needs to be organized around what the taxpayer needs are, not around the needs of the IRS,” Olson said. “That’s a lot of what Congress has been trying to say, and what I’ve been trying to say for the last four decades of my life.”

Fund It

Olson’s pitch for a separate budget could be a more efficient way for her office to lobby for specific fund allotments at the source, instead of needing to go to the commissioner, practitioners said. Proper funding is the only way for customer service to improve at the IRS, and the same goes for Olson’s office, they said.

Congress provided the Taxpayer Advocate Service with $206 million in funding for fiscal year 2016, about the same amount it gave in fiscal year 2010. Funding agency-wide is down $900 million agency-wide since 2010.

The office could promote its functions with proper funding and help a wider swath of taxpayers, said Robert E. McKenzie, a partner at Arnstein & Lehr LLP in Chicago who is a former member of the IRS Advisory Council.

“I think her argument is ‘We are successfully doing it already, give us more power, give us more functions and give us more adequate funding and we’ll meet your goals,” McKenzie said.

‘Ultimate Definition of Success.’

W. Val Oveson, who served as national taxpayer advocate from 1998 to 2000, told Bloomberg BNA Dec. 20 that the “ultimate definition of success” would be for the IRS to improve its customer service to the point that demand could decrease on the Taxpayer Advocate Service—a goal that he acknowledged isn’t entirely feasible, but was still his main message when he held the position.

“Our goal is to work ourselves out of a job,” he said.

The focus should remain on improving the IRS overall, instead of changing the taxpayer advocate’s role as Congress looks to make changes, he said.

“The focus is on future role of customer service within the IRS,” said Oveson, now president of Oveson Consulting LLC in Salt Lake City. “The Taxpayer Advocate Service statute and everything else is working very well and should continue on the way it’s going.”

To contact the reporter on this story: Colleen Murphy in Washington at cmurphy@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

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