Like most entities, the IRS has issues and each year; and the most serious IRS problems revealed are the ones you need to know about!
With each passing year the National Taxpayer Advocate’s Annual Report to the U.S. Congress lists twenty or more of the nation’s most serious tax problems.
These issues can range from basic taxpayer rights, the ways people pay taxes and a lack of progress on the part of the IRS to go the extra mile for taxpayers.
It’s the job of the Taxpayer Advocate Service (TPA), to bring these problems to light and recommend solutions to Congress and to upper management at the IRS.
In this blog post we will reveal the most serious tax problems from the past year.
#1-IRS Problems: How They Answer Tax Law Questions
With tax reform now in place; we as taxpayers, have questions year-round.
Life happens daily:
- Moving from state to state
- Opening or shutting down a business
- You’re getting married or divorced
- New additions to the family arrive
The IRS forces taxpayers to lump all questions into 3 ½ month window each year; as a result, taxpayer confidence continues to erode!
#2: Navigating the IRS
It hasn’t been easy for most taxpayers to locate those IRS personnel able to provide them with accurate and timely information.
While the IRS promotes a toll-free phone line, the automated options are difficult to understand and hold times are lengthy.
Even when taxpayers are provided with a specific phone number, most often it is for a group, rather than for an individual employee.
Group numbers make it hard for taxpayers to develop trust with personnel working their cases.
#3-IRS Problems: Soaring False Positive Rates
It’s known throughout government circles that IRS fraud detection systems generate high false positive rates!
And as a result, taxpayers suffer:
- Long processing times
- Increased taxpayer burden
- Affects timing of legitimate refunds
These soaring false positive rates harm legitimate taxpayers!
#4: Return Preparer Oversight
Here’s a mind-blowing fact for you.
Last year more than half of the tax returns submitted by return preparers were from persons who are UNREGULATED by the IRS!
It’s up to the IRS to ensure that tax preparers are competent and accountable.
#5-IRS Problems: Improper Earned Income Tax Credit Payments
What you need to know is that when the IRS allows a taxpayer erroneous claim of the Earned Income Tax Credit, it makes an improper payment.
The IRS estimated that roughly 25% of the earned income tax credits they allowed in 2018 were improper payments!
The root causes?
Complex rules for claiming the earned income tax credit combined with a lack of accessibility for taxpayers to reach the IRS for help on this.
#6: Correspondence, Field and Office Exams
With complicated IRS rules and procedures, taxpayers in correspondence exams may suffer greater burden because of the difficulty of sending and receiving correspondence:
- Lack of clarity
- No one single employee assigned to your case
The big takeaway on correspondence is that examiners don’t receive enough training on complex issues, which compounds this problem.
- IRS goal is to identify tax returns for examination in promoting the highest degree of voluntary compliance
- Tough to do though because the IRS doesn’t have a measurement system to track future filing and compliance after audits are completed!
- As a result, it’s possible that the IRS may be selecting the wrong taxpayers and cases for field audits.
- Mutually beneficial because they focus on limited and specific issues and you get a face to face meeting with an IRS employee
- Goal is to help taxpayers focus on how to better attain future compliance
- IRS employees can educate you and ensure you understand the tax laws moving forward
- You, as a taxpayer can ask questions and better explain your circumstances in person
#7-IRS Problems: Math Error Authority and Notices
When a tax return contains 1 of 17 types of errors, the IRS can assess additional tax without first giving you a notice of deficiency!
This is called Math Error Authority and it can deprive you of benefits you are entitled to and leave you with no opportunity for a judicial review.
Thankfully, the TPA and Congress being concerned with your rights, directed the IRS to provide you with an explanation when it makes an adjustment to your tax return.
As a result, the IRS sends you a Math Error Notice.
Read the full report that the TPA sent to Congress last year, here.