National Taxpayer Advocate Report to Congress

Post Date: 2/14/19
Last Updated: 2/15/19


Cross References
- IR-2019-11, February 12, 2019

National Taxpayer Advocate Nina E. Olson has released her 2018 Annual Report to Congress, describing challenges the IRS is facing as a result of the recent government shutdown and recommending that Congress provide the IRS with additional multi-year funding to replace its core 1960s-era information technology (IT) systems. The release of the National Taxpayer Advocate's report was delayed by a month because of the government shutdown.

Olson also released the second edition of the National Taxpayer Advocate's "Purple Book," which presents 58 legislative recommendations designed to strengthen taxpayer rights and improve tax administration.

The largest section of the report, which identifies at least 20 of the most serious problems taxpayers face in their dealings with the IRS, is titled, "The Taxpayer's Journey," and is organized sequentially to track a taxpayer's interactions with the tax system from start to finish. Among other issues, it addresses the ability of taxpayers to obtain answers to tax-law questions, return filing, notices, audits, collection actions and Tax Court litigation. The report also contains "road maps"— pictorial representations of the process.

"One of our goals in creating these roadmaps was to help readers understand the com- plexity of the taxpayer journey," Olson wrote. "It was challenging for us to create these roadmaps and will probably be difficult for readers to follow them, which hints at the extreme frustration many taxpayers experience when they have to interact with the IRS."

Impact of the Government Shutdown on IRS Operations and Taxpayer Rights
In the preface to the report, Olson discusses the impact of the recent government shutdown. A major point of discussion before and during the shutdown was the permissible scope of IRS activities. Under the Anti-Deficiency Act, federal funds may not be spent in the absence of an appropriation except where otherwise provided by law. One exception provided by law is for "emergencies involving the safety of human life or the protection of property." Although not stated in the law or Justice Department guidance, the IRS Office of Chief Counsel has interpreted the "protection of property" exception to apply only to the protection of government property - not a taxpayer's property.

The report says this narrow interpretation can cause severe harm to taxpayers. When the IRS issues a levy to a bank, the bank must freeze the taxpayer's account for 21 days, and then if the levy has not been released, the bank must turn the funds over to the IRS. The Internal Revenue Code requires the IRS to release a levy if it has determined the levy "is creating an economic hardship due to the financial condition of the taxpayer." However, the IRS's legal interpretation of the Anti-Deficiency Act would not permit personnel to be excepted to release levies even in extreme cases, such as where a taxpayer needs the levied funds "to pay for basic living expenses [or even] a life-saving operation," Olson wrote.

The IRS's Lapsed Appropriations Contingency Plans excepted employees of the Taxpayer Advocate Service (TAS) to open mail solely to search for checks payable to the government. The plans do not permit TAS employees to assist taxpayers experiencing an economic hardship.

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