Posts Tagged ‘National.Taxpayer.Advocate’

National Taxpayer Advocate Report: Identity Theft, OVDP, and ITINs Among the Major Issues

Sunday, June 30th, 2013

Nina Olson, the National Taxpayer Advocate, issued her annual report to Congress this past week. She also included a special report on “Political Activity and the Rights of Applicants for Tax-Exempt Status.” Here are some of the other issue she highlighted:

1. Tax reform. “The Time for Tax Reform is Now!” screams the lower right portion of the report. No argument–the US Tax Code is far too complex. Unfortunately, having tax reform depends on a functional Congress…and that’s not going to happen this year.

2. The IRS refuses to issue refunds to victims of tax preparer fraud. As Ms. Olson points out, the IRS Chief Counsel’s office says that the false return can be deemed a “nullity” and the true return can be accepted and processed. Yet the problem of getting refunds for innocent taxpayers continues.

3. Identity Theft. As Jason Dinesen can vouch, victims of identity theft will see delay after delay. Ms. Olson states that the current Identity Protection Specialized Unit is harming identity theft victims.

4. The current IRS Offshore Voluntary Disclosure Program burdens benign actors and damages IRS credibility. This is something I’ve commented on before, and I’m glad to see Ms. Olson agrees with me.

5. Lack of coordination between the IRS and FINCEN (responsible for the FBAR) burdens taxpayers and undermines compliance efforts. Ms. Olson focused on filing of the FBARs. I’d like her to take a look at the duplication between the FBAR and Form 8938. By the way, one piece of good news on the FBAR front: Buried in the FAQ of the BSA efile system is the announcement that tax professionals are now allowed to efile the FBAR for clients as long as we’re assured the information is accurate.

There’s plenty more in Ms. Olson’s report that I agree with, but I do want to point out one area where I disagree with her. Ms. Olson argues that the current limited oversight of return preparers makes taxpayers vulnerable to unscrupulous or incompetent preparers. Ms. Olson forgets that the IRS does have tools to weed out tax preparers who are unscrupulous. Indeed, the IRS has filed numerous civil and criminal cases against such tax preparers over the years. (I do agree with Ms. Olson that anyone using a tax professional should ask about his qualifications and should obtain a signed copy of the return.)

All-in-all, Ms. Olson’s report is worth reading by the IRS and Congress. She highlights many of the areas of concern that tax professionals have with the current system. Unfortunately, I expect her report to be lost in the sea of other news regarding the IRS that has come out of Washington this Spring and Summer.

“The IRS Has Failed to Provide Effective and Timely Assistance to Victims of Identity Theft”

Wednesday, January 9th, 2013

That’s not just my opinion, it’s the opinion of the National Taxpayer Advocate, Nina Olson. Most tax professionals who have run into identity theft can relate horror stories. Jason Dinesen, an Enrolled Agent in Iowa, has been dealing with an identity theft matter for over 20 months (that’s nearly two years). The matter is still unresolved.

Ms. Olson today came to the conclusion that:

■■ The IRS is moving backward — away from a centralized approach to assisting identity theft victims — and is increasing the risk that taxpayer-victims may fall through the cracks;
■■ After years of ineffective efforts to reengineer its processes, the IRS still takes too long to fully resolve the accounts of victims;
■■ While the Identity Protection Personal Identification Number (IP PIN) that the IRS has developed provides additional security, it does not cover all victims;
■■ The Taxpayer Protection Unit may not be sufficiently staffed to handle the volume of calls from impacted taxpayers;
■■ Congress may unnecessarily create additional exceptions to taxpayer privacy protections; and
■■ The Social Security Administration still makes the Death Master File available to the public, creating an opportunity for identity thieves to steal and then misuse personal information.

The IRS and the Taxpayer Advocate both have reasonable arguments; the report (linked to above) notes both sets of issues. But I think Ms. Olsen misses a key point: The place to stop identity theft is checking addresses when returns are filed. The proposal that I made back in September would stop some identity theft before it happens. An ounce of prevention is worth a pound of cure.

Ms. Olson hits a bullseye with her comments on the Social Security Death Master File; she sees no reason for that to be available to the public while the social security numbers could be used for identity theft. I agree completely. The government is handing to crooks information they need to be crooks.

Finally, Ms. Olson’s comments about the length of time it takes to resolve many identity theft claims are accurate. The cases take a long time. They are complex. That said, many individuals are waiting years to get matters resolved. This is a disservice to an agency that has “service” in their name.