Each year the National Taxpayer Advocate authors an annual report to Congress. The report typically focuses on Ms. Olson’s evaluation of how she views the IRS performance when it comes to addressing its mission as well as recommendations for improvement. This year is no different.
“This is arguably the most important piece I have written about the IRS in my fifteen years as the National Taxpayer Advocate.” Nina Olson, National Taxpayer Advocate; 2016 Annual Report to Congress
In the most recent report (which can be found here), Ms. Olson takes aim at the culture of the IRS. She reiterates a message that she has sent to Congress in the past, “To create an environment that encourages taxpayer trust and confidence, the IRS must change its culture from one that is enforcement-oriented to one that service-oriented.” The message is not a surprising one given Ms. Olson’s role as our nation’s taxpayer advocate.
And yet, it is reasonable to assume the IRS may not agree with her vision for the future. Certainly, the IRS has shown signs of a commitment to improving a taxpayers experience with the agency through various initiatives such as the ‘Get Transcript’ portal. But the agency has a long history of viewing enforcement as a critical component of its mission and ensuring taxpayer compliance. In Ms. Olson’s report, it is noted that the IRS allocates 43% of its budget to enforcement and has proposed an increase of that spending by over 7% in the upcoming fiscal year.
Another point made by Olson in highlighting the IRS’ mindset is the IRS’ quiet rewriting of its mission statement. In the Restructuring and Reform Act of 1998, Congress directed the IRS to, “restate its mission to place a greater emphasis on serving the public and meeting taxpayers’ needs. In response, the IRS adopted the following mission statement: Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. In 2009, the IRS changed it to read: Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the tax law with integrity and fairness to all.
In addition to her emphasis on changing IRS culture, Ms. Olson also makes a strong case for the simplification of the tax code. Olson remarks that it has been 30 years since the Tax Reform Act of 1986, the last major effort at significantly simplifying the tax code. And that in each year since the Tax Reform Act the code has grown more complex. The complexity burdens taxpayers and the Service alike and as a result, must be simplified. In this sentiment Olson is not alone. Even among tax practitioners, whose work often centers on assisting taxpayers comply with the tax code, there are calls for consistency and simplification through organizations such as the NAEA and AICPA.
With the political climate seemingly focused on substantive change to government, tax reform may have real potential. A significant shift in the allocation of the IRS’ budget or a change to its mission, however, is less likely. After all, in past statements Ms. Olson has even stated that 98% of compliance with the IRS is voluntary. Compare that with the fact that the IRS has unpaid assessments of over $137B and a tax gap that stands at well over $400B. Keeping those metrics in mind, one may see the IRS become even more committed to collecting what is legally due.