Keeping the IRS in Check
Nina E. Olson, the official appointed to speak out on behalf of U.S. taxpayers, has a few major gripes about the Internal Revenue Service. Among them, she believes the agency needs to better protect victims of tax-related identity theft. She also thinks the IRS should get more information out to homeowners about a new law eliminating taxes on debt canceled as a result of foreclosure.
Olson, who is the national taxpayer advocate, issued a summer report to Congress identifying areas of concern the IRS needs to focus on in the 2009 fiscal year.
This year marks the 10th anniversary of the enactment of the IRS Restructuring and Reform Act, which created the Office of the Taxpayer Advocate to identify problems within the IRS and help taxpayers resolve conflicts with the agency.
Olson works independently within the IRS and is required by law to submit two annual reports to Congress. One is due at the end of the year and, among other things, must identify the most serious problems encountered by taxpayers.
Another report is due midyear and must identify the objectives of the Office of the Taxpayer Advocate.
Olson has served as the taxpayer advocate for seven years. She is an attorney licensed in Virginia and North Carolina and the founder of the Community Tax Law Project, a low-income taxpayer clinic. Her experience working with taxpayer disputes has helped her appreciate the frustration so many people have had with the IRS.
"By 1997, I had logged more time on telephone holds with the IRS, listening to a constantly repeating 'Nutcracker Suite,' than have most IRS employees," Olson wrote in her recent report.
Olson said the creation of the taxpayer advocate office has "substantially improved tax administration and fairness for taxpayers."
Here are three areas Olson wants to focus on in 2009:
· Tax-related identity theft. Olson said identity theft targeted at taxpayers is a serious problem. In one type of scam, a thief may file a return using a person's Social Security number. The motive is refund fraud. The thief will use someone else's personal information to file a false return, typically early in the filing season before the innocent taxpayer files his or her own legitimate return. If the real taxpayer files electronically, the IRS will automatically reject the return because the system accepts only one electronic filing per Social Security number for each tax period.
Olson's report faults the IRS for not having adequate procedures in place to assist victims of identity theft. "While the IRS is reforming some aspects of its approach to identity theft, its procedures for dealing with victims have been a significant part of the problem," Olson wrote in her report.
To help alleviate this problem, the IRS is implementing an identity-theft indicator that tracks taxpayer accounts. Beginning in January 2009, returns filed using Social Security numbers associated with a universal identity theft indicator will be filtered to help distinguish legitimate returns from fraudulent ones.