The Need for IRS Reform: Taxpayers Deserve an Independent Review of Tax Disputes
With a new tax code that puts taxpayers and local job creators first, it is important to refocus the IRS to do the same.
Our tax system relies heavily on voluntary compliance, and the vast majority of taxes are paid each year with minimal interaction with the IRS. However, when taxpayers encounter a discrepancy, they should be able to resolve it. Unfortunately, the current process for resolving taxpayer disputes is broken, costly, and confusing. It is time to overhaul this process with a renewed focus on taxpayers’ needs.
Lack of Clarity and Perceived Impartiality
Many taxpayers are intimidated by the complexity and uncertainty of the current process for settling a disagreement with the IRS. When taxpayers disagree with the IRS, the cards often seem stacked against them from the very beginning.
Oversight Subcommittee Chairman Lynn Jenkins (R-KS) said at a hearing this past January:
“Over time, the process set up by the IRS has become less independent, and taxpayers are frustrated. Some express frustration at not being able to plead their case face to face. Others have been completely denied access to independent review. Taxpayers are losing faith that they will receive an independent and fair review of their case.”
Due to the lack of a clear process, some taxpayers hire an attorney or CPA to help resolve disagreements with the IRS. Others choose to go to a tax court and attempt to appeal their case in front of a judge. Regardless of how the taxpayer decides to handle the situation, the IRS remains the most difficult actor to work with throughout the process – leaving taxpayers with little trust that the agency will review the case fairly.
Jennifer MacMillan of the National Association of Enrolled Agents told the Oversight Subcommittee in December 2017 that she worries for those who cannot find professional help:
“I am constantly amazed every time I have a successful resolution on one of these things from my taxpayers. I think to myself: What would somebody do if they didn’t have me, if they don’t have the resources to hire someone or they couldn’t even find someone?”
Byron Shinn, founder and managing partner of Shinn & Co, told the Committee in September 2017:
“Over my 38 years, we have reached a new low regarding respect for the taxpayer and their professionals. It is as if the taxpayer is guilty and they have to prove the IRS wrong. The agents are doing several audits at the same time and they tend to start and stop during the audit. This prolongs the process and time spent increases while reducing flow of issues and discussions start and stop repeatedly.”
Time and Money Lost
Unfortunately, due to the uncertain process of resolving IRS disputes, many taxpayers are overwhelmed and ultimately end up paying what the agency says they owe rather than appealing the case. As former Oversight Chairman and current Tax Policy Chairman Vern Buchanan stated during a September 2017 hearing:
“Dispute resolution options need to be accessible and efficient. The process is failing if only large businesses with deep pockets feel equipped to dispute a determination made by the IRS.”
For those taxpayers who undergo an IRS audit or decide to appeal the case, the money and time lost is often financially devastating.
During a recent hearing, Rep. Jackie Walorski (R-IN) told the story of an 80-year-old farmer in northern Indiana who was faced with an unexpected audit:
“Even though the audit only took a few days, they had to spend $1,900 defending themselves and waste countless hours pulling together documents, traveling to the CPA’s office to meet with the auditor. All the while, they felt the burden was on them to prove their innocence rather than the auditor proving guilt… Consider this. That 80‑year‑old farmer I just told you about had a heart condition and was told by doctors to avoid stress… The husband died during the audit, and the wife pleaded for a little extra time. She didn’t even get a response.”
American taxpayers shouldn’t have to be worried if they encounter an IRS dispute. Right now, the process is costly and unclear – often causing significant distress and financial burden. In fact, the process is so intimidating that many Americans end up paying the IRS even if they believe the claim is inaccurate. With a modern tax code, it’s time to reform the IRS so that it also prioritizes the needs of taxpayers.
CLICK HERE to read “New Tax Code = New IRS.”
CLICK HERE to read “The Need for IRS Reform: Taxpayers Deserve Quality Customer Service.”