The Office of the Taxpayer Ombudsman was created by the Internal Revenue Service in 1979 to be the primary advocate for taxpayers with the IRS. This function was replaced in 1996 by the Office of the Taxpayer Advocate. The mission of this division of the IRS is to assist taxpayers in resolving problems with the IRS, to identify problem areas of interactions between taxpayers and the Service, and to propose changes, both legislative and administrative, that can ameliorate those problems. In practice, we find the Office most effective in those last two functions, less so in handling interactions between individual taxpayers and the service.
Individual taxpayers, according to the IRS, are eligible for assistance from the Office of the Taxpayer Advocate if they haven’t been able to resolve a tax problem through normal channels or believe an IRS system or procedure is not working as it should. According to the IRS website the taxpayer can use this service if:
- a problem is causing economic harm or significant cost (including professional fees)
- there’s a delay of more than 30 days in resolving the issue, or
- the IRS promised, but missed, a resolution date or did not respond at all.
If the taxpayer (individual or business) qualifies for help, a representative will be assigned who will get the facts about the issue, explain what needs to be done, and, to quote from the IRS website, “stay with you every step of the way until your problem is solved.”
Every state has at least one Local Taxpayer Advocate who reports directly to the National Taxpayer Advocate and is independent of the local office of the IRS. Taxpayers abroad can also access this service.
I have found the Advocate, a civil service officer, and her office most effective in identifying internal problems at the IRS and proposing solutions. The Taxpayer Advocate’s mid-year 2023 report to Congress advised, in part, that:
- The backlog of unprocessed returns was reduced by 80% from 2022 to 2023, very good news for taxpayers (often paper filers) expecting refunds.
- Taxpayer interactions with the IRS improved.
- The IRS’s outdated IT systems have a negative impact on efficiency and customer service.
- That while Form-1040X (amended individual tax return) can be filed electronically, it must be processed manually, leading to an average 7 month processing time.
- Processing of applications for the Employee Retention Credit is backlogged because the IRS is attempting to prevent payment of fraudulent claims. At the time of the report, the backlog was 800,000 with more applications arriving daily.
- The delay in resolving issues of identity theft is even longer in 2023 than 2022, now around 15 months.
Many of these problems can be resolved with the additional funds allocated to the IRS ($60 billion). On the Advocate’s to-do list for the IRS:
- Online taxpayer accounts
- Ability to file all returns electronically
- Allow taxpayers to receive and respond to information requests electronically
- Replace the 60 distinct case management systems that have limited ability to share information with an integrated system.
The Taxpayer Advocate has an important and public role as a watchdog. Unfortunately we have not seen as much success in helping individuals and businesses resolve their tax issues.
Article Submitted by Lois S. Fried, CPA, CFE, CVA, ABV.