National Taxpayer Advocate Report

Acting National Taxpayer Advocate Bridge Roberts released the 2019 annual report to Congress (https://taxpayeradvocate.irs.gov/2019AnnualReport). The National Taxpayer Advocate’s 2019 annual report has been consolidated and differs from prior reports in two ways. First, the Taxpayer First Act reduced the number of “most serious problems” the National Taxpayer Advocate must identify from at least 20 to ten. Second, the National Taxpayer Advocate initiated the Purple Book two years ago as a supplement to more detailed legislative recommendations proposed in the main volume of the report. This year, all of the 58 legislative recommendations to strengthen taxpayer rights and improve tax administration have been consolidated into the Purple Book; the longer-form recommendations have been eliminated.

The report focuses on the Taxpayer First Act, which became law on July 1, 2019. Interestingly, among its provisions were 23 that were recommended by the National Taxpayer Advocate.

The report also explained that the IRS is struggling to accomplish its mission. According to its mission statement, the IRS aims to “[p]rovide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.” Perhaps one of the key reasons why the IRS is struggling is that it does not receive enough funding to meet taxpayer needs. The report urges Congress to increase IRS funding and to change the budget rules to account for the revenue additional IRS appropriations are likely to generate. In FY 2018, the IRS collected nearly $3.5 trillion on a budget of about $11.4 billion. “It is economically irrational to underfund the IRS,” the report says. “If a company’s accounts receivable department could generate an ROI [return on investment] of 300:1 and the chief executive officer (CEO) failed to provide enough funding for it to do so, the CEO would be fired. Yet in general, the federal budget rules exclusively take into account outlays and ignore the revenue those outlays generate.” Taxpayers may be delighted that the lack of funding has led to a dramatic decrease in audit rates, but it also means the government’s revenues are not where they could be.