You’ve probably never heard of the National Taxpayer Advocate — I know I never had. But she — and the current Advocate is a she — Nina Olsen, heads an office within the Internal Revenue Service which actually has a staff of more than 2,000 charged with helping taxpayers in their dealings with the Agency. The Advocate also acts as a watchdog, and is required by the 1996 law establishing the Advocate Office to prepare an annual report to Congress on the state of affairs within the IRS and the tax collection system in general.
The 2012 annual report was just issued and its central theme — the tax code — is way too complicated. It's causing taxpayers (individuals and businesses) to spend an estimated 6.1 billion hours and $168 billion on return preparation, and it is rife with loopholes that allow "sophisticated taxpayers" to avoid paying their fair share.
This year the Advocate also spends quite a bit of time in the annual report talking about fraudulent returns and identity theft, and how poorly the IRS treats the identity theft victims.
The central finding: the IRS has failed to provide swift and effective assistance to victims of identity theft even as the number of crimes continues to soar. "Victims who come to the IRS for assistance today will routinely need to speak with multiple employees and wait more than six months to have their issues resolved," says the report.
The report charges:
- Instead of a centralized approach using its four-year-old Identity Protection Specialized Unit, the IRS handles identity theft complaints in 21 different units, "many with their own rules and procedures."
- Although the tax agency has created a special Identity Protection Personal Identification Number to guard against the problem, it does not cover all victims.
- The IRS Taxpayer Protection Unit, created to handle calls from filers whose tax returns were flagged for possible fraud, may not be sufficiently staffed to handle a high volume of calls from victims.
In federal fiscal year 2012, the report shows the IRS Identity Protection Specialized Unit received 449,809 cases, up nearly 80% from the 253,051 received in 2011. Her Taxpayer Advocate Service reported a 60% jump during the same period in cases from taxpayers seeking help with identity theft cases. On the issue date of the Report, the Advocate says there remain 650,000 "unsolved" identity theft cases within the IRS.
"Identity theft wreaks havoc on our tax system in many ways," Olsen says. "The impact on victims is significant. More than 75 percent of taxpayers filing returns are due refunds, which average some $3,000 and are not paid until the IRS fully resolves a case. That now takes more than 6 months."
Olson recommended that the IRS use the Identity Protection Specialized Unit as a centralized "traffic cop" that coordinates handling of all identity theft cases the tax agency receives. The unit should be given adequate staffing and funding, the report says.
Additionally, says Olsen, the IRS should issue identity protection personal identification numbers year round, as soon as the identities and addresses of the rightful Social Security number owner are determined, the report recommended.
In its required response to the Report, the IRS says it has made identity theft and victim assistance top priorities. The often-complex cases are routed to the office best-equipped to handle individual specifics, the agency said.
"Although we cannot stop all identity theft, our efforts in filing season 2012 provide a solid foundation upon which we will continue to build and improve," the IRS said.
You can read the Report on the Advocate's website: http://www.taxpayeradvocate.irs.gov/2012AnnualReport