Streamlining IRS services is good for all, taxpayer advocate contends

Associated Press

WASHINGTON — Americans beset by "stress, anxiety and frustration" in filing their income tax returns would be better off if Congress repealed the complex alternative minimum tax and the IRS fixed its spotty telephone service, the government’s national taxpayer advocate says.

Those were among dozens of recommendations made by the advocate, Nina Olson, in an annual report to Congress intended to outline ways to make it easier for people to figure out and pay their taxes. Otherwise, the nation’s tax system could become "out of tune" with taxpayers, who view it as defying common sense, she said.

"We shouldn’t be making people tie themselves up like pretzels so they can comply with the tax laws," Olson said in an interview.

The advocate is part of the Internal Revenue Service, functioning as a tax system watchdog and problem solver, and was given greater authority when Congress overhauled the IRS in 1998. Sen. Charles Grassley of Iowa, ranking Republican on the Senate Finance Committee, said lawmakers and the IRS should take heed.

"I’m concerned that the national taxpayer advocate’s annual report to Congress is becoming just a voice in the wind," Grassley said.

For her part, Olson said, "These things could make a big difference to a lot of people."

The report coincides with the start of this year’s tax filing season, during which Americans will send the IRS an estimated 132 million individual returns. To avoid mistakes and confusion, more than half will be prepared by professional experts, and millions will rely on computer software.

"For many U.S. taxpayers, tax filing season brings stress, anxiety and frustration," Olson said.

The root of most problems is the complexity that has slowly been built into the tax code over the years.

Among the most vexing is the alternative minimum tax, which originally was intended to ensure that a handful of wealthy people didn’t escape taxation through legal loopholes, but could snare more than 35 million people by 2010. Simply determining if the tax applies requires a 13-line worksheet and a 54-line form; some taxpayers earning less than $50,000 paid the tax last year.

Olson says Congress should eliminate the tax, but lawmakers could find the price tag prohibitive, given the looming deficits in the federal budget. Less costly fixes could remove millions of people from the alternative minimum tax, such as establishing a gross income threshold below which the tax would not apply.

"We might be able to chip away at it year after year," Olson said.

The report also says Congress should:

  • Create a single, uniform definition of a "qualifying child" for tax purposes. Right now, a child who qualifies for one tax provision doesn’t automatically qualify for another, leading to millions of IRS error notices each year.

  • Allow married couples filing jointly to separate their income and tax liability, avoiding a potentially unfair burden on one spouse if the IRS takes action against the other.

  • Permit the IRS to charge higher interest for underpayment of taxes, but repeal the failure to pay penalty, simplifying the system.

    The IRS also remains a vexing agency to millions of taxpayers. The No. 1 agency problem is the inability of many taxpayers to get through on toll-free telephone lines; people wait an average of four minutes to talk to an IRS representative and get inaccurate tax law information 25 percent of the time.

    IRS Commissioner Charles Rossotti said in a recent interview that the agency is relying on more automated calling systems and accurate routing of calls to improve performance. "We’ve been improving on two things: access and quality," he said. "We’re still well below where we should be."

    In all, the report listed 23 "most serious problems" encountered by taxpayers, including difficulty tackling complex issues such as the earned income tax credit, lack of timely explanation about why refunds are changed or delayed and the inability of many low-income people to find adequate tax advice or access to computers.

    Copyright ©2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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