According to the National Taxpayer Advocate, the Internal Revenue Service (IRS) has some work to do to better serve its customers—and its mandate.
Each year, the National Taxpayer Advocate submits an Annual Report to Congress. The Taxpayer Advocate Service (TAS) is a watchdog agency within the U.S. that provides assistance and resources to taxpayers and keeps an eye on the actions of the IRS for Congress.
- Establish baseline competency standards for those who prepare tax returns for others: Tax fraud in the form of false tax returns is common. At present, there is no minimum education or knowledge level required in order to charge money to prepare tax returns and documents for others. Unwitting taxpayers are on the line for the inaccuracy of their returns and false figures or deductions claimed within. TAS recommends Congress reapproach and reauthorize standards for tax preparer competency that it considered in 2011.
- Review rules to allow taxpayers who filed under IRS-granted postponement deadlines to obtain a refund: When the IRS pushed federal filing deadlines out in 2020 and 2021, it did not also extend the “lookback period” for entitled refunds in 2019 or 2020. TAS recommends Congress amend the lookback period so that taxpayers can file for refunds within the standard three-year time period, plus the time span of any filing postponement that might have occurred.
- Change the date requirement for charitable contribution receipts: Taxpayers that make charitable donations must currently obtain a receipt for their donation that is dated before the filing date of their return—even when later receipts, like credit card statements, undeniably prove the authenticity of the contribution. TAS suggests Congress modify the rule to allow taxpayers to provide accurate receipts that do not necessarily have to pre-date the filing of a return.
- Require supervisor approval of assessment of tax penalties earlier in the process: Currently, supervisor approval is not required before a tax penalty is proposed. TAS notes some taxpayer disputes are in the IRS Office of Appeals or in litigation, before supervisor approval is obtained. TAS recommends Congress amend this practice to ensure supervisor approval of a penalty is approved by a supervisor before the taxpayer is even sent a notice of the deficiency.
These are just some of the recommendations made by the TAS to ensure the fair treatment of taxpayers by the IRS. If you receive a notice of math error or assessment of a substantial penalty—carefully review your documentation. If your records suggest an IRS error—follow up with the IRS or speak with an experienced tax attorney for help.
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