Workload soars for IRS taxpayer advocate

Introduction

The number of American taxpayers asking the Internal Revenue Service for help jumped by 38 percent from 2005 to 2009, fueled in part by identity theft cases, economic hardship, and the agency’s more aggressive use of liens and levies, a government watchdog found.

But the rising workload at the IRS Taxpayer Advocate Service (TAS) — which swelled to 272,404 cases in 2009 — was accompanied by a similar increase in processing time, according to the Treasury Department’s inspector general for tax administration. In 2009, each case took more than 80 calendar days to process, up 22 percent from 2005.

“The economy, the IRS’ increased emphasis on enforcement actions, and legislative changes such as the electronic stimulus payment have led to more taxpayers asking for TAS help,” the watchdog’s report said. “We believe many of the issues we identified will continue to present challenges for the TAS and affect its ability to timely resolve taxpayer problems in the future.”

Another problem: In 2007, the service gave up some of its power so that its employees do not make any decision that may later be appealed by a taxpayer, preserving the unit’s independence and role as an advocate for taxpayers. The change limits the service to “routine and non-substantive” actions like inputting a taxpayer’s change of address, the inspector general said. That means most of its cases must be sent back to various offices within the IRS for resolution.

Fast Fact: Since the 2007 change, the Taxpayer Advocate Service can no longer directly resolve many common taxpayer problems such as processing claims for refund, abating penalties, or designating taxpayer accounts as “Currently not Collectible,” regardless of the amounts involved.

Other new reports released by the Government Accountability Office (GAO) or various federal Offices of Inspector General (OIG):

FINANCE

• About 3.3 million taxpayers claimed tax credits for first-time homebuyers in effect from April 2008 to June 2010, costing U.S. government $22 billion in lost revenue (GAO)
• Failure of Community Bank & Trust in Cornelia, Ga., which cost the FDIC $336 million, was due in part to relying too heavily on a senior official’s expertise rather than establishing sound controls (OIG)
• First Regional Bank in Los Angeles, Calif. violated a number of FDIC regulations and had weak risk management before its failure, which cost the FDIC $824.6 million (OIG)

HEALTH CARE

• Medicare could have saved $39.2 million in 2007 if contractor NHIC Corp. had required documentation of claims for home blood-glucose test strips (OIG)

NATIONAL SECURITY

• State Dept. did not adequately supervise DynCorp International’s $40 million contract for peacekeeping in Sudan, and company finished work a year behind schedule with claimed costs of $52.8 million (OIG)

MISC.

• Most states fail to fully describe use of education funds from 2009 stimulus law which mostly went to colleges and local school districts (GAO)
• Bureau of Prisons unable to update policies on furloughs because changes proposed in 2003 have not yet been agreed to by employees’ union (OIG)