House leaders explore needed IRS reforms to better serve taxpayers during hearing

U.S. Rep. Vern Buchanan (R-FL) underscored the need for bipartisan collaboration to make progress on reforming the IRS in ways that would ultimately benefit taxpayers during a subcommittee hearing on Friday.

Buchanan, the chairman of the House Ways and Means Subcommittee on Oversight, and U.S. Reps. Diane Black (R-TN) and Jackie Walorski (R-IN) were among the lawmakers that heard testimony from National Taxpayer Advocate Nina Olson. The Taxpayer Advocate Service is an independent office which helps taxpayers resolve problems with the IRS.

Noting that Congress has not seriously considered IRS reforms in nearly 20 years, Buchanan said reforms are important for the agency that administers the tax code to build trust with taxpayers.

“It is important to emphasize that our efforts to reform the IRS should not be seen as a punishment or a criticism of the average agency employee,” Buchanan said. “Instead, they are a recognition that the IRS mission is important. Every government entity, just like private companies, can benefit from a thorough review and some thoughtful long-term planning. And that is what we are trying to do here.”

During the hearing, Black asked Olson about how the IRS communicates guidance to taxpayers.

Olson said that the IRS has moved toward frequently asked question formats, but that they are not reliable unless the FAQ is printed out every day and changes are tracked, and “you’re really leaving the taxpayer in a vulnerable situation” without doing so.

Walorski had questions about the real-world impact of tax returns that are incorrectly flagged as fraudulent.

“Identity theft and refund fraud have been the top two case receipts in taxpayer advocate service for the last five years,” Olson said, pointing out that those issues affect both low-income and high-income taxpayers.

“People are having to get their preparers to call, and people often submit documentation multiple times,” she added. “There is no one person assigned to their case, so every time they call they have to tell their story to a different person.”

Walorski raised questions about delays in replacing the IRS’s Electronic Fraud Detection System (EFDS) with the Return Review Program (RRP).

“The EFDS is still the principal fraud detection system because the RRP still isn’t ready for prime time,” Walorski said. “In fact, Treasury Inspector General for Tax Administration (TIGTA) says there is no estimated date for full implementation, and GAO estimates the program has incurred over $86.5 million in cost overruns. When the RRP has run as a pilot, it yielded a high false positive rate, and it missed $313 million in fraudulent filings.”

Buchanan, speaking from his personal business experience, said, “we always need to be looking for ways to make improvements and gain efficiencies.”

The Taxpayer Bill of Rights contains ‘the right to quality service’ as second on its list, Buchanan said. “An IRS publication describes that right as ‘the right to receive prompt, courteous and professional assistance in (taxpayer] dealings with the IRS.’ As we consider reforms to the IRS, we should keep this right as well as the other nine in mind,” he said.