By Conduit for Action
The best way to help taxpayers is for taxes to be reduced or, even better, eliminated. In the meantime, taxpayers also need relief from what is sometimes a cumbersome and nonresponsive tax bureaucracy.
We’ve been looking at the 2023 Annual Report to Congress by the National Taxpayer Advocate. What is the National Taxpayer Advocate? It is a separate office within the IRS with the mission to examine common taxpayers’ complaints concerning the IRS and then to make recommendations for improving the system.
Some of us (who have not worked with this organization before) were skeptical that a government office within the IRS could accomplish anything to help taxpayers. It turns out (in addition to the testimony of individual taxpayers and their representatives), that in the past, the National Taxpayer Advocate has made good recommendations to help taxpayers and several of the recommendations have been implemented by the IRS or by Congress.
Some of the 2023 recommendations have to do with improvements the IRS can implement concerning subjects such as e-filing, automation, and services over the telephone.
The report also includes recommendations to Congress for legislation. For example, would it surprise you that currently the IRS can just sit on a refund claim and do nothing? It is true. Here is the report’s recommendation for federal legislation on the subject.
- Require the IRS to Timely Process Claims for Credit or Refund (Recommendation #2). Millions of taxpayers file claims for credit or refund with the IRS each year. Under current law, there is no requirement that the IRS pay or deny them. It may simply ignore them. The taxpayers’ remedy is to file a refund suit in a U.S. district court or the U.S. Court of Federal Claims. For many taxpayers, that is not a realistic or affordable option, as full payment of the disputed amount is generally required, and there can be a sizeable filing fee. The absence of a processing requirement is a poster child for non-responsive government. While the IRS generally does process claims for credit or refund, the claims can, and sometimes do, spend months and even years in administrative limbo within the IRS. Providing symmetry between the assessment statute, which has a clear ending date, and a statute requiring the IRS to timely process claims for credit or refund would be good tax administration and would protect taxpayers’ rights to be informed, to pay no more than the correct amount of tax, and to finality. We recommend Congress require the IRS to act on claims for credit or refund in a timely manner and impose certain consequences for failing to do so.
That is a pretty significant recommendation.
This leads us to suggest that Arkansas also do a review of taxpayer complaints with the goal of making the tax administration less burdensome for Arkansas taxpayers.
No, such a review doesn’t need to be done by a high-paid consultant. Arkansas already spends way too much money on consultants/cronies.
By necessity, most of the work would be done by Arkansas’s Revenue Division. It is the Revenue Division that receives complaints and litigates issues when taxpayers take the state to court.
It is a matter of getting the division to collect the data. They don’t always collect data that would be helpful to taxpayers. For example, in response to a tax professional’s concerns of large penalties charged by the state of Arkansas, a member of the Conduit team filed a FOIA request with DFA asking for information to determine the dollar amount of annual penalties collected from taxpayers on state income taxes and sales tax. Their response was that they do not collect that information. Trust us, what you don’t know, can hurt you!
That is why the division needs to be directed to compile information on taxpayer complaints. Who should do that?
Governor Sarah Sanders could take the lead and require the Revenue Division to collect the information on taxpayer complaints and have her administration work on solutions to problems encountered by taxpayers, while also sharing the compiled data with the Arkansas General Assembly. In the alternative, the Arkansas General Assembly could request the Revenue Division’s cooperation in a study (or pass a law requiring the division’s cooperation), and then direct the Senate and House committees on Revenue and Taxation to study the problems and work on solutions.
If Arkansas fails to do anything about tax administration problems encountered by taxpayers, it probably means they don’t care as long as Arkansas can squeeze more money out of a taxpayer.
Ask your State Senator and State Representative to help eliminate state tax administration problems frustrating taxpayers. Show your legislators an example of how it could work by showing them the 2023 Annual Report to Congress by the National Taxpayer Advocate.
Here are some important links:
- National Taxpayer Advocate Annual Report Congress 2023
- Current National Taxpayer Advocate, Erin M. Collins
- Description of the National Taxpayer Service.
