Tax Warrior Perspectives
Tax Warrior Perspectives

Episode 4 · 6 months ago

The Rights of the Taxpayer: Modernising the IRS

ABOUT THIS EPISODE

Most people don’t know that the IRS has a person whose singular focus is on the rights of the taxpayer. For 19 years, our guest Nina Olson filled that role as the National Taxpayer Advocate of the United States, an independent organization within the Internal Revenue Service, dedicated to assisting taxpayers in resolving their problems with the IRS. Today, Nina serves as Executive Director and Founder of the Center for Taxpayer Rights, a non-profit organization, dedicated to furthering taxpayer rights in the U.S. and internationally.  In today’s episode, Nina and Jane discuss the struggles taxpayers are having with contacting the IRS, its staff shortage, its technology challenges, and what the future may hold for the IRS.

Get the full show notes and more resources at TaxWarriors.com/Podcast.

Welcome to tax warrior perspectives, where our goal is to bring you insights for building, sustaining and growing your wealth. Join our expert discussion of the most crucial ideas and strategies for including tax in your financial plants. And now here's your host, Jane Sketchetti. Hello, I'm Jane Sketchetti, AND WELCOME TO TAX WARRIOR PERSPECTIVES. We're excited today because we have as our guests someone whose career I have followed for many, many years, Nina Olson. So let me start by telling you a little bit about Nina. Most people don't know that the IRS has a person whose singular focus is on the rights of tax payers. For nineteen years, Nina filled the role as national taxpayer advocate of the United States and independent organization within the Internal Revenue Service dedicated to assisting taxpayers resolved their problems with the IRS and making administrative and legislative recommendations to mitigate those problems systematically. I guess you can say that Nina was an original tax warrior. Before serving as the national taxpayer advocate, Nina founded and directed the Community Law project, the first independent low income tax payer clinic in the US. She also maintained a private legal practice representing taxpayers in disputes with the IRS. Today, Nina serves as the executive director and founder of the Center for Taxpayer Rights, a nonprofit organization dedicated to further in taxpair rights in the US and internationally. Nina, it is indeed a real privilege to have you on our podcast. Welcome to tax warrior perspectives. Well, thank you for having me. We're so excited. So first, what have you been doing since you left the irs? Well, the day after I retired I started at the center for Taxpayer Rights, which was a nonprofit that I found it and had been thinking about for some time how to continue to do taxpayer rights advocacy work and still keep my hand in, even though I didn't want to be within a bureaucratic structure. So the center convenes the International Conference on Taxpayer Rights. We just closed out our sixth one last week. We have tax chats online. We have a low income taxpayer clinic support center that we are about to launch, which will also, quote not only provide support to low income taxpayer clinics around the country of technical support, training and training for volunteers and things like that, but also. So we're establishing what I call a dating APP for clinics and volunteer attorneys, CPAS and enrolled agents, so that if you're...

...interested in volunteering, you can create a profile and a clinic can put in a request saying we need help on x, and it doesn't have to be just representation. It can be we just need some technical advice on a case or we need someone to do some training on a particular issue that we don't have, and it would be a way to do pro bono work, but in a coordinated way that we can really match clinics in need up with volunteers who are willing to volunteer. Wow, that's exciting. I did listen to one of the tax chats. I actually listen to a few of them. The one that I really enjoyed was the one talking about the administrative burden and you know, need to we always try to set a goal as to what we're hoping those who listen to this podcast will come away with, and I think one of my goals is to care why we want a healthy irs M, why we don't want administrative burdens and what that means. Maybe you could talk a little bit about the work you're doing with that. Yeah, you know, so much of what is a burden to taxpayers is the result of the Iris is antiquated information technology system and also many of its processes being based back in the s. You know, Charles Rozsai always talks about the iris was doing s type audits when he came in and they're still doing s types all when they come in. And so one of the things that your your clients may really want to care about is the fact that the Iris Right now has over sixty database systems for its taxpayers, at least sixty major ones. So there's no one place in the iris system where you can see all the information the iris has about the taxpayer. The audits have their own system, you know, accounts management have several systems of their own out so when you call on the phone just to resolve a problem, the sister may not be able to see into the system that has the information and then they have to make a referral which generates a letter and that says, well, we'll get back to you in thirty days and pretty soon it's six months before you can even find out what the Iris is system is saying about you and Nina. I was going to add, and I can tell you from our perspective, things are complex right the world is very, very complex. Financial Affairs are complex. So when you do speak to an irs agent, sometimes they make a mistake, sometimes they don't put the information incorrectly or they didn't understand what you were saying. To Undo those mistakes or to try and get that cleared up just adds to the problem. And meanwhile you have clients who are paying for representation and you're frustrated because you cannot get to the right people. Well, in the their point about not having what I call a three hundred and sixty view of taxpayers is that you may be selected for an audit that will end up being a no change audit because the iris has audit selection system doesn't have all the pieces of information that it needs to have in order to select the cases that really need to be audited as opposed to those that don't.

And I like to describe it as a kaleidoscope. You know those little tubes that have pops of glass that if you turn that little dial just a fraction, all the pieces of glass fall into a different pattern. So if you are missing a piece of glass you aren't going to see correctly and it may be that that one little piece of information that's sitting on some other database somewhere in the iris may be the one that says, oh wait, I don't need to worry about that taxpayer. And that is important because your taxpayers are spending lots of money in audits or, you know, or in issue resolution that they don't need to have, because there it's not even a mistake of the Irus, it's that they didn't see the full picture so they got the wrong answer, and I think that's really key to modernization. Yeah, and you know, there was something interesting said on your tax tat and it talked about something that I've often predicted and keep waiting for but it's not happening, which is if we could have the IRSS, I'll call it prepopulate, but send you your tax information, or if a tax preparer can go and download that clients tax information and say hey, here's what we have. Does this seem right? Is there anything unusual? Is there anything additional that needs to change it? And if not, you're filed. Your return is done and if you need to file something then you would file it. I just feel like that might solve the issue so that those who do have complex investments, complex situations, complex lives are getting the right resources and those that could just file basically something that's more computer generated. Would we even close? Is that something that could happen? Well, you know, we did a study. The text payer advocate service did a study back in two thousand and sixteen or two thousand and seventeen, and the first thing about complexity is that, unlike many countries around the world, the United States taxes taxpayers as a unit, as a household. Ran Other countries just tax the individual, and that makes it easier because then, if you get information in on income or whatever, you're just looking at one human being, which is information you can get, as opposed to where does the child live? You know, are you married, you know, those sorts of things. That's information that ires doesn't have and that the family, the taxable unit, has to tell the IRS. But even with that limitation we estimated that about thirty million taxpayers have what I Call Plane Vanilla returns. It's all based on information reports, mostly WTWO's interest dividends, social security, maybe unemployment insurance. Actually it's more if you add unemployment insurance and some of the other provisions, but at least thirty million of them. With the IRIS getting the W two's now, mostly by January,...

...thirty one. You know, it could actually give that information to taxpayers and they could just fill in whether they have a child, push the button and they're done. These are childless w two earners and their returns could be done just with a push of a button. All right. The other benefit of that is that the WT information, getting it from the IRS would mean that those w two's, if you move during the year or something and you forgot that you worked some place for the first month of the year and they're mailing it to your old address, that's missing and that's going to lead to an automated underreporter notice. All that stuff is resolved and then that preparers, the tax professionals, can get that information to so if your client forgets to bring you that w too, you can download it. It can be downloadable into your software and then that saves key stroking errors and all that sort of stuff and he it. Do you have any advice? In all the years that you were representing as as being the taxpair advocate, was there one or two things that sometimes you just wish taxpayers would remember that would make it easier in dealing with the IRS. Well, I mean the simplest thing, which is the least pleasant, is just simply that you can't ignore the IRS. Yeah, you have to take action. I always tell people, if you ignore the iris, it's going to come back at you at the worst time of your life, the time when you're least able to deal with that kind of stress and burden. It's going to raise its ugly head and you're also going to be dealing with a much larger issue than when it was at the beginning. And then the other thing is, and this is really just been my mantra to myself even just don't give up. It breaks my heart when people give up and end up paying the ire as out of frustration, when they know it's not the right answer and they shouldn't. Then, I know that's a cost benefit analysis. At some point you say, I've spent hours on the phone, you know, I just can't deal with this anymore. But at some point persistence really does pay off. Yeah, I would tell you that in my experience that's a double edge. All right. I've seen where we've persisted because we really believe we have the right issue, only to find out that more issues continue to get at uncovered and more issues and they're not the right issues, but there are more distractions and, from that perspective, more professional time trying to resolve it. So it is a double edged sort. I mean there are many times that that cost benefit. We're saying, you know what, let's just settle. We don't necessarily agree with it. Yeah, well, I think that settling is a different thing. You know, you're really making an assessment of what your exposure is. Good Point, you know, adversarial relationship in terms of more issues and more time, you know, and the need for certainty, and I understand that. But if it's just a simple notice that really just don't give into the IRS, and...

...it's that's more important now than ever because they're so you know, they're they're not handling the phones well, they're not handling correspondence well, and some of it is the result of covid and then even earlier the shutdown between two thousand and eighteen and two thousand and nineteen. They never, in my opinion, really even recovered from that. But some of it is they just need to marshal their resources. And again it also comes back to it being able to address these things electronically and in a good way. Right what you pointed out something when we were talking earlier about you can sign on on your investment accounts right with a lot of cyber security. You can see the full picture, you can see what you're doing, but there is really no where where you could just go to the IRS and pull up your account and look at it. I mean even trying to get an accurate notice, it's almost impossible and it takes hours. Yet, you know, the IRUS has very high authentication rules and that's understandable because the information that the iris that there are lots of people out there that would love to have that information and not do not things with it. But there has to be a way for people to sign on and get access. And the pass rate for most of the online account features of people trying to create an online account, you know, varies between thirty two percent and forty percent, which is its terrible. Can't even a line account and people give up. And then you add to that the difficulty of the phones. Once you're in. The capabilities are limited. Now they're adding more each year. I understand that but again because they're the sixty different systems. You know, you have to program into each of these systems to be able to see what's going on, or you have to sign into another account in order to Communicate About Your Exam and upload documents to your exam, and so it's not seamless. That is a focus of the Iris. The other thing about that is there is this misperception. I believe that that's going to mean that they're going to be fewer people calling the Irus and wanting to talk to a live human being, and I think that that's really not accurate, that what it will do is let people do things that they're calling about now that they can do online. But it's there's so much unmet need. At some point you are going to want to talk to some stre even if you can see on your account, Oh, here's the information, and I see why. You want to know from somebody that they've heard you, that they've listened to you, that they've actually acknowledged what you're saying and you want that acknowledgement. And the other thing is you want a letter coming back when they said, oh, we're going to do x, we're going to make this adjustment on the account. You want that acknowledgement coming back in writing or in an email telling you that they have done that, and we don't get that. Yeah, I think you're so spot on with that, because I think...

...people forget, and and maybe when I've dealt with the IRS, I sometimes think they forget that it is a person's livelihood, right, and you know I play this game a lot of times and I say, stop and think, how many people know how much money you make, how much you pay in taxes? Now, all that personal detail about you, and generally people come up with one one and a half people right, might be your spouse, maybe only half of your spouse, might be your parent, maybe only half of your parent. Probably is your accountant, but it's not a lot of people. So when you're dealing with these issues that are really sent it, if in private issues, he want to make sure someone's listening. And if you see something online, you do want it confirmed. You're absolutely right. Or if someone says I've taken care of this, you'd like to see a letter that says they've taken care of it. At completely agree with you and the irus needs to modernize to that point. One of the things that we've been saying for a long time. You know about I don't know, seventy five to eighty percent of individual audits are done by correspondence and when you're in the corresponding system there is no one employee who is assigned to your case. You're sending stuff off into the ozone. So somebody gets it, you know, gets the document, looks at it, does something, sends you out a cryptic letter. It's not with that Employe's name on it. You can't call that employee back up and say what on Earth Weait? I sent this information in. Did you read it? And what we've tried to say is if you did. Online audits, like office audits, are held where you make an appointment, where the person comes in virtually with their documentation. They can hold up their documentation to the camera and say, well, here's what I've got. They can leave that audit knowing that either it's resolved, the documentation is enough, or they'll have a list of what more they need to get and then they could send it directly to that Eboe who has had that interaction. That is not hard to do, but it is hard to do in the irs environment. They are doing some audits online, but not a lot and it's clunky. It's really flunky technology, which it does not have to be. And so that's like the vision of modernization which addresses the irs is wanting to do things in a less expensive way than having brick and mortar physical facetoface, but then builds on the strengths of virtual which is a virtual face to face but also gives the taxpayer the individual assigned to their case, and so it gets the best of all worlds. And that it's not doing it when tax administrations around the world are doing it right. It's really, you know, unfortunate. How optimistic are you that some of these changes are something we'll see in a short term, say the next five years? Well, they're going to have to do something that in the next five years.

I mean they you know, they've got a plan for modernizing their technology and you know it will probably take longer than they have mapped out in their plan, but they are going to have to because taxpayers of the United States can't suffer like this. Rank right and right. The issue on the phones is just money. I mean it's just you've got this many phone calls. You need this many people to answer the phone calls. You need more people on that side well, and training right so you know when you get someone on the phone and they they're telling you something that you know is not correct because they just haven't been trained. So I would venture to say it's also making sure you have someone on the other side who's qualified. We tell our clients many times the best thing we hope for is a really smart irs agent, because then we can explain why we thought we had a reasonable basis or, more likely than not, position and what the laws you can discuss it with some meat. But when you get an irs agent who's unfamiliar with the issue and just has a knee jerk reaction to it, it's very, very frustrating. You know, I've done the work with as your Bijan. Believe it or not, their taxpayer service is really impressive and they have a level taxpayer service where you know they're the generalist that answer the call on the first thing. But if it's clear that either the issue is going to take longer to resolve because they're multiple issues or it's above the skill level of the employee, they're not yet because there's steeped skill levels. They in real time gate, the call over to the next level of a sister wow and people who have been trained on higher level issues, more complex issues, etc. And aren't subject to the same kind of talk time thresholds and things like that. And so you know it's possible to design these things that way and I just find that so interesting. Yeah, yeah, that is interesting. Maybe we have some hope here. So, Nina, I really enjoy talking about the IRS and what I try to do is allow our listeners to get to know you a little bit better. So let me ask you a question. When did you realize you can make a difference? Well, you know, my whole background was in fine arts and I spent the first, I don't know, thirty some odd years of my life as a painter and I didn't know that. Okay, so I went to law school. I was doing return preparation to pay the bills and I went to law school at night. And after law school I was recruited, you know, the local bar was saying would you like to do some pro bono work and I thought well, I don't know anything about landlord tenant and I don't know anything about dead or creditor. I know tax and at that time I was talking to a tax court judge and she was talking about the taxpayers that were representing themselves before the tax court, you know, in the messes that were happening, and I just I was literally in my kitchen and the proverbial light bulb went off over my head and I thought to myself, I know what to do. I will...

...create a low income taxpayer clinic that will be like a legal aid, because they've got to be other lawyers and accountants out there who want to do pro bono work but don't have a vehicle to coordinated. And the result of that was the Community Tax Law Project. And Wow, as small as it was in the beginning, you know, with me just answering the phone and, you know, taking cases and everything, it became, you know, quite significant and that's that was the light bulb moment. I can do this. Wow, yeah, and then, let me tell you, have made a difference. You know, we really, really enjoy you being our guests. Thank you so much. I look forward to listening to more of your tax chats. Please keep up the fight. We need it. I know our clients are society needs it. People want to pay their fair share of taxes. They're just frustrated when the system seems to go against them. So thank you again. We're happy to have you and thank you everyone for listening to tax warrior perspectives. Thank you. Thank you for joining us today. We hope we've shared our expertise in a way. The positions you to discover the best strategies and ideas to build, sustain and grow your wealth. If you like to listen to more episodes, you can subscribe on your preferred podcasting APP or visit our website, where you will also find show notes and important disclosures. Tax Warriorscom podcast. This has been a production of twin flame studios.

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