In a report delivered to Congress, National Taxpayer Advocate Nina E. Olson said that the Taxpayer Advocate Service and the Internal Revenue Service face a challenge in treating taxpayers fairly and finding ways to increase compliance.
Olson highlighted four key areas of focus for TAS in the 2010 fiscal year and offered her recommendations for improving operations in each of those areas.
Olson's report recommended that the "IRS reinvigorate its efforts to pursue cross-functional, research-driven service improvements" and revive the Taxpayer Assistance Blueprint, which would help the IRS understand the needs and preferences of the taxpayers.
In the report, Olson also said that TAS would recommend a "more robust" return preparer strategy that will ensure that preparers prepare accurate returns so that understatements and overstatements are less prevalent.
She added that the government should regulate unenrolled federal tax return preparers and that the IRS should bring more enforcement action against "preparers who fail to perform due diligence or consciously facilitate noncompliance."
Olson also expressed the need to revamp the IRS's Offer In Compromise Program, which was designed to help financially struggling taxpayers pay what they could afford and make a fresh start.
The advocate argued that the application for the OIC program deters taxpayers from applying for the service, because it asks for too much information. She added that the number of accepted offers in the OIC program declined by 72 percent in the last seven years.
Lastly, Olson stressed that the IRS and TAS must carefully handle the expansion of refundable tax credits legislated by the American Recovery and Reinvestment Act of 2009.
She noted that the refundable tax credits present an increased risk of fraud and added that the IRS would need to balance fraud prevention with the timely delivery of refunds.
"On the one hand, if the IRS does not do enough to detect and prevent fraud, it may pay out billions of dollars as a result of false and fraudulent claims," she said. "On the other hand, if the IRS clamps down too tightly, hundreds of thousands and potentially millions of predominantly low income taxpayers will not receive timely refunds."
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