From the Press Release:
National Taxpayer Advocate Delivers Annual Report to Congress; Focuses on Tax Reform, IRS Funding and Identity Theft
WASHINGTON — National Taxpayer Advocate Nina E. Olson today released her 2012 annual report to Congress, identifying the need for tax reform as the overriding priority in tax administration. The Advocate also expressed concern that the Internal Revenue Service is not adequately funded to serve taxpayers and collect tax, and identified ways in which this chronic under-funding harms taxpayers and the public fisc. She also found that the IRS is not doing enough to assist victims of tax-related identity theft and return preparer fraud.
NUMBER ONE Problem: The most serious problem facing taxpayers — and the IRS — is the COMPEXITY of the Internal Revenue Code (the “tax code”).
Yes, we all know that, but of special interest to many readers here is item number 8.
Update from @Lisa. Thank you.
You will want to read the entire thing, but no guarantee that more than one or two Congressman will.
Below is the MSP 8 CONCLUSION:
In conclusion, the National Taxpayer Advocate preliminarily recommends that the IRS:
1. Expand and clarify the Streamlined Nonresident Filing Initiative to encourage all benign actors (including U.S. residents and those owing more than $1,500) to correct past noncompliance using less burdensome procedures that do not unnecessarily drain IRS enforcement resources (e.g., expand and clarify who qualifies for it and further explain
who will be deemed to have reasonable cause for failure to file an FBAR).
2. Send “soft” notices to educate persons with foreign accounts about the FBAR and Form 8938 reporting requirements, encouraging them to self-correct inadvertent violations, as contemplated by the FBAR Compliance Initiative Project and the FBAR Stop Filer Program.
3. Clarify how beneficiaries of Canadian retirement plans can file late or amended returns that elect to exclude undistributed income from those plans by issuing formal guidance to consolidate the seemingly inconsistent guidance provided by Revenue Procedure 2002-23, 2002-1 C.B. 744 (requiring a PLR), IRM 21.5.3.4.9.1 (Aug. 4, 2009) (instructing employees to process late elections), and 2012 OVDP FAQ #54 (requiring a submission to an examiner) in a way that minimizes taxpayer burden.
Below is the MSP 15 CONCLUSION:
In conclusion, the National Taxpayer Advocate preliminarily recommends that the IRS:
1. Make the IITA team permanent, with a formal charter and a responsibility to provide periodic written reports and formal recommendations to the IRS Services Committee, including items for the IRS Strategic Plan and Service wide Approach to International Tax Administration.
2. Develop a systematic and structured plan for implementing the 2012 WIRA Research Study recommendations and inform the public about the timeline.
3. Reinstate mailing of forms and publications to international taxpayers and U.S. embassies and consulates.
4. Allow electronic filing of 1040NR series and ITIN applications for nonresident alien taxpayers, at least those not claiming a refund.
5. Develop a method of simplified tax and information reporting online, modeled after the new online FBAR form for taxpayers incurring foreign taxes higher than the U.S. effective tax rate — resulting in no tax liability.
6. Establish a voluntary compliance program for international individuals, including a combination of simplified filing and relief from all penalties for taxpayers who have no liability.
7. Increase the threshold for the Streamlined Nonresident Filing Initiative from $1,500 of tax due to $10,000.
Better title here:
Bad Marks given by the IRS Taxpayer Advocate on Voluntary Offshore Disclosure Program in Its report to Congress
Although note: They are selling a product, “representation” This is not an endorsement and Buyer Beware.
From the NYTs
I.R.S.’s Taxpayer Advocate Calls for a Tax Code Overhaul
Sadly, I fear that her advice and counsel — which doesn’t go anywhere near as far as it should — will get ignored once again. There are none so blind as those who will not see.*
Great read, highly recommended. Regular IBS readers will recognize some of the themes we have discussed. Other sections also interesting. See also the IRS responses to the TAS recommendations – sometimes notable for the ‘avoidance’ of the issues she raises – through ‘wilful’ omissions, talking around the real point, and presenting insignificant actions as if they were somehow actual sincere resources that international taxpayers can actually use. In otherwords, truly fascinating for what is NOT said, or not addressed, as well as what is.
Maybe the likely new secretary treasury, Jack Lew, will be more receptive to the message.
http://www.washingtonpost.com/business/economy/obama-to-name-lew-treasury-secretary/2013/01/09/d6b91204-5a6b-11e2-88d0-c4cf65c3ad15_story.html
What do you think of the nomination?
There is also Most Serious Problem (MSP) 15 – “Challenges Persist for International Taxpayers as the IRS moves slowly to meet their Needs”. That section has a lot interesting information and some new ideas. Specifically,
It is also mentioned that technology can provide cost-effective solutions to many international compliance problems. There is discussion of online improvements. I think Nina Olson was over-optimistic here. She should have mentioned basic technology – like a phone. IRS Agents are not allowed to call internationally. I know this as a fact as I am under examination in OVDI and my agent does not have the ability to call me as international phone calls are not allowed to be made by the agent. I think Just Me and Sally will also relate to this.
It is ludicrous that the IRS wants to “provide services” to enforce US tax law outside of the US, but does not give its employees the ability to make phone calls outside of the US. Maybe they can call Canada as it has a +1 Country Code, however, if they can’t, I am sure many Brockers will be happy about this. However, for those Americans abroad who have to deal with the IRS for whatever reason, this inability of the IRS to use basic technology just increases the cost of compliance that Americans abroad have to pay.
@ Christophe
The appointment sucks but if I honestly said why I would be banished from this site. This is nothing new — all of Obama’s appointments suck with the exception of Chuck Hagel but that one isn’t a done deal yet and Obama, almost without exception, caves in. Another recent appointment puts the drone-prone John Brennan in charge of the CIA which should never have been given the drone joy stick to play with in the first place.
Jacob Lew is a White House insider. This means that it is going to get worse because the secretary is closer to President Obama, who sees all expats as tax cheats. Don’t count on anything improving.
Lew worked for Clinton during the 90’s and he was in charge of the hedge funds at Citi that basically were betting on the housing bubble to collapse.
He’s no different from any other “company man” in terms of politics and the financial sector. During the fiscal cliff of late, Obama basically handed over the negotiating to Lew and the House GOP leaders hate the guy. He is Obama’s lap dog and his job will be to put more revenue raising into the budget. We are revenue. There might actually be some tax reform but I wouldn’t look for it to
help us or the average person. Corps will still be given priority and they will always have the money to work the loopholes anyway.
Hagel might be ok but his job at the Pentagon is to be shifting funding to the drone program and cutting as much of everything else as possible. Mostly contractors who got rich primarily in the Bush years but rank and file aren’t likely to be spared.
Brennan is the mastermind behind the drone program and a hold over from the Bush/Cheney years. That says everything you need to know about him.
I appreciate what Olson is trying to do, but they ignored her thus far. Doubt that will change.
So, there is one thing I don’t understand. This is a report to congress. Congress passes law regarding taxes, but does not seem to have an impact to how the IRS is administering their programs to enforce such laws. Could it be the wrong audience here? The IRS commissioner is the guy that has the power to make things change in the IRS’ programs and resources allocation – not congress.
In other word is congress the IRS’ boss? This report should be directed at the IRS’ boss.
Just like Jim Jatras pointed out that treasury (executive branch) is just doing its work implementing FATCA but repeal would have to come from congress.
@Lisa
Thanks for pointing that one out too. I only got as far as 8, and thought I would post it before I ate “The WHOLE thing”! You have to hand it to Nina is persistent in highlighting these items in her Report to Congress. Now, so far the results show, that no one in Congress reads her reports..
@Christrophe.
Have not had time for news today, so no opinion. I am busy gardening with my nephew, and somehow that seems more important right now. 🙂
@all
Updated to include links and Conclusions to MSP 15, which Lisa pointed out, and I had neglected to reference earlier.
Atlantic magazine has a profile of Jack Lew:
http://www.theatlantic.com/politics/archive/2013/01/who-is-jack-lew-obamas-nominee-for-treasury-secretary/266982/
Footnote 13 on page 264 of the 2012 report typifies what garbage even the TAS produces. A crap citation that leads nowhere easily except around in a circle! If you google “2012 WIRA research study 7” all you get is a single hit reference to the citing document. Like ouroboros, the IRS just eats its own tail. Variants like “Wage and Investment Research and Analysis” don’t do much either. It would be nice to get at the data behind the blather, but of course that would be too too transparent, wouldn’t it? The purported data is likely junk anyway. Bunkum spawns bunkum.
this report release is a current event. It can be used to encourage news outlets to report on this issue.
@Victoria does it again, with a brilliant post on this NTA report…
Three Cheers for the Taxpayer Advocate Service
“And the American Taxpayer Advocate Service, our voice at the U.S. IRS, has done it again – come out swinging on behalf of Americans abroad”.
I worked for years in “technology” and while it sure could help, I think TAS overstates how it might help people abroad. What’s missing (for me anyway) in this report is the issue of trust. You can build as many websites and electronic filing systems as you like but no one is going to use them if they don’t have some faith that they will be treated fairly and not plucked right down to the last centime in their savings accounts.
I don’t think TAS or any other homeland organization/government entity or even the American public have any idea how much damage all this has done. The tip of the iceberg is of the course the renunciations but underneath is fear, suspicion and deep anger from a population that, from what I’ve experienced in 20 years abroad, was generally proud of being American and stayed remarkably loyal to her regardless of how much time was spent outside the country.
The relationship between the homeland and American citizens abroad has been deeply damaged. You cannot tell me that it is in the best interests of the United States to have turned loyal citizens into people who now questioning whether or not that love and loyalty make any sense these days. I personally had no idea how much sheer loathing America has for Americans abroad (when we even hit their radar at all that is). It’s changed my world.
Clearly they do not trust us. So explain to me again why we should trust them: the US IRS, the US government, US politicians and the American public?
Final word – I am not even sure it can be fixed though I really appreciate TAS for trying. Whatever they do going forward the memory of this mess is going to stick and the US government will have to do something very significant to win people back. I don’t think they will bother because they don’t appreciate the magnitude of the problem and even if they did, I think 99% of the homeland population would not care one way or another.
And on that cheery note I am going to make myself another cup of coffee and continuing reading Patrick Weil’s new book which interestingly enough is about denationalization/denaturalization in the U.S. It’s called Sovereign Citizen and it is outstanding. What America was more than happy to do to her citizens deemed to be un-American in the 20th century makes you understand a bit better why they don’t feel a compelling need to treat Americans abroad well in the 21st.
I have sent a letter to talk@npr.org asking them (Talk of the Nation) to cover this current event, which is also coupled to tax reform ongoing in Congress.
I hope also to send similar letters to the Ways and Means committee (link in Brock earlier) and my own Senators/rep
@Mark Twain,
and I just sent off an email to the author at the NYTs who wrote This story.
.. basically asking for some attention and focus on MSP 8 and 15. If anyone is interested, her email is: crampell@nytimes.com and twitter account – @crampell
Nina is beginning to address the tip of the iceberg, but there is quite a lot more work to be done, namely the collateral damage US Tax Policy is causing to compliant US citizens abroad (ability to secure mortgages, fruitful retirement planning and career opportunities with companies abroad).
As long as US Tax Policy is irresponsible, unrepresentative and toxic, my US passport will be dumped the minute I get my hands on a real “First World Passport”. Congress and the IRS still have some time to correct their behavior before I throw in the blue book to the nearest US Embassy.
Christoffe shares the same question as I–why is there not a report to the administrative branch? A report to Congress is only information–all laws are to be executed by adminstration—-Obummer & Co. Hence, the response from my Senators & rep,when I reference this report, is “duh, uh”
@just me—the link to THIS STORY does not function for me.
@Victoria
Your comment has the makings of a very good op-ed piece that the NYT might well run. By digging down to that visceral level and using trust as the foundation, you get beyond all the bureaucratic BS and expose the raw emotion. That makes for compelling copy. Give it some thought.
DW
*
@Mark Twain
I see that it doesn’t. Sorry about that. Fixed now.
@Victoria. I agree with @Arrow.
I tweeted it to the NYTs author @crampell, included it in an email to her, and have referenced several other comments that I haven’t mentioned, so I do think it has impact. Why not just submit to the NYTs on a lark, and see what happens.