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IRS ‘Falling Backward’ on Taxpayer Help Amid Cuts, Advocate Says

A cash-constrained Internal Revenue Service would become more automated and show less sensitivity to individuals, National Taxpayer Advocate Nina Olson said in her annual mid-year report. Photographer: Jin Lee/Bloomberg
A cash-constrained Internal Revenue Service would become more automated and show less sensitivity to individuals, National Taxpayer Advocate Nina Olson said in her annual mid-year report. Photographer: Jin Lee/Bloomberg

June 29 (Bloomberg) -- A cash-constrained Internal Revenue Service would become more automated and show less sensitivity to individuals, National Taxpayer Advocate Nina Olson said in her annual mid-year report.

“The downside of having to do more with fewer resources is that the IRS will apply more ‘bright-line’ tests to taxpayer situations, because having to look at a taxpayer’s specific facts and circumstances is time-consuming and costly,” Olson, who runs an independent organization within the IRS, wrote in the report released today in Washington.

The House Appropriations Committee voted June 23 to approve an $11.5 billion IRS budget for the fiscal year starting Oct. 1, 5 percent below this year’s budget and 13.3 percent below the administration’s request. The full House is expected to vote on the spending request in July.

IRS Commissioner Douglas Shulman has warned that budget cuts would hurt enforcement of the tax code and increase the budget deficit by allowing more revenue to go uncollected.

Olson also wrote in the report that the agency’s “discomfort with exercising judgment and discretion” extends beyond its constrained budget.

IRS Criticism

“I believe it reflects a failure to view taxpayers as human beings and to recognize that, as a tax agency, we deal with taxpayers as we find them, with all the vagaries of human existence,” Olson wrote.

Olson added that she is concerned the IRS is “falling backward in its commitment to taxpayer service.”

She criticized the agency’s handling of the initial version of the first-time homebuyer tax credit, which operated like an interest-free, 15-year loan. IRS problems in computer programming and guidance to taxpayers caused a “massive breakdown” that delayed refunds this year, Olson wrote.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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