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IRS Making Progress On Reform, But Room For Improvement

by Leroy Baker, Tax-News.com, New York

22 July 2003


As the Internal Revenue Service reaches the half-way point of its ten year reorganisation, the tax department is on the way to achieving its goal of becoming more 'user-friendly', experts say. However, a significant amount of progress still needs to be made.

One improvement, according to a Scripps Howard News Service report, has been the establishment of the IRS national taxpayer advocate office, created by the IRS Restructuring and Reform Act of 1998 to improve the dispute resolution system for the average taxpayer. It is headed by Nina Olson who formerly represented low and middle income taxpayers in cases involving the IRS.

"The system is better for it on balance: I was just Larry Gibbs calling the Baltimore office with a question that was handled beautifully, accurately and courteously," commented Lawrence Gibbs, IRS commissioner from 1986 to 1989 on the reforms which have been implemented so far. Meanwhile, Donald Alexander, IRS Commissioner from 1973 through 1977 agreed that the reorganisation has certainly helped the agency "better deal with the largest and the smallest taxpayers" with the creation of the "big case" unit aimed at more sophisticated disputes with corporate entities.

Another former commissioner, Margaret Milner Richardson, IRS head from 1993 to 1997 observed that the drive to expand the electronic filing system has made the IRS a more user-friendly institution for the public. In the last tax year, some 52 million took advantage of filing their taxes electronically, although the former IRS chief conceded the "jury is still out" on the re-organization program, telling Scripps Howard that the agency was still under-funded and under-staffed.

However, Washington tax lawyer Martin Lobel pointed out that the underlying tax code contributes much to the system's ills, and blamed laws passed by Congress which have allowed tax sheltering to flourish. "Congress has passed a tax code that's unenforceable," Lobel observed, adding that: "We had good tax simplification in 1986, but it's hopeless unless Congress simplifies the system again."

On top of this, the IRS must cope with additional regulations concerning housing assistance programs, education financing and Earned Income Tax Credits for low income taxpayers which increase the IRS's workload, not to mention the Jobs and Growth Tax Relief Reconciliation Act recently signed by President Bush.

Observers have also expressed concerns over the creeping privatisation of the IRS's functions. Christopher Bergin, executive director of Tax Analysts Inc, told the news service that he finds it somewhat "troublesome" that firms drafted in to expand the electronic filing revolution are allowed to use sensitive taxpayer information to market other products.


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