IRS Employees Should Be Able to Answer Taxpayer Questions, Smith Constituent Complains

Sen. Bob Smith, R-N.H., has sent the IRS a copy of a letter from one of his constituents. In the letter, constituent Susan W. Almy complains that no one at the IRS (assuming she can get someone on the phone) can answer her questions about Form 1120-H, which homeowner associations must complete if they have capital reserve accumulations over $100. As filing the form is time-consuming and difficult, Almy recommends (1) increasing the $100 deductible; (2) taxing homeowners associations only on that percentage of their income that reflects the portion of their capital reserve that goes to homeowner expenses; (3) finding better ways for the IRS to respond to taxpayer questions; and (4) indexing the more obscure forms into a computer file so that IRS employees who take telephone inquiries from taxpayers can see the most recent form when talking to the taxpayer on the phone.

In response, the IRS asks Sen. Smith to apologize to Almy for any problems and inconvenience she may have experienced and says it would consider her suggestions for improving the Form 1120-H.

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Sen. Bob Smith

Dear Sen. Smith,

[1] Congress in its infinite wisdom decided many years ago to tax the little capital reserve accumulation Home Owners' Associations achieve at a rate of 30% of everything over $100. The result is IRS Form 1120-H, A FORM WHICH IS USED BY SO FEW, APPARENTLY, that it is cost-ineffective to write instructions for it. (There are a few paragraphs specifically for this form, sandwiched on its reverse side among the usual boilerplate.) IRS phone answers also are not trained in it.

[2] I am writing you about this for two reasons. One, while some home-owners' associations (condominiums) use these reserves to pay for real home expenses, such as roof repair and sidings, others, such as my own, leave all these expenses to the home-owner, and only save for community expenses -- roads, water supply, sewage/septic -- which if not paid by us, would be a direct charge on the city. It seems unjust to make us pay taxes on this.

[3] Two, the smaller home-owners' associations, such as my own, use volunteer labor for self-management. We do not have an employee and permanent phone to sit for hours trying to get through to the IRS, nor can we afford to pay an accountant as much as it would take, in order to report our measly once-in-thirty-years timber cut of some $3000.

[4] I did spend a lot of time sitting on MY PHONE, ONLY TO DISCOVER THAT YOU CANNOT get an answer on obscure questions like this during tax season unless you undertake to sit at your phone during all working hours for the next week to receive the answer, as they will not reply to an answering machine. Finally somebody told me an address I could send a query to: it took 2 weeks for the letter to reach their Mass. mailroom, and another 4 months for them to get me the answer back. Meanwhile, well after tax season, I had gotten through on the phone to someone who sounded like he knew what I was talking about, and his answer disagreed with the one I got back in writing (which was, however, a few squiggles on the letter and very difficult to interpret). I called again just now and reached someone who admitted HE DID NOT KNOW WHAT HE WAS talking about, and guessed.

[5] My recommendations, that I hope you can have SOMEONE FOLLOW UP, OR AT LEAST get to the appropriate person in the higher IRS hierarchy, are as follows:

o the $100 deductible is obviously way out of date. Either put

o only tax homeowners' associations for that percentage of their

o search out better ways for the IRS to respond to taxpayers.

o search out ways to make IRS information consistent with their

Sincerely,

Susan W. Almy

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September 17, 1998

The Honorable Bob Smith

Dear Senator Smith:

[6] Your request dated August 18, 1998, to the Internal Revenue Service (IRS) Legislative Affairs Office, has recently been forwarded to my office for reply. Your request for information, on behalf of Ms. Susan Almy, concerns Form 1120-H, U.S. Income Tax Return for Homeowners Associations.

[7] The quality of service that Ms. Almy received is a subject we take very seriously. Please extend our apology to Ms. Almy for any inconvenience and problems she experienced when trying to contact us. We assure you that the goal of IRS is to provide quality service to each of our customers.

[8] Comments, such as Ms. Almy's, provide valuable insight on ways to determine areas where improvements in our service are needed. Her suggestions for improving Form 1120-H will also be forwarded to the Tax Policy Coordinator at the Department of Treasury.

[9] As you know, at the core of our redesign is the concept of specialization, which will enable tailored training and enhanced expertise of our personnel. Our internet website (www.irs.ustreas.gov) is also available for tax forms, instructions, publications, and frequently asked tax questions.

[10] For your information, we are enclosing Form 1120-H and the instructions which explain its purpose, when to file, and how to correctly prepare the form. Section 528 of the Internal Revenue Code, which pertains to certain homeowners associations, is also enclosed. This code section currently allows a specific deduction of only $100.

[11] We hope this information is helpful. Thank you for sharing your constituents' letter with us. If we can be of further assistance, please contact Dianne Hickson at (215) 516-7696.

Sincerely,

Joseph H. Cloonan

Enclosures