Tax Notes logo

NTA Annual Report To Congress Issued Yesterday

Posted on Jan. 15, 2015

The National Taxpayer Advocate released its annual report to Congress yesterday. The report is in two volumes; the first volume lists most serious problems, provides legislative recommendations, and provides some workload information, including listing the most litigated issues over the past year and a breakdown of TAS activities.

The second volume discusses TAS research studies. The TAS research studies examine the population eligible to seek assistance from low income taxpayer clinics, the impact of audits on subsequent sole proprietor compliance behavior, and a statistical analysis of id theft case closings as of mid-year 2014.

The report discusses a number of issues that we featured in PT this past year, including a discussion of Byers v Commissioner and the issue of appellate venue in CDP cases (TAS recommends a legislative fix to tie venue to place of taxpayer residence); and a discussion of Ibrahim v Commissioner and filing status issues for taxpayers who file a petition to Tax Court (TAS recommends legislation that would “allow taxpayers who petition the Tax Court in response to a SNOD to change their filing status to MFJ in accordance with the practices and procedures of the Tax Court.”)

The TAS research study on sole proprietor compliance looks particularly interesting. Sole proprietor income underreporting  is by far the biggest contributor to the tax gap. The study suggests that the impact of audits on future years’ compliance is quite limited. I have not had the chance to read the research study though its summary of the impact of audits on future years’ compliance is sobering:

Our study findings suggest that overall IRS audits have a modest deterrent effect that diminishes in the years following the audit, disappearing altogether by year five . This suggests that any initial impact of the audit on compliance is short lived.

After we have the chance to read the report fully, we will likely discuss individual sections in further detail.

Copy RID