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NTA Report Released: Essential Reading

Posted on Jan. 14, 2022

Earlier this week the NTA released the 2021 Annual Report to Congress (link to full report). The report also includes as a separate volume the 2022 Purple Book, which lists 68 legislative recommendations that focus on ways to strengthen taxpayer rights and improve tax administration.  Both the Annual Report and the Purple Book have separate appendices. For example, the Purple Report has an appendix featuring additional reference materials relating to its recommendations and a separate appendix detailing the considerable number of prior legislative proposals that have been enacted into law. For those wanting a quick snapshot, there is also a standalone Executive Summary that includes the preface from NTA Erin Collins.

The report has generated significant national media coverage, with that focus mostly on the Report’s situating issues facing taxpayers in the context of the considerable service problems the IRS has and continues to face. For example see NBC News’ Get ready for ‘frustrating’ tax season as IRS battles historic backlogs and staff shortages.

For people interested in tax administration, the NTA report continues to be a must read document. Most readers of PT need little reminder of IRS problems but the Report details in striking ways the decline in IRS resources and the concomitant reduction in service metrics and compliance activities.  We will undoubtedly revisit in detail some of the figures, but for purposes of this brief post I wanted to highlight two significant differences in this year’s report compared to prior annual reports.

First, the report contains a new feature, At a Glance,  which for the Ten Most Serious Problems “summarizes what taxpayers want from the IRS, explains why the problem is serious, and provides some key statistics.” This feature nicely brings attention to the highlighted problems, and provides ample justifications for the NTA’s proposed fixes.

Another welcome development is the Report’s discussion of Most Litigated Issues. In the past the discussion relied on commercial research that keyed in on published opinions issued by all federal courts (including Tax Court). This year, for Tax Court cases TAS added a new wrinkle, by looking not only at the court’s output but also reviewing the notices of deficiency relating to the petitions filed with the Tax Court. This allows for study of the approximately 28,000 petitions filed in FY2021, a number considerably higher than the 224 decided Tax Court opinions. (Of course many substantive Tax Court determinations come in published orders that do not find their way into opinions.) As the report notes, the change in methodology produced some differences as compared to prior years’ lists of  most litigated issues, with new topics including the American Opportunity Credit, the standard deduction, and issues relating to withholding.

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