Complaints about IRS Forms, Voluntary Disclosure and Identity Theft

In its annual report to Congress, the National Taxpayer Advocate mentions a few key areas of complaint taxpayers have against the IRS. One of them involves the amount of time required to fill forms in compliance with IRS rules and regulations. It is estimated that individuals and businesses spend about 6.1 billion hours annually complying with tax filing requirements. The report says, “To consume 6.1 billion hours, the tax industry requires the equivalent of more than three million full-time workers.” This estimate is only set to grow this year. For fiscal year 2013, tax expenditures are projected to be $1.09 trillion, while individual income tax revenue is projected to be about $1.36 trillion.

Nina Olson, the National Taxpayer Advocate also wrote another point of contention in her report – the IRS Offshore Voluntary Disclosure Initiative (OVDI). The OVDI is meant to weed out those with taxable assets in offshore accounts and allow them to pay up their taxes with penalties but without criminal prosecution. But according to Olson, the OVDI punishes the guilty and the innocent. She wrote in her report that the OVDI’s one-size-fits-all approach does not differentiate between “bad actors” and “benign actors”. Olson said, “The program has caused excessive burden and fear for taxpayers who had reasonable cause for not filing FBAR (Foreign Bank and Financial Accounts) forms or whose failure to file was inadvertent.”

One more bad apple brought up in the National Taxpayer Advocate report is identity theft. At the end of the last fiscal year, there were almost 650,000 cases of identity theft involving social security numbers stolen to obtain fraudulent tax refunds. The report also reveals the shocking fact that the IRS takes at least 180 days to resolve these cases. What causes this slow process is the fact that the IRS changed from a centralized approach to 21 individual functions to work on identity theft cases, thinking that most cases involve just one issue a relevant specialized unit can handle efficiently.

If you have been cheated by a sleazy tax preparer, the IRS will issue you a tax refund if your tax preparer stole your refund via a paper check. But if the preparer committed the fraud by altering the bank routing number on a direct-deposit request, you won’t be getting your refund from the IRS.

If you’re baffled and angry about these matters, you are not alone.

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