[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
TAXPAYER ADVOCATE REPORT AND LOW-INCOME TAXPAYER CLINICS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
JULY 12, 2001
__________
Serial No. 107-32
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
74-412 WASHINGTON : 2001
COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Oversight
AMO HOUGHTON, New York, Chairman
ROB PORTMAN, Ohio WILLIAM J. COYNE, Pennsylvania
JERRY WELLER, Illinois MICHAEL R. McNULTY, New York
KENNY C. HULSHOF, Missouri JOHN LEWIS, Georgia
SCOTT McINNIS, Colorado KAREN L. THURMAN, Florida
MARK FOLEY, Florida EARL POMEROY, North Dakota
SAM JOHNSON, Texas
JENNIFER DUNN, Washington
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisories announcing the hearing................................ 2
WITNESSES
Internal Revenue Service, Nina E. Olson, National Taxpayer
Advocate....................................................... 6
______
Book, Leslie, Federal Tax Clinic, Villanova University School of
Law............................................................ 41
Cohen, Alan H., Low-Income Taxpayer Clinic, Ithaca College....... 31
Community Tax Aid, Inc., Jeffrey S. Gold......................... 60
Community Tax Law Project, Timothy B. Heavener................... 48
Rich, Dixon R., Jr., Low-Income Taxpayer Clinic, University of
Pittsburgh School of Law....................................... 36
Spragens, Janet, Federal Tax Clinic, Washington College of Law,
American University............................................ 53
SUBMISSIONS FOR THE RECORD
Center for Law & Human Services, Chicago, IL, statement.......... 71
Hood, Edwin T., University of Missouri-Kansas City School of Law,
letter......................................................... 72
Tharrington, Angel, University of North Carolina at Greensboro,
letter and attachment.......................................... 73
TAXPAYER ADVOCATE REPORT AND
LOW-INCOME TAXPAYER CLINICS
----------
THURSDAY, JULY 12, 2001
House of Representatives,
Committee on Ways and Means,
Subcommittee on Oversight,
Washington, DC.
The Subcommittee met, pursuant to notice, at 6:05 p.m., in
room 1100 Longworth House Office Building, Hon. Amo Houghton
(Chairman of the Subcommittee) presiding.
[The advisory and revised advisory announcing the hearing
follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON OVERSIGHT
CONTACT: (202) 225-7601
FOR IMMEDIATE RELEASE
July 3, 2001
No. OV-4
Houghton Announces Hearing on
Taxpayer Advocate Report and Low-Income
Taxpayer Clinics
Congressman Amo Houghton (R-NY), Chairman, Subcommittee on
Oversight of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on the Taxpayer Advocate report and
the Low-Income Taxpayer Clinic program. The hearing will take place on
Thursday, July 12, 2001, in the main Committee hearing room, 1100
Longworth House Office Building, beginning at 2:00 p.m.
Oral testimony at this hearing will be from invited witnesses only.
However, any individual or organization not scheduled for an oral
appearance may submit a written statement for consideration by the
Subcommittee and for inclusion in the printed record of the hearing.
BACKGROUND:
The position of Taxpayer Advocate was established by the 1996
Taxpayer Bill of Rights, replacing the original Taxpayer Ombudsman that
had been created by the Internal Revenue Service (IRS) in 1979.
Taxpayers suffering significant hardships or long delays can appeal to
the Taxpayer Advocate Service for assistance. The Taxpayer Advocate
must submit a report each year to the Committee on Ways and Means and
identify its objectives for the coming fiscal year.
Section 3601 of the IRS Restructuring and Reform Act of 1998
established a program to grant up to $6 million to low-income taxpayer
clinics. This program arose from a 1997 recommendation by the National
Commission on Restructuring the IRS that the IRS provide financial
assistance to these clinics. No clinic can receive more than $100,000
per year; the funds must be matched by private money and each clinic
must re-apply for a grant after three years.
In announcing the hearing, Chairman Houghton stated, ``The Taxpayer
Advocate Service is already showing great strength in providing an
independent voice for taxpayers. In addition, a true success story of
the IRS Restructuring Act is the funding for low-income taxpayer
clinics, which provide valuable assistance to taxpayers having problems
with the IRS.''
FOCUS OF THE HEARING:
Congress will review the Taxpayer Advocate report in order to
assess the mission and priorities for the upcoming year. The hearing
will also address the functioning and funding of the Low-Income
Taxpayer Clinic program.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect or MS Word format, with their name, address,
and hearing date noted on a label, by the close of business on
Thursday, July 26, 2001, to Allison Giles, Chief of Staff, Committee on
Ways and Means, U.S. House of Representatives, 1102 Longworth House
Office Building, Washington, D.C. 20515. If those filing written
statements wish to have their statements distributed to the press and
interested public at the hearing, they may deliver 200 additional
copies for this purpose to the Subcommittee on Oversight office, room
1136 Longworth House Office Building, by close of business the day
before the hearing.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. All statements and any accompanying exhibits for printing must
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or
MS Word format, typed in single space and may not exceed a total of 10
pages including attachments. Witnesses are advised that the Committee
will rely on electronic submissions for printing the official hearing
record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the
name, company, address, telephone and fax numbers where the witness or
the designated representative may be reached. This supplemental sheet
will not be included in the printed record.
The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press,
and the public during the course of a public hearing may be submitted
in other forms.
Note: All Committee advisories and news releases are
available on the World Wide Web at ``http://www.house.gov/
ways__means/''.
The Committee seeks to make its facilities accessible to
persons with disabilities. If you are in need of special
accommodations, please call 202-225-1721 or 202-226-3411 TTD/
TTY in advance of the event (four business days notice is
requested). Questions with regard to special accommodation
needs in general (including availability of Committee materials
in alternative formats) may be directed to the Committee as
noted above.
NOTICE--CHANGE IN TIME
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON OVERSIGHT
CONTACT: (202) 225-7601
FOR IMMEDIATE RELEASE
July 9, 2001
No. OV-4-Revised
Change in Time for Subcommittee Hearing
on Taxpayer Advocate Report and Low-Income
Taxpayer Clinics
Congressman Amo Houghton, (R-NY), Chairman of the Ways and Means
Subcommittee on Oversight, today announced that the Subcommittee
hearing on the Taxpayer Advocate Report and Low-Income Taxpayer
Clinics, previously scheduled for Thursday, July 12, 2001, at 2:00
p.m., in the main Committee hearing room, 1100 Longworth House Office
Building, will be held instead at 4:00 p.m.
All other details for the hearing remain the same. (See
Subcommittee Advisory No. OV-4 released on July 3, 2001.)
Chairman Houghton. Ladies and gentlemen, this is rather
abrupt, but I think we would like to start the hearing on the
Report of the Taxpayer Advocate of the Oversight Committee.
So would you all come up here. And, frankly, if it is all
right with you, Mr. Coyne, maybe we could all come up in terms
of the panel--Ms. Olson but also Professor Book and Professor
Spragens, Professor Rich and Professor Cohen and Mr. Heavner
and Mr. Gold. I don't know if you can all sit at that table,
but if you can, it would be great.
Again, I apologize very much. It was all Mr. Coyne's fault.
And we are going to start this thing and end it promptly.
What I would appreciate you doing, if you could, is if
there is anybody who has to leave early--I know Mr. Coyne has
to leave--that we will just put you right on after Ms. Olson.
So if that is OK, then why don't we just start. I have just
got a couple of comments to make.
I am delighted you all are here. I thank you for your
patience. These are important hearings. Particularly we are
going to review the report of the Taxpayer Advocate, who is
doing an absolutely outstanding job, Nina Olson. You all know
her. You know her reputation. She has done a great job.
Then, following Ms. Olson, we are going to have
representatives of low-income taxpayer clinics.
You probably know, if not, let me say that in 1998 Congress
recognized the need to provide assistance to taxpayers who are
not able to afford proper assistance when faced with
significant Internal Revenue Service (IRS) problems. So why
don't we go into our testimony; and, Ms. Olson, if you could
begin we sure would appreciate--oh, wait a minute, wait a
minute. I am sorry. Mr. Coyne has got a statement.
[The opening statement of Chairman Houghton follows:]
Opening Statement of Hon. Amo Houghton, M.C., New York, and Chairman,
Subcommittee on Oversight
Good afternoon. Our hearing today will review the report of the
Taxpayer Advocate and receive the views of individuals who run clinics
that assist low-income taxpayers. While these are two distinct programs
within the Internal Revenue Service, they share the common goal of
assisting taxpayers with the maze of laws, regulations and procedures
of our income tax system.
Our first witness, the Taxpayer Advocate, Nina Olson, also provides
a unique bridge between the activities of the Taxpayer Advocate Service
and the performance of Low-Income Taxpayer Clinics. Ms. Olson was a
leader in the low-income tax world, having established the first clinic
some nine years ago.
We value the mission of the Taxpayer Advocate Service--that of
advocacy on behalf of taxpayers. While working within the IRS
structure, we expect Taxpayer Advocates to be a strong voice for the
little guy. And we expect the IRS Commissioner and the other functional
units in the IRS to listen to the recommendations of the Taxpayer
Advocate.
Your key goals, advocating changes in tax law or procedures that
reduce taxpayer burden, and assisting taxpayers in resolving problems
with the IRS, are ones that we in Congress, on a bipartisan basis,
strongly support. We look forward to working with you in achieving your
mission.
Our second panel today is comprised of representatives of Low-
Income Taxpayer Clinics. In 1998, Congress recognized the need to
provide assistance to taxpayers who are not able to afford proper
assistance when faced with significant IRS problems.
The low-income taxpayer clinic program provides grants to law,
business, or accounting schools, or to nonprofit groups providing tax
assistance. This funding, a total of only $6 million from the IRS
budget, and limited to matching private funds up to $100,000 per clinic
per year, enables low-income taxpayers to receive appropriate
representation when faced with disputes with the IRS. In addition, the
clinics provide important tax information to individuals for whom
English is a second language.
I'm very pleased that one of our witnesses today is Professor Allen
Cohen, representing the Ithaca College Low-Income Taxpayer Clinic. This
clinic serves many taxpayers in my district in New York, and I
appreciate your important work.
Many of our hearings and the daily stories in the papers focus on
problems with the Internal Revenue Service. The IRS does have problems,
but today we are pleased to talk about two successes--the Taxpayer
Advocate Service and Low-Income Taxpayer Clinics.
I am pleased to yield to our ranking Democrat, Mr. Coyne.
Mr. Coyne. Mr. Chairman, I just would like to submit a
statement for the record so we can move along with the hearing.
Chairman Houghton. OK. Fine.
[The opening statement of Mr. Coyne follows:]
Opening Statement of Hon. William J. Coyne, M.C., Pennsylvania
As Ranking Member of the Subcommittee on Oversight, I want to
welcome Ms. Nina Olson to today's hearing. Ms. Olson is the Internal
Revenue Service's new Taxpayer Advocate and an articulate spokesperson
for taxpayers in need of assistance. It is particularly appropriate
that her testimony is followed by distinguished representatives of low-
income tax clinics throughout the country. Ms. Olson is one of the
country's best known advocates of low-income taxpayer assistance and an
excellent choice to head the IRS National Taxpayer Advocate's Office.
As a Member of the IRS Restructuring Commission, I remember well
our discussions about how fairness dictates that all taxpayers have
access to professional assistance in resolving their tax controversies
with the IRS. Too often simple IRS notices or minor amounts of taxes
due can turn into complicated and expensive tax problems. Many
taxpayers do not know how to navigate the multi-faceted IRS system.
This is particularly true for those who cannot afford to hire
accountants or are not proficient in English. This is why I urged the
IRS Commission and the Ways and Means Committee, in adopting the 1998
IRS Restructuring and Reform Act, to include special matching funds for
tax clinics to serve those in need.
The tax clinic program has been in place now for three years and,
by all reports, it has been a great success. The grants for low-income
clinics have grown each year and, for fiscal year 2001, are funding
over 102 clinics at a total cost of $6 million. This is a program that
deserves our support.
I am personally proud that two universities located in Pittsburgh,
Pennsylvania, are operating low-income tax clinics. The University of
Pittsburgh School of Law and the Duquesne University School of Law are
recipients of low-income tax clinic grants, and they are doing a great
job. I want to personally welcome Mr. Dixon Rich, from the Pittsburgh
Law School clinic. Professor Rich and Clinic Director Martha Mannix
have been instrumental in providing my constituents with top-rate
assistance in handling IRS tax problems.
I also want to thank Subcommittee Chairman Houghton for arranging
this hearing. Oversight of IRS programs is one of the most important
things this Subcommittee does. There is much we can learn from our
hearing witnesses today. In reviewing operation of the tax clinic
program, I look forward to our discussion of:how the program can be
improved,what low-income tax clinic taxpayers find most difficult in
complying with our tax laws, andwhich tax code provisions could be
simplified to reduce complexitytaxpayer confusion, and unnecessary
dealings with the IRS
This information will be particularly helpful during the
Subcommittee's joint hearing next week on tax simplification.
Thank you.
Chairman Houghton. Would anybody else like to--would you
like to say something?
OK. Good. So what I would like to do is if I could call on
Ms. Olson first, and then I will go right to Alan Cohen. All
right. Thank you very much.
STATEMENT OF NINA E. OLSON, NATIONAL TAXPAYER ADVOCATE,
INTERNAL REVENUE SERVICE
Ms. Olson. Mr. Chairman and Members of the Committee, thank
you for inviting me here today to discuss the Taxpayer Advocate
Service's (TAS) plans for fiscal year 2002.
First, I would like to thank you for your support and
guidance that the Subcommittee has given me personally and the
Taxpayer Advocate Service collectively. Your interest
encourages us to meet our goals as defined by the Restructuring
Act.
What is the Taxpayer Advocate Service's mission? section
7803 sets out four objectives. Only one of those objectives
addresses direct casework. The other three involve advocacy
about systemic problems.
TAS, as we call the Taxpayer Advocate Service, is first
charged with helping taxpayers resolve their problems with the
IRS. I find it very interesting that Congress does not direct
TAS to actually do the problem solving. That is the difference
from the former problem resolution program, where problem
resolution officers actually made decisions on cases, pursuant
to the district director's authority.
With the independent reporting structure of TAS under the
National Taxpayer Advocate, TAS employees derive their
authority from the statute and from the National Taxpayer
Advocate.
What powers--or authorities--do the Taxpayer Advocate
Service employees have to accomplish its mission?
First, we have the ability to issue Taxpayer Assistance
Orders. Under 7811 we can order the IRS to cease an action or
to take an action. As best as I can determine, these actions
are limited to procedural provisions. That is, a TAS employee
can stop a levy if it will create a significant hardship, but
he or she cannot order a revenue officer to accept a particular
offer in compromise or require a revenue agent to reach a
specific result in an audit. We can only ask them to review the
case and consider our recommendations.
In addition to our statutory authority, the Commissioner
has determined that it makes good sense for TAS employees to
actually resolve simple repetitive or routine cases. I believe
that this combination of statutory and what we call delegated
authorities enables TAS to help taxpayers resolve their tax
problems without turning the Taxpayer Advocate Service into a
shadow IRS.
I must stop here, however, to acknowledge that there is a
missing link in the tax system. There are cases where the IRS
cannot correct its errors or mistakes because the laws prevent
us from doing so. This happens in all legal systems; and where
the remedy at law fails or is insufficient, equity steps in.
Such a remedy would be unique in a tax administration system. I
believe, however, that Congress should vest the Commissioner
with that authority to render equitable relief in instances of
hardship where the IRS has committed a wrong that shocks the
conscience of all taxpayers if it went uncorrected. It may also
be appropriate to authorize the National Taxpayer Advocate to
recommend such relief to the Commissioner and to investigate
the proposed possible hardship. We are working on this proposal
and hope to include it in our December report to you all.
The pressures on TAS to assume more and more responsibility
for actually deciding taxpayer cases is illustrated by our
recent inventory study. This study demonstrates that for fiscal
year 2000 and year to date 2001 over 80 percent of the cases
that came to TAS during that period arrived because of the
Service's failure to timely act or because of some other
systemic failure. It is stunning to me that so much of our
inventory consists of essentially overflow from the Service's
operating divisions.
There are many reasons for this predicament. First and
foremost is the issue of resources. Our study indicates that
when IRS examination or collection employees are pulled away
from their regular duties, as they have been in the last few
filing seasons when they fill in on phones or walk-in sites,
cases back up in operating divisions and ultimately end up in
TAS. With the stable initiative, we expect the situation to
improve.
A second reason for the overflow is a historical lack of
attention to planning around normal business cycles. It is my
opinion that in the past planning for examination and
collection initiatives occurred in somewhat of a vacuum. For
example, the Service might plan to send out deficiency notices
on December 29th. This notice gives the taxpayer 90 days to
file in Tax Court to protest a proposed assessment. The
taxpayer can call the IRS during the 90-day period to attempt
to resolve the case. But the 90-day period occurs during filing
season when our phone traffic is greatest. So the taxpayer is
unable to reach the IRS, doesn't file in Tax Court because they
are scared and ultimately ends up in TAS after the 90 days.
This situation could be avoided with more careful IRS planning.
I am pleased to report that TAS has gotten the attention of
the IRS on this issue. TAS representatives are now regularly
included in task forces, compliance initiatives and employee
meetings. For example, we are active participants in the recent
offer in compromise designed task force and are participating
in the exam reengineering design team.
The TAS inventory study enables us to present the operating
and functional divisions with concrete information that they
can incorporate in their planning processes.
Recently, we provided Wage and Investment with inventory
figures on a particular area called uncontrolled
correspondence. Taxpayer correspondence is controlled when we
receive it at the IRS and enter it on our document retrieval
system. When an item is entered on that system taxpayers can
call the IRS and we can tell where it is and check on the
processing of that document, where it is in the IRS. If
correspondence is uncontrolled, we can only tell that it has
been received and we can't answer any taxpayer questions. These
cases fall out to TAS.
As a result of us showing the Wage and Investment Division
what was happening with TAS receipts in response to their
uncontrolled correspondence, Wage and Investment improved their
controlled correspondence by 15 percent through the first 6
months of the fiscal year. We were then able to see a 10-
percent decline in TAS uncontrolled correspondence cases. This
direct correlation came from our working off of our inventory
study.
We are currently providing monthly inventory updates to the
operating divisions and will continue to use that data to
encourage them to handle their cases better and prevent them
from coming to TAS.
I believe that the Taxpayer Advocate Service needs to
better articulate the nature of its advocacy. We are often the
first people in the IRS to hear the taxpayer out in full. We
can help the taxpayer work through the maze of IRS procedures
and functions; we can assess the merits of the case and make a
recommendation about the disposition of the case. If we feel
the IRS is not responding appropriately to the taxpayer
situation, we can keep advocating, raising the issue up through
the Service to highest levels; and, most importantly, if we and
the rest of the Service are unable to offer the taxpayer relief
because of an administrative or legislative impediment, we can
advocate to the IRS or to you in Congress for administrative or
legislative change.
These tasks require discipline, vision and dedication. I
believe that the employees of the Taxpayer Advocate Service
possess all three qualities.
Thank you.
Chairman Houghton. Thank you very much.
[The prepared statement of Ms. Olson follows:]
Statement of Nina E. Olson, National Taxpayer Advocate, Internal
Revenue Service
THE NATIONAL TAXPAYER ADVOCATE'S FISCAL YEAR 2002 OBJECTIVES REPORT TO
CONGRESS
BACKGROUND
The Internal Revenue Service Restructuring and Reform Act of 1998
(Public Law 105-206, ``RRA 98'') requires the National Taxpayer
Advocate to submit semiannual reports to the House Ways and Means
Committee and the Senate Finance Committee. The reports must be
submitted directly to the Committees without any prior comment from the
Internal Revenue Commissioner, the Secretary of the Treasury, any other
Treasury officer, or the Office of Management and Budget. The first
report, to be submitted by June 30 of each year, must identify the
objectives of the Taxpayer Advocate Service for the fiscal year
beginning in that calendar year. This report is submitted in accordance
with Internal Revenue Code (IRC) Section 7803(c)(2)(B)(i); it details
the activities and objectives planned by the Office of the National
Taxpayer Advocate for Fiscal Year 2002.
INTRODUCTION
In his Fiscal Year 2001 Objectives Report to Congress, National
Taxpayer Advocate W. Val Oveson identified six major objectives for the
Taxpayer Advocate Service (TAS). These objectives encompass a broad
array of activities. The objectives derive from TAS' Congressional
charge, found in IRC Section 7803(c)(2), to assist taxpayers in
resolving problems with the Internal Revenue Service (IRS), and to
identify and propose administrative or legislative solutions to those
problems arising from taxpayer dealings with the IRS. These objectives
are set forth in Appendix I.
Since assuming the position of National Taxpayer Advocate on March
1, 2001, I have worked to refine TAS' strategic goals in order to
implement the objectives described above. The Taxpayer Advocate Service
identified several major strategies, operational priorities, and
improvement projects for fiscal years 2002 and 2003 as part of the
Service's strategic planning process. TAS' four major strategies for
fiscal years 2002 and 2003 are as follows:
Advocate changes in tax law or procedures that reduce
taxpayer burden and improve IRS effectiveness;
Identify significant sources of TAS casework and work with
the Operating Divisions on strategies to reduce inappropriate
TAS workload;
Improve TAS' ability to identify and respond to taxpayer
concerns; and
Ensure that the human resources component of the Taxpayer
Advocate Service is adequate to meet its workload demands.
I submit for your review and comment, in the pages following,
reports of various TAS operational areas and programs that address
these major strategies. I include descriptions of our current and
future plans for case processing (including the delegation and
implementation of additional case resolution authorities); systemic
advocacy (including the Annual Report to Congress); human resources
(staffing and training); toll-free telephone access to TAS caseworkers;
communications and liaison (internal and external outreach and
publicity); and citizen advocacy panels.
I believe these activities present a clear picture of the nature
and scope of the Taxpayer Advocate Service's efforts to assist
taxpayers resolve tax problems, be they individual cases or systemic in
nature. However, I have also identified several themes for fiscal year
2002 which bridge all of the Taxpayer Advocate Service's operations and
which speak to its fundamental mission of advocacy on behalf of
taxpayers. Each of these inquiries will assist the Taxpayer Advocate
Service in developing a definition of advocacy, a code of practice for
its employees, and an understanding of its underlying, or core, values.
Some of the issues we expect to explore during fiscal year 2002 and
thereafter include:
What does it mean to be a taxpayer advocate within the
Internal Revenue Service? Congress charged the National
Taxpayer Advocate and her employees with assisting taxpayers to
resolve their tax problems. Under what circumstances may a
taxpayer advocate refuse to accept a case or say ``no'' to a
taxpayer? Should a TAS employee advance a taxpayer's position,
regardless of its merits? At what point should a taxpayer
advocate accept the Internal Revenue Service's determination in
a given case and cease to advocate on behalf of the taxpayer?
What is the extent of the National Taxpayer Advocate's (and
her delegatees') authority to resolve taxpayer problems? Are
TAS employees merely facilitators or mediators between
taxpayers and other IRS functions? Should they be authorized to
render substantive determinations in taxpayer cases? What role
should TAS play in taxpayer examinations that are open in other
IRS operating divisions?
What is the appropriate composition of TAS inventory
according to hardship criteria? As a general rule, should TAS
receipts reflect a predominance of financial hardship cases
over those involving a delay of more than 30 days over normal
processing time? In achieving the appropriate balance, what
efforts should TAS undertake to reach out to taxpayers who have
given up on their cases or who have fallen between the cracks
of our tax administration system?
What standards of practice should TAS employees be held to?
Should we zealously advocate for a taxpayer's position or
temper our representation with objectivity and independence?
When should Local Taxpayer Advocates keep taxpayer contact or
communications confidential from the rest of the Service? To
whom do TAS employees owe a duty of care?
What is the appropriate measure of the Taxpayer Advocate
Service's performance and success? Should casework be measured
by the number of cases closed, or the number of days it takes
to complete a case, or the decline in the number of cases
received? Should advocacy be measured by the number of Taxpayer
Assistance Orders or Taxpayer Advocate Directives issued, or
the number of advocacy projects started (or completed), or the
number of legislative recommendations adopted, or the inclusion
of TAS representatives in IRS planning meetings, task forces,
and other initiatives?
Fiscal Year 2002, then, will witness the beginning of the Taxpayer
Advocate Service's exploration of its core values. We will conduct this
inquiry using a number of methods including:
internal dialog within the Taxpayer Advocate Service;
discussions with other IRS employees, managers, executives,
and the National Treasury Employees Union;
presentations to and discussions with members of Congress
and their staffs, and with taxpayers, tax practitioners, and
other professionals;
analysis of TAS' casework and methodologies; and
examination of the standards of practice to which external
taxpayer advocates adhere.
I do not expect that the Taxpayer Advocate Service will answer
these questions during fiscal year 2002. I do, however, anticipate that
TAS will undertake this inquiry and that we will be open to new
approaches and models, even as we affirm old ones. The Taxpayer
Advocate Service will evolve its own standards of practice, to which
its employees can both aspire and adhere. I am honored to be a
participant in this process, and I look forward to reporting to you in
the future about our progress toward these goals. In the sections that
follow, I believe you will see how the Taxpayer Advocate Service plans
to establish a foundation for success in this exciting endeavor.
TAXPAYER ADVOCATE SERVICE CASEWORK
Derivation of TAS Authority
Prior to the creation of the Taxpayer Advocate Service as a
separate and independent function within the Internal Revenue Service,
cases involving significant taxpayer hardship were addressed through
the Service's Problem Resolution Program (PRP). Problem Resolution
personnel were located in each district, region, and service center, as
well as in the National Office. Although in most instances the Taxpayer
Assistance Order (TAO) authority provided in section 7811 of the Code
was delegated to Problem Resolution caseworkers, in practice this
authority was not the basis upon which the vast majority of taxpayer
issues and problems were resolved.
Generally, Problem Resolution personnel were district or service
center employees. They did not report to the Taxpayer Advocate or the
Taxpayer Ombudsman but to the individual district or service center
director for their post of duty. Since district directors were
delegated broad authority to address, administer, and enforce the
internal revenue laws, employees of the district (including Problem
Resolution personnel) were able to resolve many taxpayer issues based
on the authority delegated to the district or center director,
irrespective of it being specifically related to a position
description.
Many people, both within and outside the IRS, believe that Problem
Resolution personnel exercised their authorities as a function of their
positions as Problem Resolution caseworkers. In actuality, these
authorities (except those described in IRC Section 7811) derived from
the reporting relationship of the employee to the district or center
director, and the director's authority to enforce and administer the
internal revenue laws. The ability of a Problem Resolution caseworker
to address substantive issues of the taxpayer or to take certain
administrative actions not currently available to the Taxpayer Advocate
Service (TAS) was unrelated to his or her PRP status, but rather a
function of his or her status as a district or center employee.
Congress changed the Taxpayer Advocate Service's organizational
reporting structure in RRA 98 in order to ensure an independent
problem-solving function within the IRS. The prior IRS Problem
Resolution Program was replaced by a system of local and area Taxpayer
Advocates who report directly to the National Taxpayer Advocate--the
Taxpayer Advocate Service.
Beginning in 1998, the structure of the entire IRS changed.
Authorities that were delegated to the various field components of the
Service responsible for administration and enforcement processes
(district directors and service center directors) are now delegated to
the Operating Division within the Service responsible for administering
those issues (Wage and Investment, Tax Exempt/Government Entities,
Small Business/Self Employed, and Large and Mid-Sized Business).
Taxpayer Advocate Service employees are not included in this delegation
chain, since Congress mandated that TAS employees report to the
National Taxpayer Advocate.
The Taxpayer Advocate Service's Authority Today
Under the new IRS reorganization, the National Taxpayer Advocate
(NTA) possesses certain statutory authorities that enable her to assist
taxpayers who are experiencing or are about to experience a significant
hardship. These include the authority to issue a Taxpayer Assistance
Order (TAO), either ordering the IRS to take an action or to cease an
action (a ``direct'' TAO) or ordering the IRS to review a decision
already or about to be made (a ``review'' TAO). TAOs may be issued by
the NTA, taxpayer advocate area directors, and local taxpayer
advocates. TAOs are reviewable by the Commissioner, Deputy
Commissioner, and National Taxpayer Advocate.
The Commissioner has delegated to the National Taxpayer Advocate
the authority to issue a Taxpayer Advocate Directive (TAD), addressing
a system-wide administrative or procedural problem affecting many
taxpayers. The TAD must address a process or procedure that creates
undue burden, infringes upon the rights of taxpayers, or results in
inequitable treatment of taxpayers. The National Taxpayer Advocate has
the sole authority to issue a TAD. TADs are reviewable by the
Commissioner and Deputy Commissioner of Internal Revenue.
Absent any other delegation of authorities from the Commissioner of
Internal Revenue, the ability of the National Taxpayer Advocate or her
employees to act on behalf of taxpayers is limited to those actions
described in these statutory authorities. Since the establishment of
the Taxpayer Advocate Service in RRA 98, the Commissioner has delegated
to the National Taxpayer Advocate numerous authorities relating to
procedural resolution of taxpayer problems. The NTA has, in turn,
redelegated them to TAS employees.
On January 17, 2001, the Commissioner delegated the accounts
management authority of the Customer Service function to the National
Taxpayer Advocate. The NTA will redelegate these authorities, contained
in the Internal Revenue Manual, to TAS employees at the beginning of
fiscal year 2002, following an intensive all-TAS training program
during the late summer and early fall of 2001. These authorities enable
TAS employees to perform many of the Customer Service related functions
on routine cases that do not involve substantive determinations and
thereby provide more efficient service to taxpayers.
It is a misnomer to describe the Taxpayer Advocate Service's
authority to resolve taxpayer problems as ``merely'' procedural. While
it is true that Taxpayer Advocate Service employees cannot and should
not make substantive determinations in cases, they can still influence
the outcome of a case. TAS employees can make sure that IRS employees
making the substantive determination have all of the information
necessary for making an informed decision. They can also make a
recommendation of an appropriate resolution to the deciding employee.
Finally, if the TAS employee believes that another function reached an
incorrect result, the employee can continue to discuss the case with
that function, including managers, and ultimately elevate it up to the
National Taxpayer Advocate.
TAS employees have the ability and obligation to advocate on behalf
of taxpayers, to the extent appropriate for each case. The Taxpayer
Advocate Service will undertake a program-wide analysis of ``advocacy''
during fiscal year 2002. We will develop training materials and
workshops that highlight advocacy, case preparation and presentation,
conflict management, and negotiation skills.
The Taxpayer Advocate Service must not set itself up as a second
IRS. We cannot, through our desire to resolve individual cases, become
an accomplice to masking and sustaining systemic problems. Advocacy
sometimes entails stepping back and taking a broader view of the
situation and proposing a system-wide solution. The National Taxpayer
Advocate believes that this approach is authorized by Congress in IRC
Sections 7803 and 7811.
National Customer Service Agreements
Taxpayers turn to the Taxpayer Advocate Service for relief when
Internal Revenue Service processes and procedures do not work as
intended. The National Taxpayer Advocate is committed to providing
immediate assistance and to working with IRS Operating and Functional
Divisions to improve service to taxpayers.
During fiscal year 2001, the Taxpayer Advocate Service developed a
template for agreements that we propose to enter into with each of the
divisions with regard to the processing of TAS cases by Operating and
Functional Division employees. These National Customer Service
Agreements will clearly define the roles and responsibilities of all
individuals involved in TAS casework.
The Taxpayer Advocate Service expects that these agreements will
help to ensure consistency with both taxpayer treatment and case
processing. We also hope to establish uniform standards for the
processing of work when TAS employees do not have the delegated
authority to effect a complete resolution of the taxpayer's problem. We
believe that the National Customer Service Agreements will enable us to
measure our performance against defined expectations and standards. We
plan to negotiate, execute, and implement these agreements during
fiscal year 2002.
The Taxpayer Advocate Service is currently operating in an
environment where there are numerous local agreements for processing
cases but no one consistent vehicle to provide direction to all
employees throughout the Internal Revenue Service. In crafting the
National Customer Service Agreements, we plan to review the existing
local agreements and determine the best practices for different types
of cases and procedures. These best practices will be incorporated into
the National Customer Service Agreements.
There may be instances when the National Customer Service
Agreements do not meet the specific needs of local areas. In these
cases, we will work with the local areas and the Operating and
Functional Divisions to develop site-specific procedures. We will also
continue to review the National Customer Service Agreements to ensure
that we are handling taxpayer cases in the most expeditious and
accurate manner possible.
TAS ADVOCACY INITIATIVES
Casework is only one aspect of the Taxpayer Advocate Service's
activities. TAS is also charged with advocating for systemic changes
that will help resolve taxpayer problems. Internal Revenue Code Section
7803 requires the Taxpayer Advocate Service to identify areas in which
taxpayers experience problems with the IRS and to propose possible
administrative and legislative changes that may mitigate such problems.
The Taxpayer Advocate Service's advocacy function, which culminates
annually in the National Taxpayer Advocate's Activities Report to
Congress, is not divorced from the TAS casework component. Our casework
frequently helps us identify specific problems that affect a large
number of taxpayers which can only be solved at the operating division
or Service-wide level or through legislative changes. The TAS Inventory
Study, discussed in this Report, is a valuable tool for advocacy as
well as case and personnel management.
Operating Division Taxpayer Advocates
The TAS advocacy function is primarily conducted by advocacy
analysts reporting to two Operating Division Taxpayer Advocates
(ODTAs), who in turn report to the ODTA Executive. Each Operating
Division Taxpayer Advocate is responsible for issues arising in two of
the four Operating Divisions--Wage and Investment/Tax Exempt Government
Entities and Small Business Self-Employed/Large and Mid-sized
Businesses.
Operating Division Taxpayer Advocates are responsible for
identifying and raising the awareness of systemic issues within IRS
Operating and Functional Divisions that impact taxpayers. They work
with the Operating and Functional Division managers to determine the
best solutions for systemic problems and to build support for
initiating changes in policies and procedures to resolve those
problems.
Advocacy Analysts are located in various TAS offices throughout the
nation. They work with the Operating and Functional Divisions to
identify and analyze the root cause(s) of taxpayer problems. They also
support joint advocacy projects and efforts. The advocacy analyst's
ultimate objective is to prevent or reduce taxpayer burden, represent
taxpayer interests during the decision-making processes, improve
customer service, and address inequitable treatment of taxpayers.
All Taxpayer Advocate Service employees are encouraged to identify
potential advocacy issues and submit advocacy suggestions to the
appropriate Operating Division Taxpayer Advocate. The ODTA staff
screens the suggestions for quality and currency; suggestions are then
entered into a tracking database. Suggestions may be assigned to an
advocacy analyst or referred to the appropriate Operating or Functional
Division for further action. The ODTA staff monitors and reports on
project activities in a variety of ways; examples include:
Advocacy projects are tracked using the Service-Wide Action
Plan (SWAP) database system. ODTA advocacy analysts use the
system to establish project plans, update project information,
and monitor project status. Advocacy analysts across the
country can access the database.
Advocacy analysts use the SWAP system data to prepare
project status reports for the ODTA Directors and Executive
Director and the National Taxpayer Advocate. ODTA Directors
also use the system to submit quarterly updates as part of the
Business Performance Review System (BPRS). The NTA briefs the
Commissioner on the information included in BPRS reports.
Taxpayer Advocate white papers, position papers involving
administrative or legislative recommendations that address
taxpayer problems, are issued intermittently in response to
issues arising outside the Annual Objectives Report cycle.
The Taxpayer Advocate Service also receives many legislative
proposals from TAS and IRS employees as well as from taxpayers, the
Citizen Advocacy Panels (CAPs), and the tax practitioner community. The
team that prepares the Annual Activities Report to Congress reviews the
proposed legislative recommendations and further develops suggestions
that address tax law complexity, taxpayer equity, or taxpayer burden.
Annual Activities Report to Congress
The National Taxpayer Advocate is required to report to Congress at
the end of each calendar year about its activities for the past year.
Among other items, this report must contain a summary of the 20 most
serious taxpayer problems and the 10 most litigated tax issues. This
report also provides recommendations for resolving or mitigating those
problems and compliance burdens through either administrative or
legislative action. IRC Section 7803(c)(2)(B)(ii).
The 2001 Annual Activities Report to Congress will reflect some
changes in approach from previous reports. For example, we will present
two lists of the 20 most serious taxpayer problems. We will draw one
list from the Taxpayer Advocate Management Information System (TAMIS)
which will indicate the 20 issues (broadly defined) about which
taxpayers most frequently request help from the Taxpayer Advocate
Service. Our second ``Top 20'' list will be developed by a team of TAS
advocacy and casework employees. This list will be drawn from the
collective knowledge and experience of TAS employees.
We will report on our legislative and administrative
recommendations in three ways. First, we will propose at least five
recommendations that address issues of broad taxpayer impact. We will
identify the number and categories of taxpayers affected and the
paperwork, processing, and compliance burdens associated with those
issues, both from the taxpayer and IRS perspectives. We will also
identify any privacy or business systems implications of these issues.
We will describe the operation and history (where appropriate) of each
of these provisions. Finally, we will submit a proposal to eliminate or
lessen the problem for taxpayers.
The second list of recommendations will include descriptions of
proposals that are currently under consideration by the Taxpayer
Advocate Service but are not yet developed to the level of a
recommendation. We believe this list is valuable because it identifies
issues that have already surfaced as problems but do not have a readily
achievable solution as of report publication. The Taxpayer Advocate
Service will continue to work on these issues. They may form the basis
of legislative recommendations in future annual reports or in TAS white
papers. We believe that by identifying the problems we will encourage
informed discussion about them and speed resolution.
The final list of recommendations will consist of brief proposals
that have been identified by TAS employees, IRS Operating or Functional
Division employees, tax professionals, or taxpayers as problems
requiring a legislative solution. The proposals included in this list
will all need further development; however, we hope that their
inclusion will stimulate interest and solicit additional information
and solutions from the public and the IRS.
The Taxpayer Advocate Service employees who are working on the
Annual Activities Report are approaching their work with one overriding
question in mind--what is the particular perspective or piece of
information that the Taxpayer Advocate Service can contribute to the
discussion that is unique to TAS? Clearly, Congress felt that the
Taxpayer Advocate Service could add something to Congress' own analysis
of taxpayer problems. Thus, we hope that the National Taxpayer
Advocate's 2001 Annual Report to Congress will not be a re-hash of old
solutions but will provide fresh insight, information, and experience
from the point of view of advocates who operate within the IRS.
TAXPAYER ADVOCATE SERVICE INVENTORY STUDY
Background
Understanding the Taxpayer Advocate Service case inventory is an
essential first step to accomplishing the Taxpayer Advocate Service's
strategic objectives. (See Appendix II.) During fiscal year 2001, we
conducted a study to determine the major components of TAS caseload and
the relationship between Operating Division inventories and TAS
receipts. The study results provide the framework for our fiscal year
2002-2003 strategic plans. In fiscal year 2002, we will continue to
update our study monthly to identify workload trends and emerging
issues. We will share this analysis with the Operating Divisions and
use the study to coordinate our approach to systemic problem solving.
Inventory Study Methodology
During fiscal year 2001, the Taxpayer Advocate Service convened an
inventory study task force. The task force members gathered report data
from TAS and Operating Division management information systems. They
captured TAS receipts by month for fiscal years 2000 and 2001. They
then linked TAS receipts to Operating Division inventories for the same
periods, using major issue codes. (Major issue codes are numeric codes
utilized on the Taxpayer Advocate Management Information System (TAMIS)
to indicate the major issue presented in each TAS case.) The task force
used data from Operating Division reports to capture receipts,
closures, and ending inventories. TAS focused on Operating Division
ending inventories because we believed that, as ending inventories
increase and age, taxpayers begin to turn to TAS for assistance.
The Taxpayer Advocate Service previously identified problems with
major issue code accuracy. The data reviewed by the task force
reflected these problems, and the team took steps to address the issues
in our study. The study team sampled 850 cases to test the accuracy of
the major issue codes assigned to the cases. In some instances, results
from this sample led to the reassignment of cases by major issue code
(for analysis purposes only).
We initially selected five program areas for review based on
perceived inventory problems and level of TAS impact:
1. Accounts Management (Adjustment) Correspondence,
2. Automated Underreporter (AUR),
3. Earned Income Tax Credit (EITC),
4. Innocent Spouse, andOffers in Compromise (OIC).
We established a correlation between IRS Operating Division ending
inventories and TAS receipts for fiscal year 2000. We wanted to see if
we could predict TAS workload receipts in important program areas based
on the inventory relationships.
We later expanded the study to address ten major categories of TAS
receipts/Operating Division inventory using fiscal year 2001 receipts:
------------------------------------------------------------------------
Continued from Fiscal Year 2000 Added for Fiscal Year 2001
------------------------------------------------------------------------
1. Accounts Management (Adjustment) 6. Audit Issues (Other than
Correspondence EITC)
2. Automated Underreporter (AUR) 7. Collection Issues, other
than Offer In Compromise (OIC)
3. Earned Income Tax Credit (EITC) 8. Other (Miscellaneous)
4. Offer In Compromise (OIC) 9. Processing Returns
5. Innocent Spouse 10. Refunds (Lost/Stolen/
Undeliverable)
------------------------------------------------------------------------
We continue to make predictions as we update our inventory study
data monthly. Using our current data, we are now able to identify
workload trends. Some trends are attributable to the normal IRS
workload shifts associated with filing season. Others reflect changes
in Operating Division programs and shifting staffing allocations. We
continue to refine our analyses as we gather additional data and
observe these trends.
Inventory Study Results
The results of the study provide data for TAS to use in achieving
our strategic objectives.
Identify Significant Sources of Taxpayer Advocate Casework. Current
data indicates that most taxpayer cases come to TAS as a result of
systemic or procedural problems (including delay) and not as the result
of significant hardship, threat of adverse action, irreparable harm, or
significant cost concerns--the issues that TAS is uniquely designed to
resolve. As illustrated in Figure 1, only 14 percent of cases meet
significant hardship criteria, as defined by IRC Section 7811(a)(2)(A),
(C), and (D). These cases are shown in Figure 1 as criteria codes one
through four. Cases in which the IRS did not achieve intended results
within expected periods comprise 80 percent of TAS receipts. These
cases are shown in Figure 1 as criteria codes five through seven.
[GRAPHIC] [TIFF OMITTED] T4412A.001
Figure 1
Major sources of TAS Inventory are shown in the Figure 2. We
identified a strong relationship between Operating Division workload
delays and TAS receipts in the fiscal year 2000 inventory study. First,
we found that the percentage of taxpayers likely to contact TAS for
assistance is much higher in cases in which taxpayer refunds are
delayed. Second, as inventories in the Operating Divisions increase
and/or age, there is a similar increase in TAS receipts.
[GRAPHIC] [TIFF OMITTED] T4412A.002
KEY
AUR_Automated Under Reporter
EITC_Earned Income Tax Credit
OIC_Offer in Compromise
Figure 2
The relationship between TAS receipts and adjustment inventories is
shown in Figure 3. As the inventory builds in the Operating Divisions,
TAS receipts build as well.
[GRAPHIC] [TIFF OMITTED] T4412A.003
Figure 3
Operations' improvements in service led to corresponding reductions
in TAS inventory receipts. The Wage and Investment Operating Division
achieved a 15 percent improvement in controlling taxpayer
correspondence in Adjustments for the first half of fiscal year 2001.
``Controlled'' correspondence is written taxpayer communication that is
received by the IRS, and entered onto the Integrated Data Retrieval
System (IDRS). Once an item is entered on IDRS, all employees with IDRS
access can identify that the correspondence has been received and is in
the queue for being worked. TAS experienced a corresponding 10 percent
reduction in Adjustments inventory receipts, even as Service-wide total
adjustments inventories increased. By entering taxpayer correspondence
into the IDRS database sooner, Wage and Investment is able to respond
directly to taxpayer follow-up inquiries instead of referring the case
to the Taxpayer Advocate Service.
The Wage and Investment Operating Division also achieved a
significant improvement in IRC Section 6015 (``Innocent Spouse'') case
processing by consolidating the program, strengthening communication
with taxpayers, and streamlining work processes. Innocent spouse claim
processing periods are lengthy in order to protect the rights of both
parties filing a joint return, therefore, program improvements are not
reflected quickly in TAS inventories. Even so, the Taxpayer Advocate
Service is already experiencing a 16 percent decrease in case receipts.
Work with IRS to Improve Service; Advocate Changes in Tax Law or
Procedures. TAS inventories are due, in part, to staffing shortages in
the Operating Divisions. As Operations workload ages due to staffing
shortfalls, taxpayers are negatively impacted.
The inventory study points to areas in which service can be
improved, whether through streamlining work processes, adjusting the
workload mix to minimize the impact of seasonal workload pressures on
taxpayers, or making legislative recommendations to improve program
administration. We are discussing the study with the Operating
Divisions and are exploring with them ways to improve service. In
fiscal year 2002, TAS will be able to identify each case's point of
origin by business unit (e.g. Wage and Investment or Appeals). The
ultimate goal is to provide better service to the public at the first
point of contact with the IRS thereby reducing the need for taxpayers
to come to the Taxpayer Advocate Service.
One area of mutual concern is the growing Earned Income Tax Credit
(EITC) inventory. This program, more than most, affects taxpayers whose
refunds are delayed. As the Operating Divisions continue to focus on
improving compliance in the EITC population, we expect a dramatic
increase in TAS receipts. Based on current fiscal year 2001 receipts
and aging inventories in the Operating Divisions, we predict a 50
percent increase in TAS EITC receipts. TAS and the Wage and Investment
Operating Division have agreed to work together to improve EITC audit
processes and procedures.
We have not assessed the potential impact of recent changes in tax
law in the EITC program, or changes recommended in the National
Taxpayer Advocate's Fiscal Year 2000 Annual Activities Report to
Congress, on future EITC inventories.
Ensure TAS Employees Can Meet Workload Demands; Improve Ability to
Respond to Taxpayer Concerns. The National Taxpayer Advocate believes
that current TAS staffing levels should be maintained during fiscal
years 2001 and 2002. I derive this conclusion from the TAS casework
levels projected in the inventory study. The projected levels were
based on our analysis of past receipts and adjusted for changes in
programs within the Operating Divisions.
While we do not expect the total numbers of receipts to change
significantly, we believe there may be a shift in the inventory mix and
in workload locations. As IRS consolidates programs such as Offers in
Compromise and EITC to specific sites, we may need to change the TAS
offices assigned to resolve the cases. We will analyze inventory and
predict workload shifts based on the Operating Divisions' program
strategies and workload consolidation plans.
Understanding the workload mix and the ways in which it is expected
to change will be useful in recruitment and training decisions. As the
workload shifts, training plans will be adjusted to fill knowledge and
skill gaps. Managers may need to recruit employees with the necessary
skills to meet new workload demands. Throughout fiscal year 2002 and
thereafter, TAS managers, executives, and Strategic Human Resources
staff, in partnership with the National Treasury Employees Union
(NTEU), can utilize the inventory analysis and predictions of workload
shifts to plan for employee recruitment and development.
Summary
This study suggests that the Taxpayer Advocate Service should
continue to monitor receipts by category to identify trends in
Operating Division inventories. Using this data, TAS will work with the
Operating Divisions throughout fiscal year 2002 to improve service,
which should ultimately reduce the number of cases that are transferred
to TAS due to service delays, or system or procedural problems. We will
continue to provide updates of the inventory study to TAS leadership,
interested Operating Division Commissioners, and NTEU.
TAS EMPLOYEE TRAINING INITIATIVES
Introduction
A highly skilled, well-trained workforce is key to the
accomplishment of the Taxpayer Advocate Service's mission. During
fiscal year 2002, we will focus on the development and execution of a
corporate approach to training and education. This effort, which will
incorporate both strategic and tactical initiatives, will ensure that
TAS employees are provided the skills and abilities they need to
perform their jobs and will also promote their professional development
and career progression within both TAS and the IRS.
Development of A Strategic--Multi-Year Training Plan
With the assistance of a contractor experienced in strategic
planning, we will design the first ever TAS four-year strategic
training plan. The plan will enable the Taxpayer Advocate Service to
develop employees in response to evolving customer and casework bases.
The plan will also allow us to recruit and retain those employees, by
demonstrating the organizational commitment to their professional and
personal development.
The multi-year training plan will include an annual TAS-wide
training meeting that will offer beginning and advanced training
programs for TAS employees. Session topics may included technical
skills, conflict management, case management, management techniques,
communications skills, ethics, stress management, Taxpayer Advocate
Management Information System (TAMIS), and the legislative process. The
TAS-wide program will be complemented by training sessions held at
local offices designed to address issues specific to those locales. TAS
will also coordinate with the other Operating and Functional Divisions
so that TAS employees can attend training programs offered by other
divisions.
The Taxpayer Advocate Service recently established a TAS training
advisory board with our collective bargaining partner, the National
Treasury Employees Union (NTEU). This board will assist in the review
and monitoring of the TAS training effort, the evaluation of training
priorities, and the crafting of training recommendations to the
National Taxpayer Advocate. Customer needs will be garnered from a
number of sources, including employee and customer satisfaction
surveys, input from taxpayers, and discussions with other Operating and
Functional Divisions. TAS Strategic Human Resources will review the
information and develop and deliver training effectively and
efficiently.
The TAS four-year strategic plan will:
Use computer technology to develop and maintain a well-
informed and trained workforce (E-learning). This IRS corporate
strategy aims to leverage technology to deliver 70 percent of
skills and competencies through E-learning by fiscal year 2007.
Monitor the creative, no-cost method for promoting employee
computer training piloted by the United States Postal Service.
Leverage limited TAS resources by combining our training
efforts with those of other IRS Operating and Functional
Divisions.
Explore the availability of out-service training offered by
both governmental (United States Department of Agriculture) and
private sector entities, and by professional associations
(e.g., Attorneys, CPAs and Enrolled Agents).
Design and conduct training initiatives to address the 20
most serious problems encountered by taxpayers, as identified
in the National Taxpayer Advocate's Annual Activities Report to
Congress.
Build plan flexibility so that TAS can be responsive to our
external customers, the taxpayers. For example, TAS may need to
pursue a multilingual initiative in order to improve access to
services for taxpayers with limited English proficiency. We may
need to develop and deliver training for IRS and TAS employees
so that they can better understand and respond to taxpayer
issues and questions. In addition, TAS employees may require
specific communications training to assist in taxpayer
outreach.
Coordinate with other divisions to crosstrain TAS and
Operating and Functional Division employees during formal
training sessions and Continuing Professional Education (CPE)
sessions.
Tactical Annual Training Plan
The Taxpayer Advocate Service will closely coordinate its tactical
annual training plan with the four year strategic training plan. The
annual plan will address current organizational and employee needs,
such as those involving technical components (e.g., IRC Section 6413)
and automation components (Taxpayer Advocate Management Information
System (TAMIS) and Integrated Case Processing (ICP) training), and
those necessary to accomplish our casework (the Executive
Correspondence Management System (ECMS) and core leadership skills).
Through its annual plan, TAS can assess the organization's ability
to address existing technical and programmatic training needs. The
Taxpayer Advocate Service will respond to current needs in TAS or in
other divisions, such as those evidenced around the delegation of
authorities training, and also be proactive with our customers,
internal as well as external.
In addition to incorporating component specific interests (e. g.
innocent spouse), the plan will:
Utilize available outservice training in order to free up
internal training development resources.
Expand the process of informing and educating the public
about their right to seek assistance through the Taxpayer
Advocate Service.
Continue the integration efforts with our Citizen Advocacy
Panels (CAPs).
Coordinate with Operating and Functional Divisions to
crosstrain TAS and Operating Division employees in the
development and delivery of training.
Develop and deliver training in response to congressional
legislation and/or executive direction.
Continue implementation of an employee training tracking
system so that every TAS employee's training and development
remains an organizational priority and is advanced.
The Taxpayer Advocate Service must provide its employees with the
requisite tools to accurately identify and respond to taxpayer
concerns. By setting training priorities, which reflect both corporate
goals and the needs of TAS employees and customers, the Taxpayer
Advocate Service will maintain a capable and informed workforce. These
TAS training initiatives are expected to yield improved business
results and better customer and employee satisfaction.
Nation taxpayer advocate TOLL-FREE line
NTA Toll-Free Line (1-877-777-4778)
In his Fiscal Year 2001 Objectives Report to Congress, the National
Taxpayer Advocate reported the expansion of the National Taxpayer
Advocate (NTA) Toll-free line. The NTA Toll-free line provides cost
free access to the Taxpayer Advocate Service for issues that have not
been resolved through the IRS' normal channels. The service is
available to taxpayers 24 hours a day, seven days a week.
Each call to the NTA Toll-Free line is screened by a customer
service representative to determine if the taxpayer's inquiry meets
Taxpayer Advocate Service criteria. If the call does not meet TAS
criteria, the call is transferred to an IRS employee with the
appropriate skills and training to answer the call. When the call does
meet TAS criteria, NTA Toll-Free customer service representatives try
to resolve the issue while the taxpayer is on-line. If they are unable
to resolve the case on-line, the call is transferred to the appropriate
local TAS office for resolution.
In fiscal year 2000, NTA Toll-Free customer service representatives
answered more than 295,000 calls. From October 1, 2000, through May 5,
2001, more than 243,000 calls have been answered. We continue to market
the program and educate taxpayers as to when it is appropriate to seek
assistance from the Taxpayer Advocate Service. Thus, we expect
increased NTA Toll-Free traffic during fiscal year 2002.
The NTA Toll-Free line continues to be staffed and managed by the
Wage and Investment and Small Business/Self-Employed Operating
Divisions. We gratefully acknowledge the Operating Divisions' ongoing
support for this service to taxpayers and the excellent work of the
customer service representatives who answer the calls. These employees
often provide the first meaningful step toward case resolution.
Toll-Free Access to individual TAS Caseworkers
Background
Customers of the Problem Resolution Program who were interviewed in
1994 using focus group interview techniques identified the following
customer expectations with respect to communications:
To be given the name of the contact person, and the direct
telephone number of that person. ``A single point of contact
was considered ``the single most important element in providing
high quality service.
To be kept advised of unexpected delays, recognizing that
the complexity or seriousness of the issue determines the
frequency of contacts
Our analysis of the focus group data indicated that taxpayers with
complex cases expect frequent updates, but that they recognize the cost
of employing people to place calls may be prohibitive. In addition, the
focus group data indicate that while taxpayers may be willing to
initiate an inquiry about the status of the problem, the cost of the
telephone call could be a factor in their decision to make such calls.
Taxpayers do not care if their problem is worked by a caseworker in
another city, as long as the resolution meets their expectations
``Most of the respondents said they prefer toll-free access to
the case worker, citing lengthy telephone calls and being
placed on hold as reasons.''
In 1999, the Taxpayer Advocate Service established and began
marketing a dedicated toll-free telephone number for taxpayers who need
assistance (the NTA Toll-free line). This number enables taxpayers to
initiate cost-free contact with TAS on issues or problems that meet
TAS' program criteria. In the current environment, once a taxpayer's
issue is accepted as a TAS case and a caseworker is assigned to resolve
it, the taxpayer must then pay for any subsequent telephone calls to
the caseworker.
Providing toll-free service to individual TAS caseworkers is a
logical extension of the services already offered by the Taxpayer
Advocate Service to help taxpayers to resolve their problems where
standard IRS procedures have failed or proven inadequate. Toll-free
access to assigned caseworkers is an especially critical factor in the
more complex cases, or when initial time estimates for case resolution
are inaccurate, leaving the taxpayer in the uncertain state of not
knowing what, if anything, is being done to resolve his or her
situation. The taxpayer will be less anxious if he or she can reach the
caseworker directly to provide additional information or to obtain a
case update. If a taxpayer is reticent to call the caseworker because
of long distance telephone charges, it impedes both communications and
taxpayer confidence in the process.
During the second half of fiscal year 2001, the Taxpayer Advocate
Service will begin a two month test in four offices to provide
taxpayers with toll-free access to the Taxpayer Advocate Service
caseworker assigned to their case. This service will relieve taxpayers
of the financial burden of making toll calls to resolve their tax
problems. The test will be completed in September 2001, and the results
evaluated relative to operational issues as well as the operational
costs and benefits, to determine whether toll-free service should be
extended to all TAS offices and customers. This project is included in
the Taxpayer Advocate Service's strategic plan for fiscal years 2002-
2003.
Projected Benefits of Providing Toll-Free Service to TAS Customers
The implementation of this proposal is projected to:
Remove a potential barrier to case resolution by providing
an additional, cost-free avenue of access for taxpayers to
their caseworker.
Reduce burden placed on taxpayers who incur long distance
telephone toll charges in the current environment.
Provide free access for customers who have no telephone
service and who would otherwise experience hardship in
contacting their caseworker.
Enhance both communications and the perceived "relationship"
between the two parties and thereby facilitate the resolution
of the issue being worked.
Streamline the service process by more efficiently
connecting the taxpayer requiring assistance with the IRS
employee who provides the assistance.
Relieve NTA toll-free assistors of the responsibility for
transferring taxpayers entering the current NTA toll-free line
to their caseworker thus reducing the perception among NTA
assistors that they serve as long-distance operators.
Test Objectives
The Taxpayer Advocate Service hopes to extend toll-free access to
TAS caseworkers in one-half of its field offices during fiscal year
2002. However, before we implement this program, we must address some
issues relating to costs and risks. We plan to resolve two specific
concerns through the fiscal year 2001 toll-free access pilot program:
Estimate overall costs of nationwide implementation;
identify hidden costs. An initial assumption of this test is
that the IRS is presently paying for long-distance phone
service when TAS customers ask caseworkers to call them back
(to avoid toll charges) or when the NTA toll-free call site
transfers callers to their caseworkers. Providing toll-free
service would reduce these `workarounds' and the telephone/
personnel costs associated with them would offset the cost of
establishing toll-free service. The test will attempt to
quantify the extent to which the costs incurred in the current
environment help to offset the cost of providing toll-free
service.
Identify risks and operational issues associated with
providing this service to TAS customers. Providing toll-free
access to caseworkers could result in negative outcomes. For
example, customers may take advantage of this service to
present issues unrelated to the TAS case. Such unintended
outcomes, if occurring with significant frequency, could
consume caseworker time, which could be spent on resolving
other, more pressing taxpayer issues. The test will therefore
develop and evaluate procedures that redirect taxpayers with
closed TAS cases back into the mainstream IRS functions.
Costs of Providing Toll-Free Service
If the test results indicate that there are net operational
benefits to providing toll-free service to caseworkers without any
significant offsetting problems, the National Taxpayer Advocate will
expand this service to all local TAS offices during fiscal years 2002
and 2003. As noted above, it is anticipated that offsetting savings
from reducing `workaround' situations (including eliminating
unproductive staff time and associated telephone charges) should
significantly reduce the cost of implementing a toll-free service.
Customer Service
Toll-free numbers for caseworkers will certainly increase taxpayer
access to the Taxpayer Advocate Service. However, toll-free access does
not eliminate TAS employees' obligation to provide their client-
taxpayers with regular updates and status reports on case progress.
During fiscal year 2002, the Taxpayer Advocate Service will continue
its review of TAS case processing and instructional materials to ensure
that employees are clearly instructed to contact taxpayers at
appropriate intervals during the case resolution process.
TAS COMMUNICATIONS STRATEGY
The Taxpayer Advocate Service's initial marketing campaign,
following the enactment of RRA 98, was primarily created to inform
individuals of our evolution from the former Problem Resolution Program
to the newly modernized Taxpayer Advocate Service. Implemented in March
2000, the initial campaign achieved ``brand recognition'' of the new
organization with both IRS employees and taxpayers. The Taxpayer
Advocate Service is also easily recognized within both the practitioner
and congressional communities.
In fiscal year 2000, The Taxpayer Advocate Service expanded its
outreach activities to the general public. Local Taxpayer Advocates
were required to develop outreach plans using demographic information
developed by internal research that identified potentially
underrepresented taxpayer populations.
The Taxpayer Advocate Service continues to search for the most
efficient and cost effective methods of reaching taxpayers who are most
in need of our services. Over the next two fiscal years, the Taxpayer
Advocate Service will undertake several initiatives that will heighten
public awareness of our services and offer them to the appropriate
individuals. We will also continue to analyze the impact of the IRS'
modernized organizational structure on TAS outreach strategies both
within and outside the IRS. A few of our initiatives are discussed
below:
During fiscal year 2002, the Taxpayer Advocate Service will
conduct formal research to determine markets where taxpayers
are potentially under-represented and most in need of our
services. We will build upon our fiscal year 2000 internal
research efforts and conduct external research with an
independent marketing firm. The resulting data, along with
updated demographic information, will be used to refine our
current marketing campaign.
The Taxpayer Advocate Service will develop an intensive
communications plan using various communications vehicles,
including television, radio, and print media. TAS will also
build a focused outreach strategy, both nationally and locally.
We will research the needs of our audience and tailor our
education and marketing campaigns accordingly. We will develop
specific communications plans for taxpayers who speak little or
no English or who have low literacy levels.
The Taxpayer Advocate Service will continue to increase
awareness among its internal and external partners of its
advocacy role. We will achieve this by communicating our
advocacy projects and successes through a variety of methods
including Congressional testimony, the Annual Reports to
Congress, collaboration with local Strategic Relationship
Management councils, and other IRS partners.
We plan to share, both internally and externally, the
actions taken to address the 20 most serious problems facing
taxpayers as identified in the National Taxpayer Advocate's
Annual Report to Congress. The Taxpayer Advocate Service will
place updated information on the IRS Web page, publish our
strategic assessment, and conduct liaison meetings informing
stakeholders of actions, successes, and challenges. By doing
so, we will demonstrate and communicate the value of each
individual's input and role in the effective administration of
the tax system.
During fiscal year 2002, the Taxpayer Advocate Service will
continue to partner with the IRS Operating and Functional
Division Commissioners to enhance and promote problem-solving
initiatives. We will support current efforts to educate IRS
employees about the Taxpayer Advocate Service's mission and
case criteria, through formal training, informal meetings, and
participation in various task forces.
As National Taxpayer Advocate, I will continue my practice of
appearing at meetings of Operating and Functional Division employees,
participating in panel discussions, and holding town hall meetings with
both TAS and other IRS employees. I will also continue to appear at
programs sponsored by practitioner groups as well as at Citizen
Advocacy Panel meetings. I will continue to make myself available to
the media so that I can communicate the Taxpayer Advocate Service's
mission as well as discuss specific issues we may be facing. Finally, I
will continue to meet with members of Congress to discuss matters of
concern to them or to taxpayers.
The Taxpayer Advocate Service believes its communications
strategy--of open access, outreach, and partnership--will ensure that
taxpayers who require our services will know where to find them. This
strategy should also result in appropriate referrals being forwarded to
our organization. We will strive to clearly define and communicate our
mission to taxpayers, to other IRS employees, to TAS employees, and to
tax practitioners.
TAXPAYER ADVOCATE SERVICE MANAGEMENT INFORMATION SYSTEM (TAMIS)
The Taxpayer Advocate Management Information System (TAMIS) is a
nationwide database designed to automate controlling and processing
Taxpayer Advocate Service cases. Taxpayer cases that meet TAS criteria,
as well as Congressional contact cases, are controlled on TAMIS. Once a
case is input, a taxpayer can call the National Taxpayer Advocate toll-
free number, or any of the local TAS offices, and be given the current
status of his or her case. All cases, both open and closed, are stored
on the database.
Employees can document cases on-line, which reduces the need to
keep paper copies of case histories. Employees can also indicate the
Next-Action-Date for a case. This function helps caseworkers deliver
customer service and aids inventory management.
TAS management officials use TAMIS to actively manage the case
inventory, to generate reports of program statistics (e.g., the number
of closed cases within a window of time), and to monitor TAS casework
balanced measures. TAMIS data is used to identify trends in casework
and is critical to our continuing TAS Inventory Study. Case-related
trends also help the Taxpayer Advocate Service identify advocacy issues
as well as technical training needs. Additionally, we use TAMIS data as
one tool in the identification of the 20 most serious taxpayer problems
included in the National Taxpayer Advocate's Annual Activities Report
to Congress.
Given the numerous uses for TAMIS information, it is absolutely
vital that TAMIS data be accurate. TAMIS' interface must be user-
friendly and the system must be designed so that it will capture the
appropriate data. We believe that our proposed fiscal year 2002 TAMIS
improvements will achieve these objectives.
Fiscal Year 2002 TAMIS Improvements
The TAMIS database is enhanced on an ongoing basis, often in
response to suggestions from our employees. We recently added new
fields in response to the changing structure of the Internal Revenue
Service. These new fields will track the Business Operating Division
point of case origin and the level of case complexity.
In fiscal year 2001, the Taxpayer Advocate Service convened a team
to improve the TAMIS data input instructions for our employees. The
instructions will be incorporated into the next revision of the
Taxpayer Advocate Handbook, Internal Revenue Manual (IRM) 13. In
addition to providing input instructions, we will give improved
directions regarding various major issue codes. We plan to develop and
conduct a training course during fiscal year 2002 that will focus on
key input fields and TAMIS instructions in IRM 13. Our training will
emphasize the importance of TAMIS data accuracy.
The Taxpayer Advocate Service's long-range goal is to change the
software application which runs TAMIS. Currently, we use a UNIX based
program. TAMIS will be moving to Oracle by December 2002. A redesign
team is currently meeting to develop the database. When this conversion
is completed, TAMIS will operate in a user friendly Windows environment
and have expanded data collection capabilities.
TAS-NTEU NATIONAL PARTNERING COUNCIL
The Taxpayer Advocate Service and the National Treasury Employees
Union (NTEU) have established a National Partnering Council (NPC) to
provide advice to TAS senior management about programs and decisions
that directly affect employees. The National Partnering Council is co-
chaired by the Deputy National Taxpayer Advocate and NTEU's Assistant
Counsel for Negotiations. The Council includes TAS Directors and NTEU
representatives.
The National Partnering Council's mission is to serve as an
integrative decision-making body for the Taxpayer Advocate Service.
Although management retains its right to make decisions, and NTEU
retains its right to bargain and negotiate, the National Partnering
Council affords TAS leadership and NTEU representatives with an
opportunity to discuss employee concerns at the earliest stages of
decision-making. We expect that if used appropriately, there will be
fewer issues to bargain and that when bargaining is required, the
parties will be better prepared to discuss issues and negotiate
agreement. The National Partnering Council also provides ideas and
suggestions for the TAS Strategic Planning and Business Performance
Review process. In this way, the Council links partnering efforts with
TAS performance improvement.
At its first meeting in January 2001, the National Partnering
Council established three working groups, which address NTEU/Manager
partnering relationships; TAS technology needs; and employee
satisfaction coordination (i.e., SURVEY 2001, an IRS survey document
used to monitor and address employee satisfaction issues throughout the
Service, the employee suggestion program, training needs, and other
initiatives to support employee satisfaction). More recently, the
National Partnering Council addressed the TAS strategic plan, TAS
oversight of the President's Quality Award (PQA) assessment process,
and delegations of authority to TAS employees.
The National Partnering Council meets six times a year. During
fiscal year 2002, the TAS-NTEU National Partnering Council will
continue to explore ideas and initiatives for improvement of Taxpayer
Advocate Service operations. Scheduled topics include the National
Partnering Council's role in the IRS Strategic Assessment Process;
establishing a direct communications link to the National Partnering
Council so that employees and managers can suggest ideas and receive
information; developing unique and innovative ways to serve our
customers and our employees; and oversight of TAS-wide improvement
initiatives.
CITIZEN ADVOCACY PANELS (CAP)
The Citizen Advocacy Panels were established beginning in June
1998. They have proven to be a valuable partner, providing a forum for
direct citizen input into IRS decision making. Meeting schedules for
the CAPs vary, however, each panel meets at least quarterly and the
meetings are open to the public. During fiscal year 2001, the
Department of the Treasury, in response to CAP member suggestions,
expanded the geographic boundaries of three of the four CAPs.
The South Florida CAP changed it's name to Florida CAP and now
includes all 64 counties in the state of Florida. Illinois joins the
states of Wisconsin, Iowa and Nebraska to form the Midwest CAP. The
Brooklyn CAP changed it's name to the New York Metro CAP, which
includes the five boroughs plus Nassau and Suffolk counties.
Washington, Oregon, Alaska, and Hawaii continue to comprise the Pacific
Northwest CAP.
When the initial commitment of each CAP member expired in March
2001, half of the panel members agreed to extend their terms for one
year to provide continuity to the panel and allow for staggered terms.
Treasury and the IRS developed a new recruitment model. The 2001
recruitment process incorporated lessons learned from the 1998 pilot,
and focused on the underrepresented geographic areas.
The CAPs kicked off a new marketing campaign in May 2001. The new
marketing material was developed to reach more and underrepresented
taxpayers. In fiscal year 2002, the CAPs will expand their outreach
activities. The CAPs will continue to serve as focus groups for the IRS
in the areas of: notice re-design, penalty and interest administration,
filing season walk-in site locations, nationwide roll-out of tax
kiosks, and implementation of new Employer Identification Number (EIN)
processes.
The Taxpayer Advocate Service provides staff and research support
to the panels, sponsors their recommendations within the IRS, and
guides the recommendations through the appropriate channels. Annual
Reports are submitted to the Secretary of the Treasury and the IRS
Commissioner. Copies of all reports, events, meeting agenda's and
minutes, and success stories can be found on their website at
www.improveirs.org.
BALANCED MEASURES
TAS developed ten balanced measures focused on customer
satisfaction, employee satisfaction, and business results as part of
our modernization efforts. During fiscal year 2001, we implemented nine
of the measures and are collecting data to establish baselines for our
organization. Our tenth measure addresses internal customer
satisfaction and will provide an assessment of TAS work products and
business relationships from the perspective of the other IRS Operating
and Functional Divisions. We will work jointly with the IRS Operating
and Functional Divisions to further analyze the best means to implement
and monitor this assessment as well as to establish National Customer
Service Agreements. This measure is particularly sensitive since we
must work effectively within the IRS while providing the service
expected to our most important customers, taxpayers. Our balanced
measures are set forth in Appendix III.
In one effort to engage front-line managers in our balanced
measures program, we are currently expanding our balanced measures to
include local level goals. During fiscal year 2001, local goal setting
will be limited to quality business results since we are still
baselining many of our balanced measures. We selected two quality
business results measures (casework quality index and case cycle time)
for local level goals and are making refinements as a result of the
Strategic Assessment process. In Fiscal Year 2002, we will evaluate the
initial results and plan to expand local level goals to more of our
balanced measures.
During fiscal year 2002 we will monitor our balanced measures,
strategic objectives, and program goals and make improvements in
partnership with the National Treasury Employees Union. We will verify
that our measures help us deliver the unique mission of the Taxpayer
Advocate Service:
``We help taxpayers resolve problems with the IRS and recommend
changes that will prevent the problems.''
Conclusion
In this report, I have set forth an aggressive program for fiscal
year 2002 and identified our essential areas of focus. The dedicated
employees in the Taxpayer Advocate Service continue to face challenges
related to our independence and modernization; however, the Taxpayer
Advocate Service is poised to undertake the challenging and interesting
work ahead. I look forward to building on this foundation and exploring
the profession of advocacy within the Internal Revenue Service. Thank
you for the opportunity to report on my fiscal year 2002 objectives.
Appendix I
TAXPAYER ADVOCATE SERVICE FISCAL YEAR 2001 OBJECTIVES
1. Assist taxpayers in resolving problems with the IRS.
2. Identify and address systemic and procedural problems through
analysis of the underlying cause of the problem in order to take
corrective action.
3. Identify and address operational issues that affect taxpayers.
4. Represent taxpayers' interests in the formulation of policies
and procedures.
5. Identify and develop legislative proposals to simplify the tax
code and reduce taxpayer burden.
6. Expand Taxpayer Advocate Services' outreach opportunities to
assist and educate external customers.
Appendix II
FISCAL YEAR 2002-2003 STRATEGIC OBJECTIVES
------------------------------------------------------------------------
Operational
Operational Priorities and
Major Strategies Priorities Improvement
Projects
------------------------------------------------------------------------
1. Advocate changes in tax law Report to Continue
or procedures that reduce Congress the most to work with
taxpayer burden and improve IRS serious problems Operating
effectiveness facing taxpayers Divisions and
Develop Members of
and recommend Congress to
legislative achieve a less
proposals to burdensome
address tax law process in key
complexity, areas of the tax
equity, and law; assist in
taxpayer burden simplifying forms
Advise and instructions.
Congress' Joint Partner
Committee on with Research and
Taxation on the W&I on a study of
complexity of the most
legislation being significant
considered errors on
individual income
tax returns.
Systemati
cally analyze the
inventory of
advocacy projects
to improve
overall IRS
service to
taxpayers and
reduce the number
of cases coming
to TAS.
------------------------------------------------------------------------
2. Improve TAS' ability to Train Review/
identify and respond to staff on the revise case
taxpayer concerns Taxpayer Advocate criteria
Management guidelines to
Information ensure that TAS
System (TAMIS) workload is
and Intelligent focused on
Query taxpayers with
Seek hardships.
resource support Develop
through Research supporting
to develop an information for
improved process legislative
for gathering and recommendations
analyzing data to that address
report to underlying causes
Congress on the of workload.
top 20 taxpayer Conduct
concerns focus groups and
Increase surveys.
public awareness Conduct
of TAS focused outreach
Ensure to practitioners
that TAS and community
employees have liaisons.
the authorities Conduct a
necessary to quality
resolve taxpayer assessment of
problems center campus
casework to
determine why the
Casework Quality
Index scores of
the campuses are
so much lower
than other
offices.
Improvement
Projects:
Redesign
and upgrade TAMIS
to improve trend
analysis and to
capture
relational data
for root cause
analysis.
Examine
the feasibility
of providing
taxpayers with
toll-free
telephone access
to TAS
caseworkers.
------------------------------------------------------------------------
3. Identify significant sources Plan/ Joint
of TAS casework and work with implement educational
Operating Divisions on outreach efforts outreach efforts
strategies to reduce to taxpayers with Small
inappropriate TAS workload. Propose Business/Self-
content for Employed to
Operating address rising
Division trend of
procedures unreported income
manuals and by sole
training that proprietors.
leverages TAS Conduct
experience ongoing TAS
Examine inventory Study
the sources of and consult
TAS casework to regularly with
determine whether the Operation
work being Divisions to
performed is in analyze
accord with TAS' underlying causes
legislative of taxpayer
mandate problems and
identify changes
to mitigate those
problems.
------------------------------------------------------------------------
4. Ensure that the human Assure Revisit
resources component of the that the human the staffing
Taxpayer Advocate Service is resources model study.
adequate to meet its workload component of the Complete
demands TAS organization the hiring
is adequately process to ensure
sized, trained that TAS is able
and supported to adequately
address taxpayer
problems and
systemic issues.
Design
and implement a
comprehensive,
multi-year
training program
for TAS.
Coordinat
e with Operating
Divisions to
cross-train TAS
and OD employees
during formal
training sessions
and CPE.
------------------------------------------------------------------------
Appendix III
TAXPAYER ADVOCATE SERVICE BALANCED MEASURES
----------------------------------------------------------------------------------------------------------------
CATEGORY BALANCED MEASURE DEFINITION
----------------------------------------------------------------------------------------------------------------
Employee Satisfaction Employee satisfaction score The average level of employee
satisfaction, determined though the use
of surveys.
----------------------------------------------------------------------------------------------------------------
Customer Satisfaction External customer The average level of customer
satisfaction satisfaction determined through the use
of vendor conducted transactional
surveys.
----------------------------------------------------------------------
Internal customer Being developed.
satisfaction
----------------------------------------------------------------------------------------------------------------
Business Results (Quantity) Closed cases A count of closed TAS cases. This
measure does not include non-criteria
cases, such as duplicate controlled
correspondence cases.
----------------------------------------------------------------------
Outreach resources spent A comparison of planned versus actual
versus plan outreach hours spent as outlined in
local TAS outreach plans.
----------------------------------------------------------------------
Outreach effectiveness The percentage of cases that come to TAS
through direct taxpayer contact versus
case referrals from Operating Division
employees.
----------------------------------------------------------------------
Immediate advocacy The number of actions taken
interventions expeditiously to correct a systemic
problem when there is not enough time
for the normal corrective process.
----------------------------------------------------------------------------------------------------------------
Business Results(Quality) Case cycle time The average time (TAS received date to
TAS closed date) to resolve all regular
cases worked in TAS. This measure does
not include non-criteria cases, such as
duplicate controlled correspondence
cases.
----------------------------------------------------------------------
Casework quality index A measure of TAS effectiveness in
meeting customer expectations based on
a random sample of cases reviewed and
scored against customer service
standards of timeliness, accuracy, and
communication.
----------------------------------------------------------------------
Long-term advocacy The number of substantive initiatives
proposals being worked by the Operating Division
Taxpayer Advocate Staff to improve IRS
processes and procedures.
----------------------------------------------------------------------------------------------------------------
[GRAPHIC] [TIFF OMITTED] T4412A.004
Chairman Houghton. Mr. Coyne, would you like to ask
questions?
Mr. Coyne. Thank you, Mr. Chairman.
Ms. Olson, in your earlier role as the head of the first
independent low-income tax clinic, what were the major reasons
at that point that taxpayers sought clinic advice?
Ms. Olson. Many of them were collection issues or earned
income credit issues.
Mr. Coyne. Earned income credit?
Ms. Olson. Earned income credit cases, and many of the
earned income credit cases were in the collection arena. The
taxpayers had not been able to represent themselves well in the
examination audit side, and the decision just stood that they
weren't entitled to it, and so we were dealing with collection
issues at the same time as trying to prove that they were
entitled to the earned income credit.
We also saw things like independent contractor employee
classification people being treated as an independent
contractor and not paying Social Security tax on their wages
and owing tax because of that, but, again, we were in the
collection mode there as well.
Mr. Coyne. As we move ahead in simplification of the Tax
Code, do you have any recommendations today that the Committee
ought to take into consideration?
Ms. Olson. I do believe that the Joint Committee's
complexity report and--simplification and complexity report--
the uniform definition of a qualified child for the earned
income credit, head of household, dependency exemption will go
a long way toward simplifying the law for a large number of
taxpayers. It will also simplify the administration of that
provision, the earned income credit. Because by coming up with
a uniform definition it will be easier for the IRS to test
whether somebody meets that test. It is less complex, we're
going to make less intrusive inquiries, and we can use third-
party information to do it. So, in many instances, we wouldn't
even have to contact the taxpayer before we could conclude,
yes, they are entitled to it. So that would both
administratively and for taxpayers reduce burden enormously.
Mr. Coyne. Well, thank you for your service as National
Taxpayer Advocate; and thank you, Mr. Chairman.
Chairman Houghton. Thank you. Mr. Portman.
Mr. Portman. Thank you, Mr. Chairman.
Ms. Olson, we appreciate your testimony today and, more
importantly, the work you are doing as a Taxpayer Advocate. You
jumped into this with a lot of great experience, including with
some of your colleagues who are on the panel with you this
afternoon, and a lot of energy and enthusiasm, and this report
reflects that.
You have set out in this report some fairly ambitious
objectives for the next fiscal year. You have also indicated
some of these objectives may not be achieved in the next fiscal
year and some of the questions may not be answered.
I guess I have two questions for you. One would be, do you
feel as though the current focus on individual cases--the
caseload is growing, and it is--one of the objectives you are
going to do is to look into whether that is appropriate and how
that might be changed over time, but do you feel as though you
have adequate time to address some of the root causes of some
of the complexity and some of the problem areas per Mr. Coyne's
question, or do you feel as though you are just so overwhelmed
with individual cases and managing that that you do not have
time to back up and take a look at some of the root causes?
Ms. Olson. I think that actually we have a very good
balance right now in terms of being able to look at the larger
issues and to give you information that you need and can use.
The cases that I am concerned about us getting are what I call
the overflow cases, the ones that should have been resolved at
the first point of contact, the operating divisions; and what
is heartening to me is that I have been very vocal within the
IRS about this happening.
Again, our inventory studies showing that 80 percent of our
cases are made up of that, that is to me an unacceptable ratio
and that we are going straight back to the operating divisions
to find out why this is happening and how that can be changed.
I feel that if we get that under control then the cases that we
really are getting into, the Taxpayer Advocate Service, will be
ones that are indicating either legislative or administrative
problems, not just overflow problems, but things that need to
be fixed in one of those two arenas and will point out things
that then we should be working on on a policy or recommendation
side. I am concerned that we are not getting as much
information as we could because we are dealing with these
overflow cases.
Mr. Portman. So many of those cases are simply first
impression cases, they haven't exhausted the normal procedures
and therefore may or may not reflect some more serious problems
with the system or laws as they stand or practices, procedures.
Ms. Olson. Right.
Mr. Portman. The other question I have is really one of a
judgment call on your part. I again am impressed with the goals
that you are undertaking over the next fiscal year and, as you
say in this report, beyond, but I am also concerned that you
may be taking on too much.
As the IRS goes through a very difficult time of compliance
with some of the legislation passed in the IRS Restructuring
and Reform Act 1998 (RRA) and some of the internal changes that
actually began before RRA was enacted, including restructuring,
including new performance measurements, including the
modernization efforts, there are--and including figuring out
how to deal with some of the new RRA restrictions on individual
employees, it is a concern of mine that the Taxpayer Advocate
continue to do its job in a steady and focused basis and not
add to, frankly, some of the dislocation and confusion that is
going on with the restructuring and reorienting of the IRS. Yet
your questions that you anticipate looking at in the next
fiscal year are very fundamental questions.
For instance, what is the role--what is the extent to which
you should be resolving problems rather than kick them back
into the normal system? What should the appropriate composition
be of your inventory according to hardship criteria? What
standard should you be held to? What is the appropriate measure
of success, which is a difficult question again the larger
entity is working through.
My only question to you is, is this the appropriate time
for you to take on some more of these fundamental issues when
through RRA we just went through this process in a sense
looking at what happened in 1996, coming back in 1998,
reviewing it, establishing more independence, establishing,
frankly, some better pay so that we could attract and keep good
people in the Taxpayer Advocate system. Is this the right time
to be going back and looking at some of these fundamental
problems when the caseload is high and the system itself is
under quite a bit of stress?
Ms. Olson. My employees--those questions came in large
instances because my employees were asking them of me. The
question about when can we say no to cases is very hot in their
minds, and I felt that we needed to begin a discussion about
it.
Mr. Portman. Saying no to cases as they come from the
Service or saying no because they think the taxpayer may not
have a valid case?
Ms. Olson. Saying that this is not yet a Taxpayer Advocate
Service case. They were asking me that question, and I thought
we needed to begin that dialog, not reach an answer necessarily
because I think it is a very difficult question, but to ignore
it would be putting them in a state of limbo.
Mr. Portman. The simple answer would be in the overflow
cases that it is not, because it would be again a case of first
impression without going through the normal process.
Ms. Olson. Right, and yet where is the rest of the IRS at
the time? Can we send them back if there is nobody there to
take them because they are dealing with something else? That is
a difficult thing. The same kinds of questions. What does it
mean to be an advocate?
To some extent, that was in response to many people that I
heard from the practitioner community saying to me we had a
case, the Taxpayer Advocate helped us take it to exam, and exam
said the same answer that they have given us all along. And the
Taxpayer Advocate said, well, this is what exam said; and they
didn't push back, they didn't say, well, think about this
again.
So we thought that there should be a beginning of a dialog
about what is advocacy within the IRS, how is it different from
being an advocate outside of the IRS. And my employees, when I
started talking about that in townhall meetings, were very
excited about that. I think it is helping them define for
themselves what their role really should be, and I am looking
at this as a discussion with them, and so far they have stepped
up to the plate. It is not a burden for them.
Mr. Portman. Without necessarily sort of turning the
Taxpayer Advocate system upside down, as we have done with the
IRS, for good reason, but without distracting folks from their
primary mission.
Ms. Olson. Right.
Mr. Portman. Thank you, Mr. Chairman.
Chairman Houghton. Mr. Pomeroy.
Mr. Pomeroy. Well, considering the hour and other
witnesses, Mr. Chairman, I will be very brief.
I would just first of all want to commend Ms. Olson.
The public perception of a tax collection system that
operates with integrity and responsiveness is incredibly
important. Often Congress I think, even while it is
legitimately concerned about inequities in the Tax Code or
operations of tax collection, end up scoring the cheap
political hit of demonizing the IRS and in the end just
bringing discredit upon this essential function of government.
That really serves no constructive purpose, spreads broad
constructive cynicism, and increases noncompliance.
Basically this Taxpayer Advocate function is a very
important and appropriate way in which we try to listen very
carefully to the taxpayers, respond to them, make systems
changes that the input brings us to. So as the person in charge
of all that I really do commend you.
I would say that your work is not complete in that 12
States do not have clinics, and one of them is mine, and I
would like to work with you on that. Certainly, the 102 tax
clinics in the 38 States where you have reached already, pretty
darn impressive, and let's get a 50-State representation, with
North Dakota being the 39th.
Ms. Olson. I agree.
Mr. Pomeroy. I yield back, Mr. Chairman.
Chairman Houghton. OK. Fine. I am not going to ask any
questions because I will be able to talk to you personally
here, but I want to thank you very much. If you want to stay,
fine. You don't have to. What we will do is go right on to the
other Members of the panel.
I have got three people who evidently have to get out of
here fast--Alan Cohen, Dixon Rich. Is that right, Mr. Rich?
Mr. Rich. I have an 8 o'clock flight, so I am in no rush, I
don't think.
Chairman Houghton. Anyway, I am going to call on Mr. Cohen
first.
STATEMENT OF ALAN H. COHEN, DIRECTOR, LOW-INCOME TAXPAYER
CLINIC, ITHACA COLLEGE, ITHACA, NEW YORK
Mr. Cohen. Mr. Chairman and distinguished Members of the
Subcommittee, I am pleased to appear before you today to
address the Subcommittee on matters relating to funding and
performance of low-income taxpayer clinics.
The Low-Income Taxpayer Clinic at Ithaca College.
Ithaca College is a fully accredited, independent
institution of higher education offering bachelor's and
master's degrees to approximately 6,000 students. Tompkins
County, New York, has 98,000 residents. Nineteen percent of
them are below the poverty level, and 11 percent represent
English as a second language (ESL) communities.
This tax season, senior accounting majors had training in 6
credit hours of taxes and also passed the Volunteer Income Tax
Assistance program (VITA) volunteer exam certification. Sixty-
five ESL taxpayers, approximately 40 families, tax preparation
was conducted at the ESL community sites because it is easier
for ESL taxpayers to be more familiar with locations and
translators. Returns were computerized and e-filed; and, in
addition, 70 international students were assisted at more
workshops in the preparation of 1040 NRs.
To insure quality control in the preparation of ESL tax
returns, the clinic participated in a peer review of client tax
workpapers. The accounting firm of Dannible & McKee CPAs of
Syracuse, New York, conducted an on-site review of the clinic's
2000 tax practice.
At a meeting at the IRS Buffalo District in September, the
IRS administrators confirmed that approximately only 2 percent
of the taxpayers of Tompkins County were selected for a tax
audit; and few, if any, were low-income taxpayers.
Given this information, advocacy services of an LITC in a
less densely populated rural environment may have fewer clients
to serve. We recognize that the most controversial issue at
this time is LITC compliance and that our area has one of the
largest percentage of individuals below the poverty level. If
the Service decides to initiate compliance testing with respect
to LITCs, a partnership with LITCs could prove most
advantageous.
Tax advocacy is surely needed, but is this the only
solution to the low-income taxpayer problem? I think not. There
are approximately 12 to 15 million taxpayers who would qualify
as low-income taxpayers. It makes perfect sense that the issue
of clearly understanding technical tax complexities are similar
for low-income taxpayers as well as ESL clients. The bigger and
as yet unmet need of low-income taxpayers is tax preparation.
This past tax season the Service prepared approximately
500,000 tax returns, primarily for low-income taxpayers. The
returns were prepared by revenue agents, supervisors and other
selected IRS technicians who were reassigned to the taxpayer
assistance centers across the Nation. What is the cost of this
service? What is the lost opportunity cost to the IRS? Is there
a better way?
I and many others believe pilot programs are needed
immediately to more fully address the needs of low-income
taxpayer preparation, to work more closely with the IRS to
increase compliance and accuracy for earned income tax credits
(EITC) and other low-income taxpayer issues and, most
importantly, to assist the IRS in shifting the unrealistic
burden that it has undertaken as the tax preparer for one-half
million taxpayers.
Business schools and accounting programs could also provide
an excellent venue for low-income taxpayer preparation. Funding
guidelines could be similar to the LITC grant application
process. Resources could be used for training, computers,
procedures for electronic filing.
In summary, the LITC grant project for academic
institutions is an excellent example of scholarship of
engagement. The LITC connectiveness of government, taxpayers,
private/non-profit institutions and the classroom all combine
to provide a truly needed service. Everyone benefits: The
eligible taxpayer receives a very needed free professional
service; the academic institution fulfills its community
responsibilities for outreach; the government achieves
compliance and increased electronic filing; and the classroom
environment flourishes. The LITC at Ithaca College ranks as one
of the most rigorous and rewarding college experiences for the
student volunteers.
Mr. Chairman, thank you for this opportunity to come before
this Subcommittee and discuss the impact LITCs are having on
taxpayers.
[The prepared statement of Mr. Cohen follows:]
Statement of Alan H. Cohen, Director, Low-Income Taxpayer Clinic,
Ithaca College, Ithaca, New York
Mr. Chairman and Distinguished Members of the Subcommittee:
I am pleased to appear before you today and to address the
Subcommittee on matters relating to funding and performance of Low
Income Taxpayer Clinics (LITCs).
The LITC at Ithaca College, Tompkins County New York
Ithaca College is a fully accredited, independent institution of
higher education, offering bachelor's and master's degrees to
approximately 6000 students (Fall 2000). The School of Business offers
B.S. degrees in Accounting and Business Administration, as well as an
MBA degree. Within the Business Administration degree are
concentrations in Accounting, Electronic Commerce, Finance, Human
Resource Management, International Business, Legal Studies, Marketing,
and Management.
The College is located in Tompkins County, which has about 98,000
residents. In addition to the permanent residents and Ithaca College's
student population, Cornell University enrolls nearly 18,000 students
including 7,000 graduate students. Approximately 7.3% of the Town of
Ithaca's population is of Asian origin, primarily Chinese, and there
are sizeable Hispanic and Eastern European communities. In addition, a
substantial number of Cornell students, especially graduate students,
speak English as their second language (ESL). Tompkins County has one
of the highest percentages in the state of individuals below the
poverty level--18.9% of the county's population according to 1990
census data. In addition, most of the immediately surrounding counties
are, like Tompkins, marked by farms and small villages with low average
family incomes and limited resources for tax preparation and/or
advocacy services. The IC LITC serves Tompkins County and the
contiguous counties of Cayuga, Seneca, Schuyler, Cortland, Tioga and
Chemung within a 50-mile radius of the City of Ithaca.
The Ithaca College LITC initial grant was approved on April 1,
2000, with an extension to December 31, 2000. The initial start-up
phase occurred over the nine months from April 1 to December 31, 2000.
From April 1, 2000, the LITC developed partnerships with a community
network that began contact with target groups of ESL and low-income
taxpayers. The start-up period was used to establish contracts and
create a strong infrastructure for the 2000 tax year.
The clinic established an ongoing community action group to assist
and advise ways to best contact target groups. Members included Ed
Swayze of the Tompkins County Information and Referral Service, Ann
Gifford of Cornell Cooperative Extension (which has broad, multi-county
regional outreach), and Jeanne Henderson of RSVP. The group meets
monthly.
During the nine-month grant period, a wide variety of community
partners were enlisted and oriented.
Community Partners ESL/Low-Income
------------------------------------------------------------------------
------------------------------------------------------------------------
BOCES (Board of Cooperative ESL
Educational Services)555 Warren Road,
Ithaca, NY 14850.
Literacy Volunteers of ESL
Tompkins County Inc. 124 W. Buffalo
Street, Ithaca, NY 14850.
Ithaca Housing Authority798 S. ESL
Plain Street, Ithaca, NY 14850.
Catholic Charities of the ESL
Southern Tier/Hispanic Community324 W.
Buffalo Street, Ithaca, NY 14850.
Cornell University UAW Union ESLLow-Income
Greater Ithaca Activities Low-Income
Center (GIAC)318 N. Albany Street,
Ithaca, NY 14850.
Southside Community Center, Low-Income
Inc.305 S. Plain Street, Ithaca, NY
14850.
TCE/RSVP121 W. Court Street, Low-Income
Ithaca, NY 14850
------------------------------------------------------------------------
In all of the above, there was a substantial and successful effort
to make community network partners aware of ESL and advocacy services
and to create an infrastructure for the 2000 tax season.
Publicity was extremely thorough and extensive, and will continue
under second-year funding. Steps taken included:
Letters to 67 Human Resources Directors of Corporate/
Social Services Agencies (Letter, business card, brochure)
Tompkins County Website--Informational and Referral
Services (Human Services Conditional)
Design/Production--Poster
Design/Production--Brochure Distributed to Social
Services brochure racks at 21 locations and distributed with
program letters.
Newspaper Announcements: Ithaca Journal, Pennysaver,
Cortland Standard
Radio: Public Service Announcements (Continued 2001
grant period)
Tax Season Calendar 2000
ESL--Targeted groups were not able to participate in the 1999 tax
season due to the lateness of grant awards. Therefore, all efforts were
directed towards Community Partnerships, ESL classes, and
administrative setup to provide preparation for the 2000 tax season.
The 2000 tax season commenced February 1, 2001. Our clinic had
twelve senior accounting majors as LITC Volunteers. Each student was
required to take a 3 credit senior-level tax course (Fall 2000) and a 3
credit senior tax workshop course (Spring 2001). In addition to the
traditional syllabus requirements, all tax volunteers completed the
Volunteer/Income Tax Assistance (VITA) Workbook and Compliance Exam.
Supplemental VITA tax material for resident and non-resident aliens was
also provided by the IRS. Specific training regarding ESL taxpayers was
also delivered by Community Partners experienced with ESL
constituencies.
Prior to the tax preparation season, arrangements were made with
Community Partners to conduct onsite tax preparations at their own
locations. This allowed ESL tax clients easy access of location and
familiarity with translators. Forty families were serviced at three
different site locations.
All tax returns were computerized and all but one was
electronically filed. The one exception was that of a family whose son
had independently filed, therefore preventing the full utilization of a
dependency exemption. The son's return needed to be amended and both
parties filed manually. Another very rewarding experience concerned a
Russian family, mother and daughter. The daughter spoke English and
translated for the family. The tax return was eligible for the EIC and
Child Credit. The taxpayer received a substantial refund and the mother
and daughter were overwhelmed with joy.
Additionally, four separate workshops were provided to Ithaca
College international students. Approximately 60 taxpayers participated
in the hands-on tax preparation of their federal and New York State
non-resident tax returns. At one of the workshops, an Ithaca College
international student questioned an IRS deficiency letter regarding his
1999 federal non-resident return. Apparently, an income tax had been
assessed on scholarship income. The student taxpayer, being unfamiliar
with IRS tax correspondence, paid the tax deficiency of approximately
$2,100.00. After proper review, an amended tax return was filed and the
student received a full refund.
To insure quality control in the preparation of ESL tax returns,
the clinic participated in a peer review of client tax workpapers. The
accounting firm of Dannible & McKee CPAs of Syracuse, New York,
conducted an onsite review of the clinic's 2000 tax practice. An
unqualified report was issued and no material exceptions were noted.
For the record, on behalf of the LITC Volunteers and Ithaca College, a
sincere thank you to Mr. Christopher Didio, partner, Bridget Reilly,
staff assistant, and the firm of Dannible & McKee CPAs, for
volunteering the critically needed independent quality control review.
LITC Funding and Application Process
The grant period 10/1/99-9/30/00, which was Ithaca College's first
year, was not approved for funding until March 30, 2000. The
administrative delay prevented ESL tax preparation for the 1999 tax
season. Notwithstanding this event, the clinic commenced its start-up
phase on April 1, 2000. The grant period then was administratively
extended from 9/3/00 to 12/31/00, to allow for easier record-keeping
and a better matching of academic and government calendars. This change
to a calendar year grant was well received by grant recipients.
Competition for the 2001 LITC Grant was very keen. Increased
applications and IRS competitive checklists made the selection process
rigorous. Ithaca College received a grant in the amount of $26,867. The
Ithaca College administration and faculty are extremely proud to be
part of the 2001 academic grant recipients, which represent many
prominent academic institutions across the nation.
The Partnership Between the LITC and the IRS
Almost immediately, grant recipients urged the IRS to take an
active role in promoting LITCs to eligible taxpayers. The clinics were
in favor of ``stuffers,'' announcements of LITCs, their services and
locations. The stuffers would be added to the IRS mailings pertaining
to audit, compliance inquiries (EITC), collection and other taxpayer
correspondence. This is a very delicate and sensitive issue and
currently the Service is working on a solution.
On September 7, 2000, I traveled to Buffalo, NY, for a meeting with
Hanna Cohn, Director of the LITC at Volunteer Legal Services of Monroe
County New York, the Buffalo District Director, and various IRS
department administrators. At that meeting, many issues were discussed,
two of which were significant. First was the promise of active
participation from the IRS regarding stuffers and marketing. Second and
more importantly was the issue of our local IRS office (Elmira-
Binghamton, NY) contacting or referring low-income taxpayers who are
currently being examined to the Ithaca College LITC. I was graciously
allowed to ask questions regarding the total number of current audits,
collection proceedings and EITC compliance letters. Without being
specific, I was informed that the audit selection process covered
approximately 2% of the taxpaying population and substantially all were
not with low-income taxpayers. If this is correct, advocacy services of
an LITC in a less densely populated rural environment may have fewer
clients to serve. We recognize that the most controversial issue at
this time is EITC compliance and that our area has one of the largest
percentages of individuals below the poverty level--18.9%. If the
Service decides to initiate compliance testing with respect to EITCs, a
partnership with LITCs could prove most advantageous.
As part of the LITC grant, recipients were required to participate
in an annual tax conference. In April 2001, the group met in
Washington, DC, sponsored by the American Bar Association Section of
Taxation. The first day was devoted to the IRS, grant procedures, and
administrative audit requirements. The groups were separated into
academic and non-profits. The second day was spent discussing advocacy
and was expertly facilitated by the presentations of law school
faculty. This was my first meeting at a LITC conference. In the future,
more emphasis should be placed on ESL problems and solutions. The
partnership between the IRS and LITC is new; it has to mature. Given
the new climate at the IRS, I am confident the relationship will grow
and be beneficial to the targeted taxpayers.
Are LITC's Fulfilling all the Needs of Low Income Taxpayers and ESL
Constituencies?
The beginning years of the LITC grant program have had a successful
record of increasing grant applications and increased funding. Academic
and non-profit institutions have answered the call and are providing
the advocacy for low-income taxpayers and professional tax services for
ESL constituencies. A review of the 2001 grant recipients includes,
among others, professionally qualified advocates from well-known law
schools, universities, and established legal clinics. The remainder of
grant recipients represent specific ESL contingencies. I am confident
as applications increase further that additional funds will be made
available by Congress to continue this outstanding program.
Tax advocacy is surely needed, but is this the only solution to the
low-income taxpayer problem? I think not. There are approximately 12-15
million taxpayers who would qualify as low-income taxpayers. Nina Olson
stated in her testimony to this committee on April 3, 2001, ``--
essentially taxpayers whose income is so low as to be eligible for the
Earned Income Credit are a captive market for return preparers who are
not very accurate or who are not making the proper inquiries for their
clients in order to accurately complete returns.'' Ms. Olson also
remarks about the non-compliance problems of the EITC. It makes perfect
sense that the issues of clearly understanding technical tax
complexities are similar for low income taxpayers as well as ESL
clients. The bigger, and as yet, unmet need of low-income taxpayers is
tax preparation.
Recently the Internal Revenue Service reorganized; this great
undertaking is an exciting administrative change. The Service's
enlightened attitude towards taxpayers is refreshing. However, does the
IRS also believe that tax preparation to low-income taxpayers is
important? Absolutely! This past tax season, the Service prepared
approximately 500,000 tax returns primarily for low-income taxpayers.
The returns were prepared by Revenue Agents, supervisors, and other
selected IRS technicians who were reassigned to Taxpayer Assistance
Centers across the nation. What is the cost of this service? What is
the lost opportunity cost to the IRS? Is there a better way?
Mr. Chairman, our own Congressional district has an unusually large
number of citizens below the poverty level. When you apply the 250% of
poverty level limit required by LITCs, the eligible taxpayers increase.
In Tompkins County, which has approximately 98,000 people, possibly
20,000-25,000 could qualify as low-income taxpayers.
In Ithaca, taxpayer preparation for low-income taxpayers is
provided by one TCE Clinic, RSVP, which services 1,200 taxpayers, and
one VITA site at Ithaca College, which assists 200 taxpayers. Where do
the remaining low-income taxpayers go? Is the tax preparation fee
commensurate with the professional service performed? Are there hidden
fees for processing and fast refunds?
I and many others believe pilot programs are needed immediately to
more fully address the needs of low-income taxpayer preparation, to
work more closely with the IRS to increase compliance and accuracy for
EITCs and other low-income taxpayer issues, and most importantly, to
assist the IRS in shifting the unrealistic burden it has undertaken as
the tax preparer for one-half million taxpayers.
One proposal already being considered in the Senate is funding for
VITA programs. VITA sites now provide an excellent venue for low-income
taxpayer preparation. Funding guidelines would be similar to the LITC
grant application process. Resources could be used for training,
computers and procedures for electronic filing. VITA programs can now
process tax returns (computerized/e-filed) for approximately $25. When
you contrast this with the IRS's cost per tax return, VITA funding as a
pilot project is worth exploring.
Summary
In summary, the LITC grant project for academic institutions is an
excellent example of the Scholarship of Engagement. The LITC
connectiveness of government, taxpayers, private/non-profit
institutions and the classroom, all combine to provide a truly needed
service. Everyone benefits: the eligible taxpayer receives a very
needed free professional service; the academic institution fulfills its
community responsibility for outreach; the government achieves
compliance and increased electronic filing; and the classroom
environment flourishes. If properly supervised, the classroom becomes a
professional tax practice. This environment nurtures communication
skills, training, computerization, tax work papers, quality control,
electronic filing, and professionalism. The LITC at Ithaca College
ranks as one of the most rigorous and rewarding college experiences for
the student volunteers.
Mr. Chairman, thank you for this opportunity to come before this
subcommittee and discuss the impact LITCs are having on taxpayers.
Chairman Houghton. Thanks a lot, Mr. Cohen. I really
appreciate you being here representing our part of the country.
You are great. If you have to leave, do so or at any time
because we are going to go through the panel and then have some
questions.
So what I would like to do is to ask Mr. Rich--Mr. Rich,
would you like to testify? Why don't you just turn on the mike
then.
STATEMENT OF DIXON R. RICH, JR., ADJUNCT PROFESSOR, AND FACULTY
MEMBER, LOW-INCOME TAXPAYER CLINIC, UNIVERSITY OF PITTSBURGH
SCHOOL OF LAW, PITTSBURGH, PENNSYLVANIA
Mr. Rich. Thank you. Good afternoon or at this point good
evening, Mr. Chairman and Members of the Oversight
Subcommittee; and I would particularly like to thank
Congressman Coyne for inviting me personally down to explain
the University of Pittsburgh's program to you.
Basically, I would like to discuss three aspects of the
program--basically, our clients, our students and our cases--
and then, second, like to take a look at a short review of what
has worked good for us and what hasn't and then a
recommendation, third.
Specifically, the University of Pittsburgh School of Law
has a tax advocacy LITC. We don't prepare tax returns. We help
people with problems with the IRS. We answer all calls, and we
refer taxpayers that have preparation problems to the VITA
programs that exist in the area. And if a taxpayer calls with a
frivolous claim, we send them on their way. We don't waste any
time on frivolous claims.
Where our clinic is located, it is centrally located in
Pittsburgh, at the University of Pittsburgh Law School next to
the Law Library. The building is open during the day and the
evenings so people that have to work don't have to miss work to
meet with us.
It is a great opportunity because in the Pittsburgh area
prior to this clinic there was no place low-income taxpayers
could go for help except the IRS, and when they go to the IRS--
and they have expressed this and the clients I have talked to--
they don't get the same comfort level that they do coming to
talk to us. Once they realize that they are talking to somebody
on a confidential basis and they can tell us the whole story,
whereas if they are talking to the IRS they have to watch what
they say, I think that also speeds up their process. Because
once they know that we are available, they are willing--the
last thing they want to do is have a tax problem hanging over
their head. But the second-to-last thing they want to do before
that is to call themselves. So if they understand, hey, we can
talk to these people, we can sign a power of attorney, and they
can take care of the problem with us, I mean, we have to pay
whatever we owe or do whatever we have to do, but it really
helps resolve problems a lot quicker.
To respond to what Nina said, when somebody gets a notice
in the mail, they get one notice, they don't do anything. They
get two notices, it starts snowballing on them. Then, before
you know it, they are in collections when they might have had
just to send a birth certificate in to prove that their child
they claimed the earned income credit for was actually their
child.
Because one thing that I have found is that you don't run
into traditional family units. You might have people with last
names being the mother of somebody, you know, and it is just
not as easy as it used to be to prove these things.
So having qualified students--and our students, second--and
third-year students, a lot of them have a surprising amount of
general and public accounting experience; and they are almost
all law clerks. So they are very well represented, and the IRS
has been very cooperative in working with the students. Also,
the IRS in our area has been very cooperative in helping get
our names out.
The Collections Division is an area--and that is the one
recommendation I have to make--is the one area where we could
help a little more with getting notices--because lawyers aren't
allowed to target people, but in this instance where you have a
notice going to taxpayer, it is easy to--well, I shouldn't say
it is easy because of the logistics of which taxpayers get the
notice and not--but to stick a little piece of paper in the
notice that says, here, if you are within 250 percent of the
poverty level you can call these people and get help. I think
that really speeds up the process, and it might cut into the
dead weight that Nina's coming across.
In particular, we have had all kinds of clients. Our
clients are singles, single and married moms and dads, abused
spouses, disabled taxpayers and retired taxpayers. The types of
situations and the cases we have--we have had two Tax Court
cases. I have only been there a year, but we have had two Tax
Court cases, both of which we have prevailed on, and stipulated
cases where there aren't any trials. We just go in and prove--
we sit down, do what we have to prove, and the case is over. We
are not wasting any Tax Court time.
We have also had a lot of issues with dependency and
claiming exemptions, filing status, proving head of household,
things like that, and offers in compromise, installment
agreements, formally and informal, cases where we have the IRS,
the Service Center will issue out a 1099 matching audit.
Well, this one poor lady, a relative did her tax return for
her. She got a big tax bill. Well, what we did--she did miss
some income, but what she also missed was a bunch of expenses
and deductions. We took care of that. She still owes a little
money, but it is a whole lot less. That was for 1999, and for
2000 we are just going to do the same thing. So we are really
killing two birds with one stone there. You know, we have one
taxpayer and we have cleaned up 2 years in matter of a couple
of months.
So I think this is one area I know in the Pittsburgh area
where there were no legal clinics before. If you had a family
problem, you could go to one place, but you couldn't go to
anyplace with a tax problem.
The one area where I really think the IRS and where I would
recommend we help is the stuffer notices. I know in Pittsburgh,
the appeals office, the taxpayer service office, the walk-in
office, they have been very helpful. They tell people, hey, if
you have a problem, call these people and PITT will help you.
But the actual notices, the collection notices that go out of
Philadelphia and the automated collection system, if you could
stick notices in them, I think you could really help a lot of
taxpayers and cut down a lot on--you could target who we need
to help.
I mean, targeting people when you are a lawyer isn't good,
but in this situation, I mean, that is our audience. Taxpayers
are who we are supposed to help. They get a notice, and it
would be easy, I would think, to include our blue stuffer
notices with all of the other notices that go out of
Philadelphia.
From the students' perspective, I think it really helps our
students in the skill of learning how to meet a client, to gain
their confidence and to interview a client and to gather the
information necessary to prove your case to the IRS, especially
in our situations because sometimes the evidence isn't as
clear. There isn't a checkbook or leases, things that normal
people have.
In closing, I really thank the fact that you are giving
low-income taxpayers an opportunity for confidential
independent help other than the IRS. When they walk into our
office they are nowhere near the Federal building, and it gives
them a comfort level and gives them the ability to promptly
respond without having a sword or something hanging over their
head.
Thank you very much for giving me the time this afternoon.
My testimony goes into a lot more detail, but I just wanted to
really concentrate on the fact that, up until you guys and
ladies have started this program, there was no other program
like this, and I want to thank Nina for doing so.
[The prepared statement of Mr. Rich follows:]
Statement of Dixon R. Rich, Jr., Adjunct Professor, and Faculty Member,
Low-Income Taxpayer Clinic, University of Pittsburgh School of Law,
Pittsburgh, Pennsylvania
Good afternoon, Mr. Chairman and Members of the Oversight
Subcommittee. My name is Dixon R. Rich, Jr. I am a tax attorney in
Pittsburgh, Pennsylvania, and an adjunct professor at the School of Law
of the University of Pittsburgh. I have been involved as a faculty
member of the Low-Income Taxpayer Clinic for the past year.
I wish to thank the Subcommittee and Congressman William Coyne in
particular for this opportunity to share our perspective of and our
experience with the Low-Income Taxpayer Clinic at the University of
Pittsburgh. I would also like to extend the regrets of Clinic Director,
Professor Martha M. Mannix, who is unable to take part in the hearing
today.
We greatly appreciate the three-year funding from the Internal
Revenue Service (IRS) and believe the Low-Income Taxpayer Clinic (LITC)
provides a much-needed community service to individuals who have few
other avenues of assistance, at the same time it is a unique and
valuable professional learning experience for second and third year law
students.
I would like to cover three aspects of our experience for you:
first, a brief description of the Clinic at the Law School including
its history, its clients, its students and its cases; second, a short
review of what has gone well for us and our clients; and third, a
recommendation for the future that we believe could improve what is
already a highly-effective program.
The Low-Income Taxpayer Clinic at the University of Pittsburgh is
one of PITT Law School's four student clinics: tax law, health law,
elder law and environmental law, that provide important legal services
to the community and professional, hands-on training for future
lawyers. As a result of receiving the funding award from the IRS,
Professors Martha M. Mannix, Thomas D. Arbogast and Leo N. Hitt
organized the Clinic during 1999, which then opened its doors to
clients and students in January 2000.
Specifically, the University of Pittsburgh School of Law LITC is an
``advocacy clinic.'' We assist low-income taxpayers with resolving open
issues with the IRS. We respond to all inquiries and refer tax
preparation requests to local VITA programs. PITT's LITC is housed
adjacent to the law library with the Law School's other student clinic
offices, where Ms. Stacey Patrick, our LITC administrative assistant,
receives client and student messages and correspondence and maintains
our client files.
The Clinic is centrally located on the main boulevard in the
Oakland neighborhood of Pittsburgh and easily accessible by public
transportation. The building is open during the day and evening,
enabling students to meet with taxpayers without taxpayers missing
work.
The LITC program provides low-income taxpayers an opportunity for
free tax assistance that is confidential and independent from the
Internal Revenue Service. Unlike the IRS Walk-in Taxpayer Assistance
offices, our LITC is physically separate and independent from the IRS.
This provides low-income taxpayers with a comfort level they cannot
obtain from assistance provided by IRS employees.
Prospective clients usually ask about our connection with the IRS.
Once they understand we are independent and that their conversations
are confidential, clients feel more relaxed and are more inclined to
fully explain their situation. By executing a Power of Attorney, low-
income taxpayers are afforded representation before the IRS and the
luxury of not having to personally talk and correspond with IRS
employees. Clients are candid that the anxiety of talking with IRS
employees creates stress that snowballs with each notice and delays
them from responding to IRS notices. After contacting a LITC, an
eligible taxpayer is more likely to promptly respond to IRS notices.
During the past year, we have been contacted by approximately sixty
(60) taxpayers and have accepted and represented thirty-eight (38)
clients. Our clients are all ages and consist of singles, single and
married moms and dads, abused spouses, disabled taxpayers and retired
taxpayers.
This past year we had eight (8) students during the fall 2000
semester and ten (10) during the spring 2001 semester, nine (9) women
and nine (9) men. Many of the students have public accounting, general
accounting or law firm clerking experience, so our clients are
represented by qualified students that are assisted and closely
monitored by our LITC faculty. Upon receipt of an inquiry, a specific
student is assigned to contact the taxpayer and interview them to
determine their eligibility. If the taxpayer is eligible, the student
proceeds with the representation and prepares an engagement letter. On
average, each student handles one (1) to four (4) cases/clients. Any
student without an active case is assigned to specific marketing
projects.
We field general questions from taxpayers. Over the past year we
have handled two Tax Court cases involving a taxpayer's eligibility for
head of household filing status and the earned income credit. Both
cases were settled in favor of the taxpayer by stipulation, without the
need for a trial, thereby saving court time. We have responded to IRS
notices requesting further proof from taxpayers filing as head of
household, claiming exemptions for dependents and claiming the earned
income credit. We have contacted a bank and corrected the amount of
income reported on a Form 1099 when it foreclosed on a low-income
taxpayer's residence, then prepared an amended tax return reducing the
discharge of indebtedness income recognized when the bank sold his
house. We have filed Offers-in-Compromise on behalf of taxpayers
dealing with the Collection Division of the IRS. We have assisted low-
income taxpayers with formal and informal installment payment
agreements with the Collection Division. We have also handled innocent
spouse claims, one of which is still pending, and have reviewed the
possibility of utilizing Due Process Hearings in innocent spouse and
other similar hardship cases with a longtime Pittsburgh Appeals
Officer, recently trained for Due Process Hearings. We have responded
to an IRS Service Center Form 1099 matching audit conducted by mail on
behalf of a taxpayer, who had a relative prepare her 1999 return. We
correctly reported her gross income, substantiated the claimed
deductions and deducted additional expenses originally overlooked. She
still owes tax, but now it's much less. In addition, we are in the
process of amending her 2000 Form 1040 to deduct additional expenses,
similar to those overlooked in 1999. We have also assisted a number of
taxpayers with their filing status, their options for claiming
withholding exemptions on Form W-4 and their option of receiving their
earned income credit in advance during the year by increasing their
``take-home pay.''
We have placed flyers in the IRS Pittsburgh Appeals/District
Counsel Office, which handles appeals and Tax Court cases, and the
Taxpayer Service Walk-in Room, which handles general questions,
provides tax forms and processes hand delivered payments. Additionally,
students distributed flyers to elderly facilities, shelters, the
Department of Welfare, churches and other social/government subsidized
nonprofit organizations. All students are involved in marketing and
some have obtained radio and print exposure. We arranged publicity
through the local media with an interview on a local news and talk
radio station and through an in-depth article, including contact
information, in the Pittsburgh Post-Gazette. We have also advertised in
a few neighborhood newspapers distributed free to the public in areas
likely to house eligible taxpayers. This marketing experience is
invaluable for students, since not introduced through the academic
component of law school.
The Internal Revenue Service has also been very helpful by
including LITC Stuffer Notices with IRS Appeals Division notices, as
well as displaying and distributing our PITT LITC flyers in their
offices. The Tax Court also includes LITC Stuffer Notices in ``S''
(i.e. small) cases to be held in Pittsburgh. While preparing this
testimony, we received an inquiry from Malvern, Pennsylvania, clear
across the state from Pittsburgh, involving a taxpayer with a mental
health disability and a 1996 tax liability accruing penalties and
interest. With technology today, we can represent an out-of-town
taxpayer or contact a closer LITC. Telephone calls like this show the
effectiveness of including LITC Stuffer Notices with IRS notices;
eligible taxpayers most needy of our free services can be directly
informed.
Handling LITC cases also trains students in meeting and
interviewing clients. Students develop the skills of earning a client's
confidence, asking questions in a patient and unobtrusive manner,
framing the issues, designing a solution or alternate solutions, then
eliciting pertinent information and obtaining substantiating
documentation. A few female students have also gained experience
addressing and earning the confidence of older male clients.
Many low-income taxpayers do not have cancelled checks, leases and
other documentation normally submitted to the IRS. Students gain the
experience of utilizing alternate sources of substantiation such as
affidavits. Low-income taxpayers do not always have the luxury of
living in traditional family units, (i.e. one or two parents with
children). Different generations of families and stepfamilies and other
nontraditional living arrangements further complicate the ability to
provide traditional substantiation to the IRS. The availability of our
LITC services enables low-income taxpayers living in nontraditional
arrangements to prove their filing status, eligibility for tax benefits
and resolve controversies.
Since the time frame to completely resolve an issue with the
Internal Revenue Service usually exceeds one (1) semester, students
gain the experience of picking up a case midstream, that another
student started. At the end of each semester when pending cases are
passed to the next LITC class, they also gain the experience of
preparing closing memos outlining each case's history and law, its
current procedural and administrative status and items to be completed.
Alleviating the stress associated with personally communicating
with the IRS generally improves the quality of life of low-income
taxpayers and their families. The low-income taxpayers benefit and the
students benefit by gaining practical, clinical training. The IRS may
benefit by prompt responses and more efficient communications, since
students understand the IRS regulations and can accurately respond to
IRS inquiries, thereby reducing the need for follow-up requests.
In closing, the University of Pittsburgh School of Law would like
to thank Congress, the Committee on Ways and Means and this
Subcommittee for the opportunity to provide important legal services to
low-income taxpayers that were not available before the Low Income
Taxpayer Clinic program was established. Our confidential and
professional relationship with our LITC clients and our independence
from the Internal Revenue Service distinguish our services from the
free services provided by IRS employees. As you may be aware, before
the LITC program, low-income taxpayers were generally limited to
seeking free tax assistance from the IRS.
The Internal Revenue Service and the Tax Court have been extremely
helpful in implementing this program and advising low-income taxpayers
of our free services. The IRS has also been very accommodating in
corresponding with students representing taxpayers. The managers of the
Pittsburgh Taxpayer Service, Appeals and District Counsel Divisions
have agreed to meet with our fall 2001 LITC class to explain how their
respective divisions operate and make themselves available for
questions.
We recommend including stuffer notices in IRS collection notices
generated by the Collections Division sent to low-income taxpayers to
directly inform a large group of eligible taxpayers that would benefit
from our services, since other independent, confidential representation
rarely exists.
Chairman Houghton. Thanks very much, Mr. Rich. Mr. Book.
STATEMENT OF LESLIE BOOK, ASSISTANT PROFESSOR OF LAW, AND
DIRECTOR, FEDERAL TAX CLINIC, VILLANOVA UNIVERSITY SCHOOL OF
LAW, VILLANOVA, PENNSYLVANIA
Mr. Book. Good evening, Mr. Chairman and distinguished
Members of the Subcommittee. Thanks very much for your
continued interest in low-income taxpayer clinics.
In light of the time of day and prior testimony and written
testimony, I am going to summarize a few important points and
highlight some areas that I think are worth highlighting.
Villanova University where I am affiliated is one of the
few organizations that, prior to the Restructuring Act, hosted
tax clinics. Since the 1998 Restructuring Act, the growth of
tax clinics has been remarkable, and I am pleased to be able to
be part of this growing and exciting community, and I would
like to talk about some of the issues and challenges raised by
the growth and the operations of the program.
Today, LITCs across the country represent thousands of
taxpayers involving all stages of the tax controversy process
and all sorts of issues, including varied issues like earned
income tax credit, innocent spouse, injured spouse, offers in
compromise, educational expense deductions, substantiation of
business expenses and others. Moreover, LITCs are helping
nonfilers reenter the tax system.
I wanted to highlight just a few attributes of our client
base and talk about how I think LITCs can really play an
important role in the system.
Many of the clients of LITCs such as Villanova's are least
able to help themselves. A number of our clients, like other
clients at LITCs, are relative newcomers to the country who may
speak English as a second language. These ESL taxpayers, while
diverse in their backgrounds, often share significant language
barriers and fear of government and have little understanding
of our Nation's voluntary system of tax self-assessment. Many
other of our clients, like those at other LITCs, are recently
off the welfare rolls in welfare-to-work programs. Others are
recently separated or divorced. A significant number of our
clients lack access to computers and to the Internet that many
of us now take for granted in our lives and have limited
literacy skills and educational backgrounds.
What that means for the most part is a number of these
taxpayers are ill-equipped to handle and work through the
oftentimes confusing and lengthy controversy process. The
procedural and substantive provisions of the Internal Revenue
Code, as we all know, are quite complex, and LITCs play an very
important role in ensuring that those taxpayers have a voice in
the system.
What I would like to do is really acknowledge the strong
administration of the program that the IRS has been able to
provide since day one. I think it has been a challenge to get
up and running a grant administration program as well as an
organization that is reviewing the performance and operation of
the LITCs. What has happened is because of the great success of
the LITCs and the funding provisions there has been enormous
growth in the program.
In the 3 years in which LITC funding has been available,
the growth has been substantial. In the first year, the IRS
received 43 grant applications and approved 34 grants totaling
approximately $1.46 million. In the second, year the IRS
received 88 grant applications and approved 81 grants totaling
approximately $5 million. Last year, the IRS received 141 grant
applications and approved 102 applications covering a full $6
million authorized under section 7526.
Largely because of the success and remarkable growth of the
LITC program the IRS has been placed in a very difficult
situation that I believe will only get worse. According to the
IRS, of the 102 organizations which received funding for 2001,
almost 50 percent of those organizations would have received
additional funding if the $6 million authorization cap in
section 7526(c)(1) were higher and more appropriated funds were
made available. Moreover, according to the IRS in 2001 the $6
million funding limitation prevented eight otherwise qualifying
organizations from receiving any funding at all.
The effect of this is that many otherwise needy taxpayers
in parts of the country are not able to receive representation.
Many organizations that receive only partial funding are not
able to serve fully their communities.
There are 12 States without any LITC at all; and many large
cities, especially those with significant ESL communities and
high populations of those recently moved from the welfare
rolls, could support more LITCs. If things merely stayed the
same, the IRS would continue to be placed in the unenviable
position of rejecting in whole or in part worthy organizations'
grant applications and denying the possibility of extending the
benefits of LITC activities to deserving communities.
Accordingly, in my written testimony I recommended that
Congress consider raising the authorization limitation from $6
million to $15 million and likewise consider specifically
appropriating funds so the IRS does not have to make difficult
decisions in terms of allocating resources to LITCs apart from
other areas in which the IRS is intending to modernize.
In sum, I believe the LITC program has been an unqualified
success, and I look forward to continuing to work with the IRS
and with Congress in ensuring its future success.
Thank you.
[The prepared statement of Mr. Book follows:]
Statement of Leslie Book, Assistant Professor of Law, and Director,
Federal Tax Clinic, Villanova University School of Law, Villanova,
Pennsylvania
Mr. Chairman and Distinguished Members of the Subcommittee:
Thank you for providing me the opportunity to testify on the
important topic of low-income taxpayer clinics (LITCs). LITCs have been
one of the true success stories of the Internal Revenue Service
Restructuring & Reform Act of 1998 (RRA), and I am pleased to be able
to share with the Subcommittee my experiences serving as a Director of
a tax clinic hosted by an academic institution.
Let me introduce myself. Since August, 2000, I have been an
Assistant Professor of Law at Villanova University School of Law in
Villanova, Pennsylvania, and Director of our school's Federal Tax
Clinic. Prior to joining Villanova, I was a professor at Quinnipiac
University School of Law in Hamden, Connecticut, and Director of its
Tax Clinic. Both of those academic institutions are unique in that they
are among the dozen or so organizations that sponsored tax clinics
prior to RRA's authorization to the Treasury to allocate up to $ 6
million for matching grants up to $100,000 to qualified organizations.
Villanova University School of Law has been a recipient of LITC grants
since the program's inception, and has received $87,250 for the year
2000 and is scheduled to receive $100,000 this year.
I. The Importance of LITCs
Prior to RRA and the work of pioneers in the tax clinic community,
including two other distinguished witnesses here today, Professor Janet
Spragens and the current National Taxpayer Advocate, Nina Olson, many
in the tax community were surprised to hear about low income
individuals' need for legal representation. Now, however, I believe
there is a growing awareness of the need for professional tax
representation for the low income taxpayer community. Today, LITCs
across the country represent thousands of taxpayers involving all
stages of the tax controversy process in issues involving the earned
income tax credit, innocent spouse and injured spouse provisions,
offers in compromise, educational expense deductions, substantiation of
business expenses, and others. Moreover, LITCs are helping non-filers
reenter the tax system.
Many clients of LITCs are those often least able to help
themselves, including relative newcomers to the country who may speak
English as a second language (ESL). These ESL taxpayers, while diverse
in their backgrounds, often share significant language barriers and a
fear of government, and have little understanding of our nation's
voluntary system of tax self-assessment. Other clients include those
who have re-entered or just entered the workforce from the welfare
rolls, and recently separated or divorced taxpayers. A significant
number of LITC clients lack access to computers and to the internet
that many of us now take for granted in our lives, and have limited
literacy skills and educational backgrounds. A large percentage of LITC
clients have limited means of transportation, and are overextended,
balancing the demands of both work and family in single-parent
households. These factors hinder significantly their ability to work
with the often complex substantive and procedural provisions of the
Internal Revenue Code, which apply even to low-income persons. Merely
answering IRS-generated correspondence, gathering facts through
contacting witnesses and collecting documentary evidence in support of
a matter can be difficult in the face of some of these factors.
While the amounts in controversy for these matters are often small
(for a typical matter in the Villanova Tax Clinic, the amount in
controversy is about $4,000, although some matters can involve much
more), for our clients the amounts are significant. A few thousand
dollars for a single working mother just getting by can mean the
difference between being able to move to a better and safer
neighborhood, clothes for the family, or steady access to
transportation or child-care.
In the last year, the Villanova Federal Tax Clinic was contacted by
over 100 taxpayers seeking our services. We were able to represent 42
of those taxpayers, as well as continuing to provide services to six
taxpayers whose representation continued from the prior year. Six of
those taxpayers were ESL taxpayers. These matters included all stages
of the tax controversy process. In the past year, working with the IRS,
the Tax Clinic was able to make a significant difference in our
clients' lives. A few highlights included successfully restoring the
earned income credit for a number of clients; abating a crippling tax
assessment to young man who sold assets in a custody account upon
turning 18 but who initially failed to file a tax return; successfully
prevailing at Appeals on an equitable relief innocent spouse claim for
a victim of domestic abuse who was unable to gather on her own the
evidence needed to demonstrate eligibility; and many offers in
compromise and installment agreements that gave our clients the ability
to overcome past mistakes and the opportunity to become responsible
taxpayers.
A number of the taxpayers we did not represent were taxpayers who
had no basis in positions but who genuinely did not understand the
often complex rules applicable to their situations, including issues
involving filing status, earned income tax credit and the financial
disability rules applicable to refund claims.
In addition to LITCs helping resolve individual cases for otherwise
unrepresented taxpayers, they provide other benefits that are just as
tangible, only somewhat indirect. Through their individual
representation and outreach to communities such as the growing English
as a Second Language population, LITCs contribute to a general sense of
confidence among taxpayers that the tax system is responsive to all
members of society. In the past year, the Villanova Tax Clinic
sponsored informational outreach sessions to community service
organizations working with victims of domestic abuse and the ESL
community. Prior to our sessions, these organizations and their
constituents were largely unaware of some of the more important tax
issues applicable to their communities. Moreover, through the presence
of LITCs working cases both in the court system and before the IRS,
LITCs help ensure that the tax system is aware of issues and needs of
constituencies that often do not have a voice in the system. LITCs help
reduce the administrative burdens on the IRS and the court system often
associated with pro se taxpayers. Through LITCs at academic
institutions, enrolled students gain valuable educational experiences
and practical skills necessary for professional representation, and are
often exposed to the value of public service and the importance of pro
bono activities.
II. The Growth of LITCs
The RRA LITC funding provision has contributed enormously to the
growth of tax clinics. In the three years in which LITC funding has
been available, there has been remarkable growth: in the first year of
the program, FY 1999, the IRS received 43 grant applications and
approved 34 grants totaling approximately $ 1.46 million; in the second
year, FY 2000, the IRS received 88 grant applications and approved 81
grants totaling approximately $5 million; in the third year, for the
calendar year 2001, the IRS received 141 grant applications and
approved 102 applications covering the full $6 million authorized under
section 7526.
Treasury and IRS have done an admirable job of creating the grant
review processes and putting in place personnel necessary to manage and
administer the grant program. Working with the American Bar Association
Section of Taxation and the American University School of Law, the IRS
has co-hosted annual meetings allowing the LITC community to come
together to consider substantive, procedural and grant-related issues
in a collegial atmosphere. The IRS has put in place program guidelines
in grant application packages, and has generally been responsive
informally to LITC-generated questions and concerns.
Nonetheless, largely because of the success and remarkable growth
of the LITC program and the annual $6 million authorization limitation
of section 7526(c)(1), the IRS has been placed in a very difficult
situation that will only get worse. In FY 2001, 141 applicants sought
grants totaling $9.8 million, almost 40 percent more than the statute's
authorization amount. According to the IRS, of those 102 organizations
awarded funding for 2001, almost 50 percent of those organizations
would have received additional funding if the $6 million cap were
higher and appropriated funds were available. Moreover, according to
the IRS, in 2001, the $6 million funding limitation prevented eight
otherwise qualifying organizations from receiving any funding at all.
The effect of this is that many otherwise needy taxpayers in parts of
the country are not able to receive representation, and many
organizations that received only partial funding are not able to serve
fully their communities. There still are 13 states without any LITC at
all, and many large cities, especially those with significant ESL
communities and high populations of those recently removed from the
welfare rolls, could support more LITCs.
If things merely stay the same, the IRS will continue to be placed
in the unenviable position of rejecting in whole or part worthy
organizations' grant applications and denying the possibility of
extending the benefits of LITC activities to deserving communities. It
is likely that these problems will be exacerbated in the immediate
future if the $6 million cap is not increased substantially. In
response to concerns previously raised by many in the LITC community
regarding the need to be in a position to hire more qualified personnel
and to better plan resources, starting in 2001, as permitted by section
7526(c)(3), the IRS has awarded to a number of institutions multi-year
grants up to a period of three years. Starting in 2001, the IRS has
also switched the grant program year from a fiscal year ending 9/30 to
a calendar year, which should also assist LITCs in their planning,
especially those hosted by academic institutions. Yet, it is likely
that the number of qualified organizations seeking LITC funding will
increase and the amount of funds sought by already funded organizations
will increase, especially among potential and existing LITCs at non-
academic non-profit (NANP) organizations.
The growth in NANP LITCs has been truly astounding: in 1999, there
were only 13 NANP's awarded grants, and by 2001, the IRS awarded 67
grants to NANPs. This development is one of the most significant
aspects of the LITC program. Essentially, many of these organizations
receiving grants (or organizations related to the grant recipient),
were involved in other aspects of support for the low-income taxpayer
community. The availability of funding through the LITC program has
increased awareness among those providing a panoply of other services
to this community about the importance of the tax system toward
achieving societal goals benefitting low-income people. This awareness
is growing, and those who have not traditionally been associated with
tax representation are now an important part of the support system for
low-income taxpayers, a development that will I believe create lasting
benefits for the tax system. As the tax system increasingly is used as
a tool for social policy benefitting low-income and the working poor,
the intersection of tax and other areas of the law, including family
law and public-benefits law, will become increasingly important. The
NANP LITC growth will help ensure that our nation's working class
citizens are afforded access to representation that considers their
overall well-being, including tax matters.
The upshot of the LITC success, however, is that barring an
amendment to section 7526(c) authorizing additional funding, the IRS
has been and will continue to be placed in the difficult and unpopular
position of turning away qualified organizations from funding. To
ensure that there are adequate resources available for all
organizations, the authorization limitation of section 7526(c) should
be raised to allow the Treasury to allocate $15 million a year to LITC
grants, which will allow for full funding for those qualifying
organizations that were denied in whole or part in 2001, while
providing a cushion for measured growth to permit the possibility of
funding LITCs existence in areas not yet served or underserved.
A. Possible Objection to Funding
While there has been general support for LITC funding, one possible
objection to increasing the amount authorized for appropriation under
section 7526 would be that Congress might not wish to indefinitely fund
LITCs or fund LITCs beyond a start-up period. The existence of federal
funding has allowed organizations to leverage the federal dollars and
successfully compete in the marketplace for matching dollars to be used
for qualified LITC activities associated with representing low income
clients or providing outreach to the ESL community. Section 7526's
matching requirement ensures that no organization can remain complacent
and completely dependent upon federal assistance. Nonetheless, in light
of the great expenses associated with running a tax clinic and the
scarce resources of many of these organizations, without Congressional
funding it is likely that many of the LITCs would fold or scale down
their operations. Continued IRS administration of the grant program
will also ensure that organizations remain competitive, as the IRS will
likely reward those organizations that demonstrate strong quality and
improvement. In sum, continued funding is a good long-term investment
for the taxpayers and the tax system overall.
III. Publicity for LITCs
One issue that has been important for LITCs is publicizing their
existence among the target client community. Publicity is vital for
LITCs to reach their statutorily-mandated audience and ensure that
access to representation is readily available to those in need. One
avenue for publicity is through IRS-generated distribution and posting
of LITC-generated literature, including posters and so-called
``stuffer'' letters similarly advising unrepresented taxpayers about
the existence of clinics. The stuffers provide information to
unrepresented low income taxpayers about the LITCs, such as phone
numbers, addresses, and hours of operation, while also generally making
clear that, while the IRS partially funds LITCs, the IRS and LITCs
operate independently and that a taxpayer's decision to use or not use
the services of an LITC will not affect the taxpayer's rights.
While many LITCs have been conducting targeted outreach programs to
both better educate taxpayers about their rights and responsibilities
and also increase the community's general awareness of LITCs, the
possibility of including stuffers in certain types of IRS-generated
correspondence is an important means of accessing unrepresented low
income taxpayers in need of representation. In the old Student Tax
Clinic program, the IRS Manual authorized the IRS, in certain
correspondence, to include stuffer letters advising taxpayers about the
existence of Student Tax Clinics. There is no such authorization
regarding LITCs. Instead, many LITCs have negotiated on an ad hoc basis
with local IRS functions the placement of stuffers in select
correspondence. (For some LITCs, the Tax Court includes a stuffer
letter describing the availability of tax clinics in its notices
setting ``S'' cases for trial to unrepresented taxpayers).
I understand that the IRS has developed a policy encouraging the
use of LITC flyers at various walk-in offices and is in the process of
studying ways to create and implement fairly an LITC stuffer program.
In some areas, such as in Connecticut and Rhode Island, the LITCs and
local IRS management have met to facilitate the creation of combined
LITC stuffer notices. These notices have been placed in correspondence
covering all IRS controversy functions, including EITC correspondence
examination letters originating from the Andover Service Center,
Appeals Office acknowledgment letters, certain collection due process
correspondence, and pre-trial Counsel correspondence to unrepresented
taxpayers who have cases on the Tax Court ``S' calendar. In
Pennsylvania, the Villanova Tax Clinic has similarly been successful in
placing stuffers in certain correspondence, including Appeals
acknowledgment letters, and is working with local IRS management on the
possibility of expanding the placement of stuffers.
That notwithstanding, the lack of a public IRS National Office
unified position tends to hinder the ability of local LITCs to
negotiate with local IRS management on the placement of stuffers. I am
encouraged by National Taxpayer Advocate Olson's commitment to this
issue, and while I believe that there are certainly logistical concerns
regarding implementation on a nation-wide basis (especially as the IRS
is still implementing the many RRA-mandated changes to its
organizational structure and compliance activities), a strong statement
of support from other senior IRS management on the issue might
facilitate the placement of LITC stuffers locally pending a more
comprehensive IRS implementation plan.
I have found that once local IRS employees work with LITCs, they
generally favor clinic involvement and encourage publicizing LITCs to
taxpayers. LITC participation helps the compliance process for IRS
employees in a number of ways. LITCs are often contacted by prospective
clients who have no basis in certain positions or matters whatsoever.
Taxpayers are more inclined to listen to LITCs than IRS employees no
matter how courteous or dedicated the IRS personnel may be. Sometimes,
LITCs are better able to dedicate resources to explain exactly why a
taxpayer's position has no merit. This process helps ensure that IRS
and possibly judicial resources are spent more productively. When LITCs
do take on matters, they are often able to research the issues and
develop the facts in a way that facilitates IRS or judicial
consideration of the merits. Moreover, LITC involvement helps shepherd
taxpayers through the incredibly complicated and often lengthy
procedural maze of tax controversies. This shepherding helps ensure
that taxpayers stay the course and understand the implications of
actions and decisions. For the most part, I believe that fully informed
IRS employees would favor early LITC involvement in the process, and
the use of stuffers in appropriate correspondence.
I also believe that certain matters are particularly appropriate
for LITC involvement and more active IRS publicity efforts, including
pre-trial Counsel and Appeals correspondence to taxpayers who have
docketed ``S'' Tax Court cases, equitable relief innocent spouse relief
requests, EITC correspondence audits and doubt as to collectibility and
so-called hardship offers in compromise. While LITCs should assist the
IRS in addressing some logistical concerns, such as possibly creating
combined stuffer notices and identifying with particularity the types
of matters where stuffers are appropriate, without active and creative
IRS facilitation, I fear that the stuffer matter will continue to be
addressed on an ad hoc basis. I look forward to continued cooperation
with the IRS on these matters; for while LITCs and the IRS may be
adversaries on individual matters, we are partners in ensuring the
continued health of the tax system. Access to representation that
publicity can provide helps ensure that taxpayers entitled to important
rights and substantive benefits are given an opportunity to exercise
those rights and receive benefits (like tax credits) to which they may
be entitled.
IV. The Possibility of Creating a Separately Funded LITC-type Program
For Return Preparation Activities for Low Income Taxpayers
The IRS currently funds voluntary return preparation services for
taxpayers through its VITA and TCE programs. In addition, through the
LITC program, the IRS has taken the position that the preparation of
tax returns for ESL taxpayers constitutes a permitted qualifying
activity and is part of a program to inform ESL individuals. Thus,
there are effectively three permitted activities under the LITC
program: 1) the representation of low income taxpayers in controversies
before the IRS; 2) outreach, not including the preparation of current
year tax returns to the ESL community, including presentations on
substantive and procedural issues to taxpayers; 3) and the preparation
of current year tax returns for ESL taxpayers. There have been recent
proposals by private organizations and proposed legislation, the Low
Income Taxpayer Protection Act of 2001, S. 802 (sponsored by Senator
Bingaman), to create a separate federally-funded program to assist
organizations that perform return preparation work for all low income
individuals.
There is a substantial need in the low income community for
improved access to free and qualified return preparation services,
including greater access to free e-filing. To the extent that Congress
does in fact adopt additional legislation authorizing direct funding
for return preparation clinics on a basis similar to that provided to
LITCs, this new return preparation program, and not the LITC program,
should be the exclusive means to support current year return
preparation activities for all low income individuals, including ESL
taxpayers. This would ensure that IRS management of the LITC program is
simplified and targeted mainly to LITCs performing representation and
ancillary non-return preparation outreach work to ESL taxpayers. It
would also allow current LITC's that exclusively perform return
preparation activities to avoid some of the administrative concerns
associated with the possibility of commingling of resources dedicated
to some activities that are not qualifying activities under the LITC
program (e.g., the preparation of tax returns for non-ESL low income
taxpayers). If such an approach were adopted, I would anticipate a high
level of synergy and cooperation among 1) LITCs doing representation
and non tax-return preparation outreach; and 2) organizations funded
under this new provision that would be dedicated to return preparation
for all low income individuals. This approach reflects the strong need
for both preparation and controversy activities, while also recognizing
that preparation and controversy are different functions often
performed by different organizations or individuals within
organizations.
V. Delays Affecting Consideration of Offers in Compromise
While not exactly related to the administration of the LITC
program, the IRS's implementation of some of RRA's provisions has
direct effect on LITC clients. Recent GAO testimony before the Senate
Finance Committee (Information on Selected IRS Tax Enforcement and
Collection Efforts, GAO-01-589T (Apr. 5, 2001)) highlighted the delays
taxpayers have experienced who have claimed innocent spouse relief or
submitted an offer in compromise (OIC) request. While the IRS is
administering innocent spouse requests on a more timely basis, the
delays associated with considering OIC requests seem to be getting
worse.
It is not uncommon for clients of the Villanova Federal Tax Clinic
to be told that they will have to wait close to a year for the IRS to
consider their OIC requests. From the tax system's perspective, the
delay in OIC consideration has a particularly pernicious effect among
low income taxpayers. Many have significant credit problems as a result
of an IRS filing of a notice of federal tax lien and genuinely wish to
resolve their delinquencies on a timely basis so they could put past
mistakes behind them. The long response time contributes to an
inability for our clients to manage their financial affairs and weakens
confidence in the tax system. The delay also often necessitates
duplicative requests for information, as the financial information on
the OIC request is often stale when the IRS eventually gets around to
considering the matter.
While there has no doubt been a surge in OIC requests since RRA,
LITCs and their constituents would greatly benefit from the IRS
improving and expediting the review process.
I wish to thank the Chair and distinguished members of the
Subcommittee for inviting me today to testify and discuss these
matters.
Chairman Houghton. Well, thank you very much. I am going to
do this in the order of distance you have to travel. So, Mr.
Heavner, since you probably have to get back to Richmond, why
don't you go next and then we will just go to the others.
STATEMENT OF TIMOTHY B. HEAVNER, EXECUTIVE DIRECTOR, COMMUNITY
TAX LAW PROJECT, RICHMOND, VIRGINIA
Mr. Heavner. Thank you, Mr. Chairman and distinguished
Members of the Committee. Thank you for the opportunity to
appear and testify before you today regarding the low-income
taxpayer clinics.
I appear before you attempting to fill some very large
shoes of my predecessor Nina Olson as I am the Director of the
Community Tax Law Project, and I am also here today as the
current director of the Low-Income Taxpayer Clinic National
Resource Center.
I have submitted a more comprehensive statement, but I
would like to highlight just a few points concerning the
benefits that to low-income taxpayers clinics provide, and I
will call them LITCs for the sake of this discussion.
Many of the benefits LITCs provide are direct and obvious.
They provide direct representation to low-income individuals
regarding their tax liabilities and obligations to which they
would not otherwise have access. They also conduct outreach to
these same taxpayers and those who work within that community
to educate and inform these taxpayers of their tax obligations.
The efforts of the LITCs have been an unmitigated success.
Since the adoption of IRC Sec. 7526 as part of the IRS
Restructuring and Reform Act which provided funding for the
LITCs, the clinics have been able to assist thousands of low-
income taxpayers through direct representation and outreach.
These are the direct and tangible benefits that flow from the
outstanding work being done by these clinics.
I wanted to share with you some less obvious benefits that
are derived from the work of the clinics based on my personal
experience. Prior to taking my current position as director of
CTLP, I worked as an attorney in a field office for the
Richmond, Virginia, Office of Chief Counsel for the IRS. In
that role, I was responsible for numerous cases which involved
low-income taxpayers who often were attempting to represent
themselves.
I experienced firsthand the frustration, fear and anxiety
of these taxpayers based on their participation in this
process. I also quickly discovered how ill-equipped these
taxpayers were to handle these matters. Normally, I was able,
with significant effort and expenditure of time, to help
taxpayers understand at least the basic nature of their claim
and the process in which they were involved. They were often
unable to gather information necessary to support their
position and often did not trust what I was telling them was in
their best interest.
There were many instances in which, although I did not
doubt the veracity of the taxpayer, the complete inability to
support their position with anything other than their oral
testimony was insufficient to satisfactorily resolve their
issue and may have not gotten to the right answer. This often
led to the need to go before the Tax Court for resolution of an
issue that should have been able to be resolved by the parties.
When working with the same types of issues with other low-
income taxpayers that were represented by an LITC, there was a
much different result. By working with LITC attorney
representing the client, I was able in a much more efficient
manner to narrow the real issues in controversy; and then that
attorney was able to assist the client to fully develop their
case, especially on factual issues, and present it in a well-
reasoned response to the issues raised by the IRS. Most of the
time the attorneys, the two attorneys, myself included, were
able to resolve the matter without the need for litigation. If
litigation was required, it was based on a well-developed case,
both legally and factually.
The efficiencies created by the work of the LITCs were not
limited to this prelitigation stage. I attended several Tax
Court calendars where LITCs were present and ready to discuss
potential representation with pro se taxpayers. Some of these
taxpayers may never have had any contact previously with the
Service other than receiving the letter or with counsel in
preparation of their case.
All of those involved in the process were beneficiaries of
the presence of the LITC representatives. The Tax Court
appreciated the ability of taxpayers to confer with the
representatives if they chose to do so. They often led to the
ability to resolve the matter, again without the need of court
intervention.
In cases that the LITC were involved in, had the LITC not
been involved the Tax Court would have probably had to dismiss
the case for either failure to prosecute or would have had
terribly insufficient information on which to base its
decision. The representative of chief counsel also very much
appreciated the LITC presence because many times the LITC
representative was able to confirm to the taxpayer, from an
independent source, that what the counsel attorney had been
telling them was the correct result and was in their best
interest, and again was able to avoid litigation.
Finally, the biggest beneficiaries obviously were the
taxpayers served by the LITC. The ability to consult with an
independent counsel provided an incredible amount of legitimacy
and confidence to the process that would have otherwise been
lacking. Too often I heard pro se taxpayers that didn't have
the benefit of an LITC representative say that they didn't
really get their day in court or that ``I was railroaded.''
Avoiding this feeling by the taxpayer and making sure that
they feel they are fairly treated is vitally important in our
system of tax administration.
I also want to highlight the efficiency of the LITCs as a
delivery system for these much-needed services. The key to the
success of the LITC is the leverage they provide in maximizing
the benefit of the grants given. LITCs are able to use
volunteer services. In the academic clinics they are able to
use the student representatives; and for the nonacademic, not-
for-profit organizations they use a combination of in-house
counsel and volunteers attorneys and accountants to provide pro
bono representation.
The use of this donated time and effort allows LITCs to
provide services worth significantly more than the actual
dollars received in grants. Based on the requirements under IRC
Sec. 7526, these funds are awarded on a matching basis and this
further leverages the use of the funds.
Before section 7526 was enacted, CTLP had significant
difficulty in obtaining grant funds. Although we received
compliments on what we were trying to do, our activities
wouldn't normally fit within the mission of potential grantors.
Now that we have funds from Sec. 7526 we have been able to
exceed our matching grant and actually receive funds in excess
of the matching as we seek grants.
The limit on available funds under Sec. 7526 has already
caused the IRS to limit the amount of awards given to some 50
percent of the authorized grantees and caused eight otherwise
eligible groups to fail to receive funds. This lack of funds
will also inhibit the expansion of the programs into States and
cities that do not have the services available. To ensure that
adequate resources are available to allow for necessary growth
and expansion into these areas, the authorization limit under
7526 should be increased to $15 million, and this number should
be indexed to account for inflation. This increased
authorization would be sufficient to meet these goals.
I thank you for the opportunity to speak with you
concerning Low-Income Taxpayer Clinics, and I also thank you
and look forward to your continued support of the clinics.
[The prepared statement of Mr. Heavner follows:]
Statement of Timothy B. Heavener, Executive Director, Community Tax Law
Project, Richmond, Virginia
Mr. Chairman and Distinguished Members of the Committee:
Thank you for the opportunity to appear and testify before you
today regarding low-income taxpayer clinics (LITCs). I appear before
you today in my capacity as the Executive Director of The Community Tax
Law Project (CTLP). CTLP is a 501(c)(3) corporation founded in 1992 for
the purposes of: (1) providing pro bono representation to low-income
Virginia taxpayers in federal, state, or local tax disputes; (2)
educating low-income individuals about their rights and
responsibilities as U.S. taxpayers; and (3) increasing public awareness
of and encourage informed debate about the tax policy and practice
issues impacting low-income taxpayers.
I also appear before you today in my capacity as the current
director of the Low-Income Taxpayer Clinic (LITC) National Resource
Center. The Center was created to provide technical assistance and
training to start-up and ongoing LITCs, coordinate training and
publicity materials for LITCs on a wide variety of issues, and work
with the IRS, Treasury, and Congress in the implementation of the LITC
program and on low-income taxpayer issues in particular.
The common misconception is that low-income taxpayers do not pay
taxes and therefore cannot have any tax problems. The fact is that low-
income taxpayers confront many of the same issues faced by any other
taxpayer, and have a number of special concerns as they interact with
the tax system. Issues commonly encountered by these taxpayers include
improper worker classification, substantiation of deductions, hobby
losses, disability income, pension income, unreported tip income,
start-up business expenditures, among others. Of special concern to
low-income taxpayers are the areas of the Earned Income Tax Credit
(EITC), new entry into the tax system (especially English as a Second
Language [ESL] taxpayers), and innocent spouse relief. Although
taxpayers may need assistance and representation in addressing these
issues, and the implications of these tax liabilities are substantial,
they normally do not have the means to obtain paid advice or
representation.
Prior to the Internal Revenue Service Restructuring and Reform Act
of 1998 (RRA), there was limited awareness of the need for
representation and outreach to low-income taxpayers concerning their
tax obligations. At that time, only 15 tax clinics existed nationwide.
Thanks to the tireless efforts of advocates like Professor Janet
Spragens and my predecessor, Nina Olson, Congress realized the
importance of increasing this awareness and the availability of
representation to low-income taxpayers and recognized this need with
the enactment of I.R.C. Sec. 7526 as part of the RRA. Based on the $6
million of funding authorized under Sec. 7526, there are now 102 LITCs
which are funded for the purpose of providing representation and
outreach to low-income taxpayers.
Thanks almost exclusively to these grants, LITCs have been able to
address the needs of low-income taxpayers in a variety of ways. Most
directly, LITCs represent taxpayers in disputes with the Internal
Revenue Service at all levels of the administrative and judicial
process. Our experience indicates that most of the taxpayers we
represent are, for a number of reasons, unable to develop and provide
to the I.R.S. sufficient information to adequately support their
position. LITCs are adept at gathering and presenting this information
for the represented taxpayer. They also assist the taxpayer in
understanding the process that they are involved in and educating them
regarding their tax obligations.
Another important role that LITCs serve is client counseling and
negotiation. We can explain to the client in a way they can understand
the issues, and discuss with them the alternatives available. Without
this understanding, taxpayers cannot decide how to proceed or what is
required of them. For example, many clinics have bilingual staff to
assist ESL clients. LITCs counseling often includes advice similar to
that given by the I.R.S., to which the taxpayer was not receptive based
on fear or distrust. Thus, through an independent review, LITCs often
impact positively on the tax administration system by confirming for
the taxpayer that they have made errors and do have a tax liability.
I can confirm this from my past personal experience as a attorney
with Chief Counsel for the I.R.S. During my three years with Chief
Counsel, I regularly worked with pro se, low-income taxpayers who were
involved in Tax Court litigation. As a public servant, I took very
seriously not only my responsibility to represent the I.R.S., but also
to ``get the right answer.'' Pro se taxpayers were often overwhelmed
and fearful of the process. Normally I was able, with a significant
effort and expenditure of time, to help taxpayers understand at least
the basic nature of their claim and the process in which they were
involved. These taxpayers were often ill-equipped or unable to gather
the information necessary to support their position and often did not
trust that what I was telling them was in their best interest. There
were many instances in which, although I did not doubt the veracity or
sincerity of the taxpayer, the complete inability to support their
position by anything other than their own oral testimony was
insufficient to resolve their tax issue in a way that may have been the
``right answer.'' This often led to the need to go before the Tax Court
for resolution of issues that the parties should have been able to
resolve without the need for court involvement.
When working with the same type of issues with other low-income
taxpayers that were represented by CTLP, the result was much different.
By working with the attorney representing the client, I was able in a
much more efficient manner to narrow the real issues in controversy and
tell the attorney what type of information I would need to see to
support the taxpayer's position. The attorney was then able to assist
the client to fully develop any factual issues and present a coherent,
well-reasoned response to issues raised by the I.R.S. Most of the time
when working with CTLP, I and other Counsel attorneys were able to
resolve the matter without the need for litigation. If litigation was
required, it was based on a well-developed case, both legally and
factually.
From this personal experience, I can unequivocally state that the
tax administration is significantly enhanced by the direct
representation of low-income taxpayers provided by LITCs. Taxpayer's
level of confidence in their outcomes were increased. On cases that I
worked with CTLP, the savings of time to Counsel attorneys, other
I.R.S. personnel, and the Tax Court was immeasurable. LITCs are able to
aid the tax system in getting the right answer in a way that is
impossible for the I.R.S. to provide.
LITCs do more than just direct representation. They provide
outreach to the low-income taxpayers which focuses on helping this
community better understand and fulfill its tax obligations. The ESL
community is a significant focus of these outreach efforts. Many
clinics translate their informational materials into at least two, and
sometimes as many as 5 different languages for distribution. I am
aware, for example, that the Pine Tree Legal Assistance LITC in Maine
has plans to produce its internet web site in 4 languages. CTLP Staff
Attorney Anita Soucy recently was featured on a nationally-syndicated
radio program for Spanish speakers discussing tax issues relevant to
the Hispanic community, which reached approximately 40,000 people in at
least six states. LITCs also do educational programs to the taxpayers
and those who work with taxpayers to educate them about various tax-
related issues common to ESL taxpayers.
Another area of specific outreach conducted by LITCs include
training welfare-to-work program participants. For example, the
Brooklyn Legal Services LITC is developing educational materials for
home based day care centers and other welfare-to-work programs, to make
them aware of their tax compliance obligations, including self-
employment tax and record keeping requirements. CTLP has met with case
workers involved in the welfare-to-work program in Virginia to educate
them about the issues that the program participants will face upon
entering the workforce or starting their own business.
Also, in carrying out its representational function, many clinics
conduct trainings and outreach to attorneys and accountants in their
area. CTLP conducts an annual CLE on tax issues that concern low-income
taxpayers that serves the dual purpose of training current and
potential volunteer attorneys and accountants, as well as a means of
outreach to others in the legal and accounting community. CTLP also
produces a newsletter, the Community Tax Law Report, which contains in-
depth and scholarly analysis of tax issues relevant to low-income
taxpayers. This type of outreach is valuable in increasing awareness of
the issues beyond the population we serve.
The impact to date of the LITCs has been very substantial. CTLP
handles over 200 cases per year. Based in part on the grant funding
received under Sec. 7526, we have been able to hire another full time
staff attorney, which will allow us to increase the number of cases
substantially. I recently spoke with an LITC that just received grant
funding and became operational in April, 2001, which had already
handled 25 cases. When you consider that the average case affects at
least two (and often more) individuals, these two clinics alone will
handle over 300 cases that affect over 600 individuals, with both of
these numbers increasing over time. This does not even factor in the
outreach efforts that touch countless others, both directly and
indirectly.
The key to the success of LITCs is the leverage they use to provide
the maximum benefit to the low-income community. A significant number
of clinics already have links within their communities to network with
other organizations that serve the low-income population. This
networking creates a synergy which enhances the return on the LITC
efforts. LITCs also rely on the provision of services on a volunteer
basis. The clinics that are part of academic institutions benefit from
student-provided services. Non-academic non-profit (NANP) organizations
generally use a combination of in-house counsel and volunteer
attorneys, accountants and enrolled agents to provide pro bono
representation to their clients. The use of the donated time and
efforts allows LITCs to provide services worth a significant multiple
of the actual dollars received in grants.
Based on the requirement under Sec. 7526 that funds be awarded on a
matching basis, the LITCs further leverage the federal funds they
receive. Prior to the RRA, CTLP made approximately 30 grant requests,
but was able to secure funding only from (our guardian angel) the
Virginia Law Foundation for $28,000. The receipt of the maximum award
of the federal grant under 1A7526 provided CTLP the opportunity to
obtain not only matching funds, but grants in excess of the matching
funds, from several sources, including the Commonwealth of Virginia,
The Community Foundation, National Association of Public Interest Law
(NAPIL), and the continued support of the Virginia Law Foundation.
Although the matching requirement may be challenging for some new
clinics, it is a constraint which has the positive effect of making
other organizations aware of the work that LITCs are doing and allows
us to maximize the benefits received from the federal grant funds
available under Sec. 7526.
In an efficient and effective manner, LITCs have already made a
tremendous impact in the communities they serve and will continue to
increase this impact as they become more established and reach broader
and deeper into those communities. Even with this tremendous impact,
more needs to be done. According to the I.R.S., almost 50% of those
programs awarded funds would have received additional funding, if more
funds had been available. In addition, the I.R.S. has stated that the
overall $6 million limitation under Sec. 7526 prevented 8 applicants
who were otherwise qualifying organizations from receiving funds.
Currently 12 states and several major metropolitan areas do not have a
federally funded LITC. This lack of funds will be even more severe in
FY 2002 due to multiple-year funding authorizations to existing
clinics. If all clinics received continued funding under these
multiple-year funding authorizations, approximately 2/3 of the
available $6 million dollars would be allocated to these existing
clinics. Another possibility is that clinics that received multiple-
year commitments may see their awards reduced based solely on
limitation of funds, not based on lack of merit.
This limit on available funds most likely will mean that otherwise
eligible LITCs will not receive funds and/or will receive significantly
less than they need. The lack of funds will also inhibit the expansion
of these programs into states and cities that do not have this service
available. To ensure that adequate resources are available to allow for
the necessary growth and expansion of LITCs into areas where there are
still needs, the authorization limitation under I.R.C. Sec. 7526 should
be increased to $15 million, and this number should be indexed to
account for inflation. This increased authorization would be sufficient
to meet these goals.
Although the implementation of the grant program under I.R.C.
Sec. 7526 allows for return preparation for ESL taxpayer under the
auspices of outreach, there is a great need within the low-income
community for access to free and qualified return preparation services
beyond that which is currently authorized. Many within the LITC
community feel that this is an area of need which should be addressed.
Any authorization for increased return preparation for low-income
taxpayers beyond that which is currently allowed should, however, not
be funded through the current Sec. 7526 authorization, but should have
access to a separate funding authorization designed to specifically
address this need.
We, as members of the LITC community, appreciate this opportunity
to tell you about the outstanding work being done in the area of low-
income taxpayer representation. We also are grateful for the continued
support available under I.R.C. Sec. 7526. We look forward to the
continued growth and vitality of the clinics that will allow us to
ensure that all taxpayers have access to qualified representation
concerning their tax obligations.
Chairman Houghton. Thank you, Mr. Heavner. Ms. Spragens.
STATEMENT OF JANET SPRAGENS, PROFESSOR OF LAW, AND DIRECTOR,
FEDERAL TAX CLINIC, WASHINGTON COLLEGE OF LAW, AMERICAN
UNIVERSITY
Ms. Spragens. Thank you, Mr. Chairman.
Mr. Chairman, I am the Director of the American University
Tax Clinic in Washington, D.C. ours is one of the older clinics
in the country. We started our program in 1990. We started it
as an educational program for law students to teach them about
representing taxpayers and practical applications, and at the
time we had no idea how great the demand would be for our
services. We were literally overrun by clients who came to us
and sought out help from us.
At the time, there were 14 tax clinics in the country; and
if a person had a problem involving a landlord-tenant issue, a
battered spouse issue, a criminal defense issue that they
needed help with, there were legal services organizations all
over the country who could help them. If they had a tax issue,
there was no one to help them. We were one, as I said, of only
14 all over the country. Since 1998, there are now 102 tax
clinics helping people all over the country, and that is just a
huge compliment to this Committee and this Congress in creating
this extremely valuable program.
Other Members of the Committee have talked about what the
clinics do and the importance of the clinics and the successes
that they have had and how valuable they are, and I am not
going to repeat that. I would only say that this Congress has
enacted three Taxpayer Bill of Rights provisions over the
years, and I can tell you that the most important taxpayer
right that was created in any of those provisions was to give
people access to lawyers, to access those rights. Because
unless people know about them and unless people can access
those rights, those taxpayer rights lose a lot of value.
The only problem today that exists in this extremely
successful program is that it is running out of money; and as
other Members of the panel have said, the statutory cap, which
is now $6 million in section 7526, badly needs to be adjusted
upward; and we are suggesting a cap of $15 million. As I said,
there were 14 clinics when we started, and a $6 million cap
seemed enough because the statutory limit for any one clinic
was $100,000. If every clinic got a full grant, that was a
million four, which didn't come close to the $6 million. No one
understood how quickly these clinics would grow and develop,
and we are now bumping up against the cap.
As Mr. Pomeroy said, there are still several States that do
not have clinics. There is not an overabundance of clinics. One
hundred and two clinics is two clinics per State. We could use
one in every city in the country, and in some of the major
cities we could use more per city. So we can certainly use more
clinics, and we need more money.
Clinic education for an academic institution is extremely
expensive. At my law school, I can stand up in front of a
hundred students and generate tuition dollars from a hundred
students, and all I need is a classroom and a blackboard. If I
am teaching in a clinic, first of all, I can only teach about
eight or nine students at a time. Because if you have each
student having three or four cases, supervising all those cases
by people who need a lot of supervision, who are novices at
that, limits the number of students that you can help in any
one time. In addition to that, you need computers, fax
machines, copiers, stationery, malpractice insurance. You need
everything that you need to run a law firm.
It is much more expensive for a law school to offer that
kind of education, and you also need a huge amount of space
within the law school. So law schools are not going to offer
this without some kind of supplemental funding to help them
defray these costs.
I think my time is almost up. I am going to stop there.
[The prepared statement of Ms. Spragens follows:]
Statement of Janet Spragens, Professor of Law, and Director, Federal
Tax Clinic, Washington College of Law, American University,
Mr. Chairman and Members of the Committee:
Thank you for inviting me to testify on the issue of low income
taxpayer clinics, their needs and performance record. I come before you
today in my capacity as a tax professor at the American University
Washington College of Law and Director of the American University
Federal Tax Clinic. The American University Federal Tax Clinic is an
academic clinical program. The program is open to third year students
at our law school who receive 6 hours of degree credit for their work.
In the program, student-attorneys, under the supervision of two faculty
members, Nancy Abramowitz and myself, represent low income taxpayers
who have controversies with the Internal Revenue Service. The clinic
charges no fees for its services. Since its inception in 1990, the
American University Federal Tax Clinic has represented over 700 such
taxpayer-clients, and it has given advice and informal assistance to
hundreds more. The American University Federal Tax Clinic predates the
Low Income Taxpayer Clinic funding program (Internal Revenue Code
section 7526) created in the IRS Restructuring and Reform Act of 1998.
Since the inception of that program, the American University clinic has
received three $100,000 matching grants under it.
When the American University Federal Tax Clinic first began to
represent clients in 1990, there were only 14 other such clinics in the
country. Since 1998, the year Congress enacted Section 7526, that
number has grown exponentially. This year 102 tax clinics around the
country were awarded low income taxpayer clinic grants by the IRS out
of a field of 141 applicants. The enormous growth in the number of
clinics spurred by the tax clinic funding legislation represents an
important commitment by the Congress and the entire tax community to
ensure that fair results are reached in tax controversies involving
taxpayers at all income levels, not only for those in upper income
brackets.
The tax clinic funding program has, in my judgment and in the
judgment of many, been a total and unqualified success. By any
standard, the IRS has made a serious commitment to it at the highest
levels, and has devoted significant resources to it to insure that it
runs smoothly, provides timely information and funding to the clinic
community, and addresses their questions and needs in a straightforward
and complete way.
The program itself has resulted in the creation of dozens of new
academic and nonprofit legal resource centers all over the country,
which thousands of low income taxpayers have tapped into for
professional help in the resolution of their tax matters. On an
individual taxpayer level, the program has helped to build taxpayer
confidence in the integrity of the tax system, and has resulted in the
fair resolution of disputes all over the country. And finally, the
program has helped to bring low income taxpayer issues into more
visible focus for policy makers, for tax professionals, for the media,
and inside the IRS itself. This is a remarkable record of achievement
for a program after only three years of operation.
Owing in large part to its success, the tax clinic funding program
is now in need of some minor adjustments and fine tuning which require
legislative intervention. And that is what I would like to discuss with
you today. In addition, I would like to discuss this Committee's role
in insuring that the needs of the low income taxpayer population are
properly served in the new era of the IRS under Modernization. As the
legal representatives of this population, the tax clinics are a direct
link to these taxpayers, and should be an invaluable source of
information on this topic.
Low Income Taxpayers in Profile
Before addressing any of these oversight issues, however, it may be
useful to describe some of the economic and cultural characteristics
that make up the population of taxpayers who are represented by the
clinics, and the types of issues raised in their audits and in the
controversy process.
To begin with, many workers in entry level jobs in this country are
immigrants for whom English is not only not a first language--indeed,
it would be a stretch to describe it even as a second language. (These
taxpayers are generally referred to as ESL taxpayers). Many of our
clients have no ability to speak English whatsoever, and require
translators to communicate with us (which we provide through volunteers
from our International LLM program).
These newcomers to the US are frequently entrepreneurial, starting
their own small businesses as street vendors, merchants, or food
service providers. They tend to use cash and money orders for their
expenses, rarely have credit cards or bank accounts, and almost never
have any records of their financial transactions--or even copies of
their tax returns. Many come from countries where there is no
requirement of annual self-assessment of taxes, and these taxpayers
often become nonfilers in the US. Language is an incredibly powerful
barrier for these taxpayers in all aspects of their life, but it is
particularly difficult for them in their attempts to understand and
deal with a highly sophisticated and complex administrative and
judicial tax system.
Whether English speaking or not, taxpayers working near or at
minimum wage levels tend to have limited education and literacy skills,
and minimal understanding of financial matters. Often these taxpayers
work unusual hours (such as less desirable shift work) and many work
two or more jobs, which they get to by public transportation. Housing
and food expense are often a reach, and these taxpayers commonly
qualify for some form of public assistance. Many of our clients share
living space in apartments or houses among several generations and/or
collateral relatives and friends, and they often take in boarders to
help defray their expensive rent, especially in major cities. Having a
phone is often a luxury, and their phones are often disconnected for
lack of payment. Job tenure is often short, and many float from job to
job. These taxpayers do not own their own homes and do not have
retirement plans, brokerage accounts, or other accumulated assets. Most
live paycheck to paycheck.
When such taxpayers receive a letter from the IRS that they are the
subject of an IRS examination and that they potentially might owe $1500
or $2500 or $4000 to the government in tax deficiencies, it is an
intensely stressful event, and they are understandably frightened.
Sometimes they simply discard the letter out of fear. For the same
reason, they also regularly fail to attend IRS conferences or return
phone calls. Moreover, immigrant taxpayers, even though they may be
legally living in the US, often also harbor a paralyzing fear of some
immigration-related penalty, and are unlikely to communicate with the
IRS in any way.
I would like to tell you that these instances of low income
taxpayer audits are rare, and/or that when audits do occur, the issues
are simple and easily resolved. However, exactly the opposite is true.
Even seasoned tax professionals are often surprised to learn just how
complicated low income tax returns and audits can be, as well as how
often these taxpayers are audited. Indeed the frequency of low income
taxpayer audits, compared to those of high income taxpayers, has been
the subject of several front page stories in the New York Times in
recent months.
These taxpayers come to interviews at our clinic wearing
construction work boots or uniforms, often with young children in tow
who draw on yellow pads, play with toys, or simply run around the room
while we are conducting the interview.
Before enactment of the LITC program there were very few places in
the country these taxpayers could turn to for legal help, or to whom
IRS agents could refer them. Most legal services offices did not have
tax specialists on their staff of poverty lawyers. And only a handful
of tax clinics existed around the country. Without the LITCs, these
taxpayers would be lost in a complex administrative and judicial world
they had no hope of understanding. The LITCs have truly been a lifeline
for these taxpayers.
It is hard to describe the gratitute these taxpayers feel for the
help they receive from their student-attorneys at the AU clinic. At the
conclusion of their cases, many write us effusive letters, send us
plants and other small gifts, bring us food they have cooked, and offer
us personal assistance should we have future plumbing or carpentry
needs at our homes. Some continue to send us greeting cards year after
year. If these taxpayers could, I am sure that they would also write to
you personally and thank you for setting up the LITC program.
The Issues Of Low Income Taxpayers
The number of audit issues on low income taxpayer returns is
surprisingly large and even more surprisingly, often extraordinarily
difficult to resolve. A major source of complexity is the earned income
tax credit, an income supplement program offering low income taxpayers
with children a refundable credit of almost $4000 per year. The
statute, however, is a minefield of technical eligibility requirements,
passive income limitations, and tiebreaker rules. The GAO reported in
November, 2000, that EITC claims ``have historically been vulnerable to
high rates of invalid claims'' and the IRS has been ordered by Congress
to devote a considerable amount of its enforcement resources to
monitoring the credit each year. Therefore the credit generates a large
number of taxpayer audits, resolution of which is by no means simple.
Adding to the difficulty of the statutory complexity is the fact
that a large number of EITC audits are conducted long distance, through
EITC centers. Long distance audits are, by their very nature, difficult
for the low income taxpayer community to handle. In the case of a long
distance EITC audit, for example, taxpayers seeking our services often
bring in IRS form requests for documents they have received, such as
for birth certificates, school records, and medical records of their
children. In many of these cases, the taxpayer has carefully collected
the information and sent off a timely response to the IRS to the best
of his or her ability. But it is often the case that ``substantiation''
of the existence of the child and/or his or her residence is only one
of the issues in the audit that the IRS is concerned about, which may
also include double claiming of the credit, or the application of the
tiebreaker rule.
Thus, despite fully complying with the ``substantiation'' request,
the taxpayer may still receive a Notice of Deficiency stating that
additional tax is due. Subsequent attempts to reach the agency and
discuss why the matter is still unresolved will cost the taxpayer long
distance phone charges which can grow to large amounts if, as commonly
happens, the taxpayer is required to spend a lengthy period ``on
hold.'' For low income taxpayers living on the financial edge, imposing
this toll charge for access to the system is a significant hardship and
many taxpayers simply give up. These taxpayers come to our clinic
expressing frustration, surprise, and puzzlement as to why the audit is
still ongoing since the taxpayer has provided all the information
requested.
Other seemingly straightforward tax issues, such as filing status,
dependency exemptions, and child care credits can become rather complex
issues in living situations that, as noted above, often differ markedly
from traditional ``Ozzie and Harriet''-type, nuclear, wholly functional
families. Discerning what constitutes a ``household'', or whether a
married couple is effectively separated, for example, can be
surprisingly difficult in these circumstances.
In addition, low income taxpayers are frequently audited in
connection with issues such as worker classification, tip income,
social security income, automobile expense, Schedule C income and
expense, charitable contributions, uniforms, gambling income, and a
host of others requiring supporting financial records or data. Again,
in a population where checks and credit cards are not used, and record
keeping and retaining receipts are not common, these tax disputes can
become quite time consuming and complicated as both the IRS and the
clinics struggle to find alternative types of proof that will satisfy
the statutory standard.
Divorced taxpayers interpreting the knowledge requirements of the
new separate liability/innocent spouse rules make up still another
large group of low income audit issues, as do collections issues
including the availability of offers-in-compromise, installment payment
arrangements, and collections-due-process relief. We are also
occasionally seeing cases involving the Alternative Minimum Tax.
For immigrant taxpayers, there may be additional issues involving
the lack of a validly issued social security number, or problems
arising from borrowed or shared social security numbers, or the
taxpayer's complete failure to file a tax return and the IRS's attempt
to reconstruct income.
Success of the LITC Program
Even in the short time low income taxpayer clinics (LITCs) have
existed to help individual clients, their contributions to the system
have been nothing short of enormous. First, IRS statistics about the
numbers of taxpayers assisted and of cases resolved surely confirm the
success of the program. But numbers alone do not tell the whole story.
I believe that the existence and growth of the LITC program has had a
far more basic and important ripple effect throughout the entire system
than the numbers themselves show; and that clinic representation of the
working poor serves many functions above and beyond actual advocacy in
individual cases.
First, clinic representation educates the working poor about their
tax issues and responsibilities, thereby promoting better future
compliance. IRS employees can of course talk to taxpayers about the
importance of recordkeeping and future compliance, but the trust that
is built between a lawyer and client lends itself far better to the
giving of this advice. Better education and understanding tend to
enhance our voluntary self-assessment system and to reduce the
taxpayer/tax collection agency tension that figured so prominently in
the 1997 Senate Finance Committee hearings leading up to enactment of
the 1998 Restructuring Act.
Second, the availability of clinic representation of taxpayers who
are frightened, confused, and often non-English speakers, tends to
promote quicker and fairer resolution of disputes. The working poor are
subject to some of the most complex provisions of the tax code. When
the law and the processes by which disputes are resolved are not well
understood, there is difficulty communicating, exchanging necessary
information, and coming to a reasonable result. The presence of a
representative facilitates the process on both sides and allows for a
speedier route to a resolution agreeable to the taxpayer and the
government.
Moreover, we have found that many taxpayers, on a fundamental level
have some basic misunderstandings of just how the tax controversy
process works. For example, any number of our clients whose cases have
reached the U.S. Tax Court will, in the initial interview, focus
exclusively on their perception that they have been abused by the IRS
rather than talking to us about the merits of their case. These
taxpayers believe that if they just ``explain'' to the judge how badly
they have been treated, they will win in court. Therefore they haven't
tried to resolve their case with District Counsel's office prior to
trial. This approach, however, does not sit well with Tax Court judges
who must reach a decision on the substantive issue.
Other taxpayers have trouble seeing the forest for the trees: they
refuse favorable settlement opportunities which concede major items
under review because the Service failed to concede a small single item
to which they firmly believe they were entitled. Proper tax counseling
as to the burden they have to meet at trial, the risks involved in
going to court, as well as the time commitment in preparing for trial,
often times leads taxpayers to settle their cases on very favorable
terms, where they would not have done do without our guidance.
These resolutions not only reduce the government's cost of
enforcement, but they also often increase the taxpayer's level of
satisfaction with the process. Satisfactory dispute resolution also
increases confidence in ``the system'' so necessary to taxpayers'
willingness to comply with the rules.
Third, the proliferation of clinics has had the effect of
increasing the visibility of low income taxpayers and their tax issues,
as well as ``democratizing'' the case law to include low income
taxpayer fact patterns and issues. Since the arrival of the LITCs,
there seems to be a far broader base of understanding of these issues
in recent years at the Internal Revenue Service as well as in the
media, the tax community and the public at large. Increased visibility
and publicity lay the foundation for better public debate about
administrative and even legislative issues impacting this sizable
population.
Fourth, the LITC program has fostered better communications among
LITC clinics and between clinics and the government in bringing problem
areas to the attention of the IRS. Clinics communicate among themselves
and with the IRS via electronic mail channels (there is a very popular
LITC listserv which is an important source of distributing
information), allowing quick identification of common problems and
quick access to appropriate government officials to alert them to
matters of common concern. This communication has also resulted in the
IRS being able to address issues (such as the need for toll free phone
numbers for taxpayers to resolve appeals issues) that are of major
concern to the low income taxpayer community.
IRS Modernization
The recent reorganization of the IRS into operating divisions based
on taxpayer classification has important ramifications for all
taxpayers, but has some unique and discrete issues for low income
taxpayers in particular--making the role of tax clinics all the more
important. The reorganization, based on taxpayer segmented groups,
essentially incorporates the idea that in a world of electronic
commerce, high speed computers, fax machines, cell phones, and
inexpensive telecommunications, that the IRS can better service its
``customers'' through end-to-end accountability based on segmented
taxpayer groupings rather than geographical areas.
In respect of low income taxpayers, the Wage & Investment (W&I)
Division will have the primary responsibility for dealing with these
taxpayers with the Small Business/Self Employed (SB/SE) Division
handing their controversy work. W&I services by far the largest number
of taxpayers of any of the four new Divisions, and it is the historic
IRS view of low income taxpayers, indeed, all individual taxpayers,
that they are the most compliant group, a group that typically
interacts with the IRS only once a year, who pay most of their taxes
through withholding, and who typically receive a refund at the end of
the year. Within the Service individual issues are also generally
thought more manageable and easier to resolve than those in the other
Divisions. This view will necessarily shape decisions regarding
allocation of Division resources.
For many taxpayers, the 21st century administrative
approach of Modernization will no doubt work well. However, low income
taxpayers do not, as a general rule, have access to computers and fax
machines, do not have budgets for long distance phone calls, and do not
have the resources to file electronic returns or retain professional
representatives to assist them with tax compliance or audits. Language
and cultural issues, moreover, seem to magnify where there is no face
to face contact. In short, these taxpayers are not part of the sleek
modern world of technology envisioned by the ``new'' IRS. Such
taxpayers tend to fare less well in a world of geographically remote
IRS offices dependent upon mail or long distance phone contact for
customer service. These taxpayers are better off with walk-in locations
and face-to-face contacts to resolve their problems.
To its credit, the IRS is aware of these issues and is grappling
with them as it moves to reorganize the entire agency. Throughout its
evolution the reorganization has been an extremely open process, with
the agency seeking input in literally thousands of interviews around
the country, including return preparers, tax clinics, professional
practitioner groups, taxpayer representatives, and many others. And the
agency has been receptive to outside suggestions. For example, when the
issue of long distance phone costs in resolving audits was brought by
the tax clinic community to the Service's attention, the agency created
a number of toll-free lines to address the problem.
Nonetheless, given the increasingly complicated and constantly
changing nature of the tax law, and the compliance burdens it places on
low income taxpayers, as well as the sometimes difficulty of reaching
and communicating with this group, the effect of Modernization on low
income taxpayers is an appropriate oversight issue.
In this regard, the LITCs have a vital role to play in providing
data and information as well as suggestions for administrative
improvement.
Current Needs OF the Tax Clinics
The contributions of the clinics to the system are not without
cost. LITC programs are exceedingly expensive to run (particularly for
law schools for a variety of reasons); and law schools, bar
associations, and others involved in the clinic movement are directing
large amounts of resources and personnel into the program. The American
University Federal Tax Clinic regularly contributes far more than the
required ``match'' to obtain its LITC grants.
Various legislative amendments to Section 7526 and other changes
could significantly aid the task of the clinics in carrying on their
work, and providing these important benefits to the system.
(1) Increase the Section 7526 Statutory Cap to $15 million
The most pressing need of the LITC program is for an amendment to
Section 7526(c)(1), increasing the annual statutory funding cap from $6
million to $15 million. In 1998, when section 7526 was enacted, there
were only 14 tax clinics in the country. With a per clinic limit of
$100,000 per year, the maximum grant amount the IRS could award, even
if every clinic applied for and received the maximum amount, was $1.4
million. The $6 million cap therefore seemed to be an acceptable, even
generous amount of funding for the LITC program.
No one could have predicted, however, the meteoric response of the
academic and nonprofit communities to the LITC program. This year,
however, with 102 recipients of grant money (from over 140 applicants),
and even more applicants expected next year, the IRS is concerned that
it will have to turn away qualified applicants, and/or cut back amounts
to some because of lack of funding. This should not be allowed to
happen.
The number of tax clinics in existence today is not excessive, and
indeed, is still too small. Having 102 clinics nationwide is
approximately 2 per state. But given the complexity of the rules and
the numbers of taxpayers nationwide needing assistance, as well as the
constantly changing substance of our tax laws, the system could easily
support one clinic in each city in the country, perhaps more in some of
our larger cities.
I hope that my testimony today has made clear why a significant
increase in the cap amount is appropriate and would be a good use of
funds. The benefits these clinics offer to their individual clients in
particular and to the system generally, far exceed their cost to the US
Treasury.
(2) Create a Separate Pprogram for Tax Filing Assistance outside
Section 7526
Since 1977, the IRS budget has funded two important volunteer tax
filing assistance programs, the ``Tax Counseling for the Elderly (TCE)
Program'', which provides tax information and filing assistance for
seniors; and the Volunteer Income Tax Assistance (VITA) program, which
offers tax filing assistance on a walk-in basis in libraries and other
public buildings around the country in the evenings and weekends each
year in the months before April 15.
Accurate filing assistance, as well as the post-filing controversy
assistance offered by the LITCs, are both critical needs of low income
taxpayers; and the TCE and VITA programs are both excellent programs.
But like the LITC program, more aid is needed.
Currently, the IRS has interpreted section 7526 to permit LITCs to
assist ESL taxpayers with their filing needs as an appropriate LITC
activity, though not other low income taxpayers. A better approach
would be for Congress to create a separate matching fund program, apart
from section 7526, with a separate funding stream parallel to the
section 7526 controversy assistance monies, which would be available to
any nonprofit, accounting school, or other institution which offered
filing assistance to any low income taxpayer. Such organizations could
also help small businesses run by low income taxpayers set up their
books and records and file quarterly employee and other IRS forms. The
separate program could then also administer TCE and VITA.
This streamlining of functions would simplify administration of
both programs, as well as provide needed funds for tax filing
assistance, currently an undermet need of this population.
(3) Insure that IRS has Adequate Budget for Translators to serve the
ESL Population
The issues involving ESL taxpayers are a growing concern of the
fair and proper administration of the tax laws. It is critical that the
IRS have the resources to communicate effectively with this population
of taxpayers.
CONCLUSION
I appreciate the opportunity to express my views to the Committee
today on the subject of low income taxpayer clinics. The tax system is
one of which we are all a part, and we all have a stake in insuring
that it operates efficiently and fairly for all classes of taxpayers.
Historically, providing pro bono attorneys to low income people has
been the best guarantee that their rights will be respected, that the
system will deal with them fairly, and that they will receive just
results when they interact with the legal system. LITCs are working for
those goals in the tax area, and the support and encouragement of this
Committee toward those ends is appreciated by the entire LITC
community.
Chairman Houghton. Well, thank you very much. Now, Mr.
Gold.
STATEMENT OF JEFFREY S. GOLD, CHAIRMAN, COMMUNITY TAX AID, INC.
Mr. Gold. Thank you, Mr. Chairman, and thank you for
sticking with us with this late hour. We appreciate the
opportunity to offer our views today on the functioning and
funding of the Low-Income Taxpayer Clinic program.
My perspective about providing pro bono services to low-
income individuals and families began about 30 years ago--more
than 30 years ago when I started Community Tax Aid in New York
City. So we predate the LITC program by a few decades. This
nonprofit group is the oldest group in New York. The group is
the oldest volunteer group of accountants and provides low-
income taxpayers with a complete tax service including
representation at the IRS State tax agencies and the Tax Court.
There is no paid staff and an annual budget of less than
$4,000. And that is my roots.
When I moved to the District in the early eighties, we
began a similar group. This past year, 250 volunteers helped
nearly 1,400 clients with a wide variety of tax problems
ranging from return preparation to offers in compromise and, as
I said earlier, representation in various situations. We have
our own training program and stress quality control.
Our talented volunteers make this possible and deserve all
the credit. They include CPAs and a growing number of lawyers,
economists and others. We regularly offer our services in
Spanish, Mandarin, Cantonese, Amharic--which is Ethiopian--
Arabic and Korean, and this year we are hoping to add another
couple of languages. Either our volunteers speak these
languages or we recruit interpreters.
We have developed mutually beneficial relationships with
community groups to help our outreach into the community. The
LITC program is well conceived, but it is a work in progress
and should be revisited regularly so revisions can be made. The
people we serve deserve no less.
The greatest need has already been mentioned by several of
my colleagues, to at least double or even triple the current
budget. And please keep in mind that most low-income taxpayers
have not done anything to complicate their tax lives. Yet our
tax laws, forms and instructions get more and more complex,
while nearly half of our adult population is either illiterate
or functionally illiterate, and this is the conclusion of the
National Institute of Literacy, an independent Federal
organization. This means about 90 million people in this
country, and this population includes far more than the ESL
population. Funds are needed to make sure that we can provide
more help with return preparation to low-income native English
speakers.
Amazingly, Congress expects the working poor to understand
and comply with the baffling array of tax laws when they
cannot--and most cannot--afford the professional tax help they
need, nor can the IRS VITA program offer the needed help. The
taxpayers often run into problems and are subject to severe
penalties. Three are at the top of my list, and I will leave my
statement in the written testimony to speak for that.
Community Tax Aid, we, as an independent not-for-profit,
can afford to spend the time with the clients they need to work
out situations such as extended payment schedules for an
installment agreement so they can get away from installment
payments and pay on estimated taxes which they rarely
understand, and this will relieve them from paying added
unnecessary expenses and save a lot of tax administration
dollars.
Some in the LITC program would have separate funding
vehicles for groups that deal only with controversies and
another for those that prepare tax returns or ESL work. I
suggest that we are speaking about one very large community and
that all should be kept, at least for the time, under a single
funding tent. All types of programs should work together toward
a common goal.
Effective outreach brings in people so they have access to
quality tax return preparation. What follows is that this
should reduce or prevent the need for costlier controversy work
and save considerable costs to the IRS and Tax Court.
At CTA, our limits are far lower than LITC caps, and we
generally do not lack for clients. We decided long ago that
people with the lowest incomes get the highest priority and
have kept to this principle even if a client with a higher
income and a more interesting issue arrives. Our primary goal
is to serve low-income clients, not give our volunteers a wider
range of tax issues to develop their skills.
Again, I urge that the funding for LITC programs be
expanded significantly to meet the needs. If our Nation can
spend $117 million to administer the tax rebate program as well
as the $500 million that is being talked about over 5 years to
speed up the processing of immigration applications, growing
the original $6 million annual grant for LITCs by a multiple of
two or three times should be elementary. We need to be more
than--substantially more than a band-aid solution.
I close with an invitation to Members of Congress and staff
to visit CTA in the metro D.C. area next tax season and see the
extent of problems that low-income taxpayers face.
Thank you.
[The prepared statement of Mr. Gold follows:]
Statement of Jeffrey S. Gold, Chairman, Community Tax Aid, Inc.
Mr. Chairman and members of the Subcommittee, thank you for the
opportunity to offer my views today on the functioning and funding of
the low-income taxpayer clinic (LITC) program.
My perspective about providing pro bono services to low-income
individuals and families began more than 30 years ago when the massive
changes in the 1969 Tax Reform Act inspired me to found Community Tax
Aid (CTA) in New York City. This nonprofit group is the oldest group of
volunteer accountants and continues to provide low-income taxpayers a
complete tax service. CTA/NY has no paid staff and an annual budget of
less than $4,000.
When I moved to the District of Columbia in the early 1980s we
began a similar group. It has grown from three sites in DC to 13 that
extend to five surrounding counties in Maryland and Virginia. This past
year, 250 volunteers helped nearly 1,400 clients with a wide variety of
tax problems from return preparation to offers in compromise and
representation before the IRS and state tax agencies. In the past we
also have represented clients at the Tax Court. We have our own
training program and stress quality control.
Our talented volunteers make this possible and deserve all the
credit. They include CPAs--from the big-five accounting firms as well
as smaller ones, industry, government and nonprofits--and a growing
number of lawyers, economists and others. We regularly offer our
service in Spanish, Mandarin, Cantonese, Amharic (Ethiopian), Arabic
and Korean. Either our volunteers speak these languages or we recruit
interpreters.
This past year we were approved for a $42,000 LITC grant and are
using this to improve and expand our service to the ESL (English as a
second language) community. We have developed mutually beneficial
relationships with many groups, such as churches, community groups and
legal services programs, to help our outreach.
With this introduction, allow me some observations and suggestions.
The LITC program is well conceived. But it is a work in progress
and should be revisited regularly so revisions can be made. The people
we serve deserve no less.
The greatest need is to at least double the $6 million
appropriation. The need is enormous and most low-income taxpayers have
not done anything to complicate their tax lives. Yet, our tax laws,
forms and instructions get more and more complex while nearly half of
our adult population is either illiterate or functionally illiterate.
This is the conclusion of the National Institute for Literacy, an
independent federal organization. These adults, says the NIFL, lack a
sufficient foundation of skills to function successfully in our
society. Since 90 million people are involved, the problem extends far
beyond the ESL population. Funds also are needed to provide more help
with return preparation to low-income native English speakers.
Amazingly, Congress expects the working poor to understand and
comply with a baffling array of tax laws. When they cannot--and most
cannot afford the professional tax help they need nor can IRS VITA
programs offer the needed help--the taxpayers often run into problems
and are subject to severe penalties. Three are at the top of my list:
First are the draconian ten-year and two-year prohibitions from
claiming the earned income credit when it is likely the taxpayer was
following poor advice from an equally unschooled friend or preparer.
Second is the ``user fee'' imposed less than a decade ago for paying a
tax bill on installments--even though most of the underpayments are due
either to improper treatment of employees as independent contractors
and to innocent underwithholding by working parents with children.
Third is the use of the math error label by the IRS to speed resolution
of problems.
These are aspects of our tax law that people with low income and
minimal literacy cannot understand. At CTA, for example, we can afford
to spend the time to work with the client to work out an extended
payment schedule so they have the money to pay quarterly estimated
taxes. This relieves them from added unnecessary expenses and saves
scarce tax administration dollars. If our client was improperly treated
as an independent contractor and no longer works for the employer we
can, with the client's approval, treat the client as an employee and
leave the employer to the tender graces of the IRS.
Some in the LITC program would have separate funding vehicles for
groups that deal only with controversies and another for those that
prepare tax returns or ESL work. I suggest that we are speaking about
one very large community and that all should be kept, at least for the
time, under a single funding tent. All types of programs should work
together toward a common goal.
Effective outreach brings in people so they have access to quality
tax return preparation. What follows is that this should reduce or
prevent the need for costlier controversy work and save considerable
costs at the IRS and Tax Court. This is far preferable to shifting
administrative costs to low-income taxpayers who can ill afford the
burden.
I leave it to others to speak about the LITC limits that require at
least 90 percent of cases to be within 250 percent of the poverty level
and that the amount at issue not exceed $50,000. At CTA, our limits are
far lower--$18,000 for individuals and $26,000 for families (with
discretion to go higher for large families--and we generally do not
lack for clients. We decided long ago that people with the lowest
income get the highest priority and have kept to this principle even if
a client with a higher income and a more interesting issue arrives. Our
primary goal is to serve low-income clients, not give our volunteers a
wider range of tax issues to develop their skills; this will happen
over time.
Again, I urge that funding for the LITC program be expanded
significantly to meet the needs. If our nation can spend $117 million
to administer the ``rebate'' program under the new tax law, and the
administration is requesting $500 million over five years to speed up
the processing of immigration applications, growing the original $6
million LITC appropriation by a multiple of at least two or three in
the next year should be elementary.
I close with an invitation to members of Congress and staff to
visit CTA next tax season and see the extent of the problems that low-
income taxpayers face.
Thank you.
Chairman Houghton. Thanks very much. Mr. Coyne.
Mr. Coyne. Thank you, Mr. Chairman.
Mr. Rich, your testimony includes a recommendation that the
IRS collection notices sent to low-income taxpayers include a
stuffer about the Clinic's services. How does the appeal
stuffer process work and would it work the same for collection
notices?
Mr. Rich. All the stuffer notices--it is a single piece of
paper that says that if you are within 250 percent of the
poverty level you can contact a low-income tax clinic, and it
gives the University of Pittsburgh and I also think in our area
it also gives the University of Duquesne number.
By putting those in the collection notices--right now, the
Tax Court issues--any Tax Court case calendared in Pittsburgh,
a small case, they get a stuffer notice. Over in the appeals
division that handles Tax Court cases with the IRS and also
handles appeals of exams from taxpayers, they have our stuffer
notices in the front window there; and the receptionist there
always informs people of our existence. And also down in the
first floor where walk-ins come in and ask questions, pick up
forms, we have our stuffer notice there.
But where we don't have our stuffer notices and the people
that aren't getting them are the people that are getting the
notices in the mail. Those are the notices that kind of just
sit, and a lot of times we get envelopes that are never opened.
Because people are just afraid when they get a notice from the
IRS and they know they are not entitled to a refund, it is not
usually good news.
Once they get us involved--and, believe me, as soon as they
find out all they have to do is sign a power of attorney and we
will take care of them, all they have to do is just give us the
information, it is a weight off of their shoulders. Right away
they will jump over backward trying to get the information to
you and trying to get this behind them.
So from that perspective, the stuffer notice, to me it is a
direct contact to the person that is going to have the problem;
and it is something that we are not wasting a lot of money
marketing and things like that. The tough part is-- and from
the IRS' perspective, Nina might know better than myself--but I
know a lot of people in collections, from the logistics, just
to put another piece of paper in a letter is a lot when you got
a whole lot of letters to do.
You don't want to give everybody a notice, yet at the same
time there has to be some way to distinguish between an
eligible taxpayer or somebody in that 250 percent of the
poverty level area and somebody that wouldn't be entitled to
it. But if could you overcome that burden, you could inform
taxpayers that have a real need, they open their first notice--
because normally a lot of times they might open the first
notice because they don't know what it looks like, but, believe
me, the second notice they know what it looks like. They look
at that and say, oh, I can call these people for help. You
know, it just gets them into the system.
A couple of people we have had are non-filers where they,
you know, they got a notice and they are looking for a tax
return and they realize they can come to us. Now what we do is
we send them to the VITA program to get the returns done but
then we coordinate with the IRS to make sure they are filed and
all these sort of things.
So it is actually also bringing people back into the system
that have been out. Just having a buffer of somebody that they
can come to and to inform them of that, I think is one of the
biggest hurdles; and by using stuffer notices we can directly
target the people that need our help.
Mr. Coyne. Has the IRS been receptive to including stuffers
in appeals notices?
Mr. Rich. Yes, the appeals people are very helpful and the
district council people have also been very helpful as well as
the taxpayer service people. It is just collections, and I know
in our area--98 percent of the people I have ever met at the
IRS are nice enough to be your mom and dad. I know in our area
collections has been tough over the years.
For example, last year, there were seven seizures. I mean,
seizures are very low, but in Monroeville, for Congressman
Coyne, one revenue officer had three out of the seven seizures
going. So I mean, we have a tough area to deal with; and by
helping or informing those collection taxpayers that we are
available, I think we could help a lot of people directly and
also help the IRS. Because the quicker they can dispense of
cases, we are helping them with their backlog.
Mr. Coyne. Thank you very much. Ms. Olson.
Ms. Olson. I just wanted to comment on that.
I serve on a team at the IRS that is addressing these types
of issues, and one of the things we have been wrestling with
about a stuffer is can we do it, first, on a national basis so
we are not having to sort by zip codes and just putting one
special one for the Pennsylvania clinics. Can we put one in
that would list all of the clinics that are eligible just on
the back of the stuffer?
We are trying to see whether or not stuffers are the most
effective medium to communicate with taxpayers. We are
wondering whether on a notice, in order to save costs, can we
put just a little box on the front that is highlighted that
says, call this number; and you will get a recording, you can
key in your zip code and we can pull up, you know, the clinic
in the area. It would be an 800 number just dedicated to that.
We are also looking at and we are asking for a counsel
opinion about--just a sort of security that our collection
folks or our customer service reps-- when a taxpayer calls up
and they are hearing that it is someone who is saying I don't
know what this is all about, you know, I don't have any money,
that we can unsolicited say there may be a clinic in your area.
And then we have on their screen the employee working there
would be able to pull down by zip code the clinics that are
available and we can give then the contact number.
So we are looking at some ways that might be more effective
to communicate this information in addition to the walk-in and
the brochures that we are putting out.
The only other thing I would say is that down the road our
printing capacities are being consolidated and that will allow
us to do many more of the sorts at a much more efficient manner
than it would be now with the sort of archaic printing
technology that we have. We do have a time line for that. It is
not as fast as maybe some of the people would hope. We are
looking for some intermediate ways to approach that.
Mr. Coyne. Thank you very much. Thank you, Mr. Chairman.
Chairman Houghton. Now we have got another time problem.
Mr. Portman has got to leave at 7:15. So, Mr. Portman, would
you like to inquire?
Mr. Portman. Thank you, Mr. Chairman. I will probably see
some of you at the airport. We are trying to catch flights.
First of all, I appreciate your testimony and what you do
every day. And we have one of the pioneers in Ms. Olson. I am
glad you stayed around in this area. This, as you know, came up
during the Commission quite a bit--in fact, Ms. Olson, help
us--and Ms. Spragens testified--I recall, Janet, you were
involved in the Commission deliberations on this. And probably
some of you did as well. I apologize if I don't remember your
testimony. But 7526--and it is also something that this panel
has taken the lead on, as you know. Without Mr. Houghton, Mrs.
Johnson, Mr. Coyne and now our new Member of the Ways and Means
Committee from North Dakota or the Dakota----
Mr. Pomeroy. North.
Mr. Portman. There would be no program. We not only started
it, but every year--but we are the ones that write the letters
to the appropriators saying give us the money. And this year,
as you know, the Subcommittee has given another $6 million, it
was reported out yesterday. So I think we are on our way to
getting that again. But it is very tight, as you all know who
work with the IRS.
Ms. Olson, the IRS budget is going to be very tough this
year. We again got a good mark up out of the Subcommittee, but
we have to do it every year, and this group pushes that.
But I have to make the point, that when we put this
together it was about controversies with the IRS. It was not
about tax preparation. You remember, Ms. Spragens, when we came
up with this idea it was a new idea building on an old system
that has been out there for years. Those of you--I don't know,
Mr. Gold, you said how many years you have been at it in New
York and then here. But this is decades old.
But it was to focus not on the broader issue of how to
prepare your taxes but when people with low income got involved
with the controversy with the IRS where they could go. And some
of the testimony, Mr. Book and others, have said, several of
you have said we should perhaps set up a separate program for
tax preparation or put more money in here for tax preparation.
That is something we need to think about and talk about as a
Subcommittee. Because that may be a different mission than what
we at least had anticipated.
I look at the language--and Mr. Coyne was on the Commission
with me. It says to represent low-income taxpayers in
controversy with the IRS. And then it says, or to operate
programs to inform individuals for whom English is a second
language about their rights and responsibilities.
It is under the ESL part of the statute that the IRS has
expanded into tax preparation which isn't really--I don't think
was the intent of the Congress. That is only by way of saying
that we would be supportive I think of expansion of the
appropriation. It is not going to happen this year, in my view,
but maybe next year we can provide some data about the need
that would help us in that regard. And the more applications
the better, more stuffers the better, which leads to more
interest in places like Cincinnati, Ohio, will get some of
these clinics applying so we can get them more and more
involved.
But the point is, I guess, that if you all think we are not
focused enough on controversy and we are getting into these
other areas and it should be a new program, we need to hear
from you because it may be better to start a new program rather
than try to expand on this one.
When you looked at the funding over the years, we started
off with $1.5 million, as I recall, try to find it here, then
it went to $5 million, then to $6 million last year. We funded
72 percent, those who applied, which is a pretty high
percentage. I don't know what you got in terms of your criteria
here. I assume there were a lot of good quality candidates who
were turned down, but 72 percent is pretty high. 59,000 was the
average.
One way to do this, of course, is to reduce the amount you
give so you can cover more people. Another is to increase the
match. It is now 50/50. Maybe we should be trying a higher
match for some. Other ways, to say after 3 years maybe you
should graduate, sort of get on your feet and to find more
private sources or other public sources.
Anybody have any thoughts on those ideas?
Let's assume for the next year we are going to live within
the $6 million budget. Mr. Rich.
Mr. Rich. I know, Congressman Portman, in Pittsburgh
getting private funds for this sort of thing would be next to
impossible. We have just been through two stadium deals in
Pittsburgh, and private funds and that sort of thing are very,
very tight. With the city budget and the county in the
Pittsburgh area, I think this is the only place that we can
look. Now I am sure the university has other places to look,
but I know personally that would be very, very tough to all of
a sudden cut somebody off in the third year.
Mr. Portman. Other comments on those options?
Ms. Spragens. I can only speak to academic institutions
because that is my frame of reference, but, as I indicated in
my testimony, I think that it is very expensive to provide
these kinds of programs. There are still many, many schools who
have not opted into this program because of the expense. So I
think that this idea of seed money to get things started in
hopes that the program will be able to be self-supporting is
not realistic.
I think you are going to see a dropoff in clinics if they
don't--at least academic clinics, if they don't----
Mr. Portman. I assume we are coming up on the third year
for some of the original applicants so we will be going through
that reevaluation process. Are you concerned about that, Ms.
Spragens, that some of these entities might not get their
funding?
Ms. Spragens. Am I personally concerned?
Mr. Portman. Yes, having been one of the originals.
Ms. Spragens. Actually, my program was awarded a potential
3-year grant last year. So I am not immediately concerned about
this.
But let me just say that this program--and I don't think I
have to convince members of the Subcommittee how important this
program is, but I think that it is more than just the
settlement and resolution of individual cases. I think we are
talking about building confidence in the system. I think we are
talking about bringing low-income issues into more focus, more
visibility before the IRS, before the media, into public
debate, democratizing the case law by bringing these issues up.
It seems to me this is a program that ought to be funded to
the extent people are willing to leverage private resources and
participate in it. I think these are dollars so well spent that
I am reluctant to respond directly to your question about how
we can get people out of this program by increasing a match
or----
Mr. Portman. I am talking about getting more programs
involved. The point would be to get more bang for the buck by
not having--let's say 70 some percent were able to get funded
this year. Let's say next year, next fiscal year we can only
get $6 million again, which I think is very likely, and we have
more applicants because there are more stuffers and more
interest and more people applying. How would you spread the
wealth? Would you have smaller grants? Would you have just a
lower percentage of grants given out? Would you require a
higher match? Would you graduate some folks off who could do it
on their own?
I mean, the easy answer is, you know, $15 million; and I
understand that. I think this Subcommittee would be your first
place to support that, but that ain't going to happen in my
view this year given the budget. Maybe you will have better
luck in the Senate.
But that is what I am just wondering, if there is ways to
restructure the program to respond to the need.
I don't need to take up any more of your time. I also have
to catch my flight. But, again, thank you all very much for
what you do every day.
I will yield to Mr. Pomeroy and the Chairman.
Mr. Rich. Congressman Portman, one thing, if you did have
to cut programs I would recommend reducing the grants versus
cutting sites. Because these things--cases are started in the
pipeline, and especially with offers in compromise and things
it takes a long time to deal with the IRS and to resolve a
controversy. So to stop something midstream with something that
has really caught on and really helps people would be I think
detrimental. I think the programs might be able to pick
themselves up by the bootstraps if you cut their allowance
versus cutting it off. You know, just reduce it. So if you are
thinking of something like that, I would tend toward reducing
it.
Mr. Portman. The funding would stay level but there would
be a lot more interest and more applicants as there have been
every year.
Mr. Rich. These programs like North Dakota--I am sure there
are a lot of people out in North Dakota that could really use
this--farmers, people that are self-employed, that don't have
any place to go that get in trouble with estimated tax
payments. You don't pay this year and it just snowballs up on
you.
Chairman Houghton. Thanks very much. Mr. Pomeroy.
Mr. Pomeroy. Have a safe flight, Congressman Portman.
I want you to know, panel, that this is an absolute first
in my legislative experience. This is a Subcommittee receiving
testimony after 7:00 at night after the last vote of the week.
Only the compelling power of the Chairman and the dazzling
presentations of the panel would have created this kind of
critical mass of legislative participation; and it really has
been very, very interesting.
Ms. Spragens, staff has been telling me of your involvement
prior to my time on the Committee in terms of taking this from
an AU program and advocating for some Federal support to get it
more broadly extended. Has it worked as you had hoped?
Ms. Spragens. Mr. Pomeroy, I think it is a dazzling
success. I couldn't be prouder of the number of clinics that--I
mean, I take no personal--I didn't do it.
Mr. Pomeroy. Modesty noted.
Ms. Spragens. The answer is, yes, I am very happy with the
program. As I said, it is now just a victim of its own success.
It has gotten so successful it just needs more money to keep
going.
Mr. Pomeroy. Have a safe flight, Professor Rich.
What are your matching sources?
Ms. Spragens. My organization?
Mr. Pomeroy. Generally, where do you get matching funds?
Ms. Spragens. The academic clinics are supported by the law
school, and the law school does not draw a distinction between
offering a clinic course and offering contracts or torts or
securities regulation or any other course. However, it is very
expensive education because of the low faculty-student ratio
and all the collateral costs. We don't have----
Mr. Pomeroy. Thinking back to my law schooldays there
wasn't a malpractice premium high enough to cover my exposure
if I was doing tax returns for other people or helping people
resolve conflicts, so I do understand that one. And then the
law school's participation is in kind toward the Federal grant
dollar then?
Ms. Spragens. We overmatch. We contribute so much money. I
am very proud of my school, that we have made such a commitment
to this program. Between salaries and secretarial help and
equipment, I mean we just overmatch. So we have never had a
problem with the match. I think nonprofit organizations which
are dependent on raising private funds are much more at risk
for developing a match.
Mr. Book. My experience at Villanova is similar. Our
institution is well above the match amount in light of salary
and equipment for the clinic computers and space and
secretarial assistance.
Ms. Olson. Congressman Pomeroy, when I ran the Community
Tax Law Project, the first year that I ran it I sent out 30
grant applications to both State, local and national
foundations; and I got 30 very polite ``your idea is wonderful
but, you know, we don't have the funds for it.'' Over the years
we slowly built up something from community foundations and
from the bar association and the bar foundation.
But I also went up to the general assembly of Virginia for
3 years in a row. The first 2 years we were turned down in our
request roundly, and it wasn't until the third year when I was
actually able to wave a piece of paper in front of them. You
see this? For every dollar you give us, we bring in another
dollar. We got this IRS match. Then we got the appropriation.
So now the Commonwealth of Virginia funds the Community Tax Law
Project to the tune of $50,000 a year.
Mr. Pomeroy. As I pitch this back to North Dakota to the
dean of the law school, what can you tell me about what the
students have gained from their participation in the program?
Mr. Book. From a student's perspective it is a great
educational experience. They are getting a lot of practical
training in skills like interviewing, counseling, negotiating.
They are getting an opportunity to work with a difficult
substantive area in the law. They are getting the opportunity
to get client contact at an early stage in their young careers.
They are also getting a very important sense of the
importance of pro bono work and public interest work that
hopefully can carryover in their professions. Many of my
students will be going on to doing work at corporate law firms
or nonpublic interest work, but a lot of them are still
involved and interested in the sorts of work that is done by
our clinic and other organizations. So skills and public
interest exposure is very important.
Mr. Pomeroy. Ms. Spragens, the same?
Ms. Spragens. The kinds of experiences they get are turning
out better lawyers. They are lawyers who have had client
contact. And you would be surprised what students don't know. I
mean, the smartest students who are going on to----
Mr. Pomeroy. Having been a student, no, I wouldn't be
surprised.
Ms. Spragens. To earn very large Wall Street salaries and
so on.
One student--whenever a student sends out a letter, I have
to approve it even if it is a form letter. And a student
brought in a letter, and it was a very good letter. I said
fine, send it out. And I don't even know why I said this, but I
said be sure to put a copy in the file, and the student said
good idea. You know, I mean it is just silly little things that
people don't know about how to keep a file, how to write a memo
to the file, what to wear to an interview. I mean, they are all
the things that Les said about learning about how to interview,
how to negotiate a settlement agreement.
But just basic lawyering skills are developed there, the
clinical model, in ways that they just aren't throughout the
law school curriculum. So it is very good education for the
students; and, of course, the by-product is that it serves a
need in the community that is in large part unmet and, as I
said, has these ripple effects as well. It is a win-win
program.
Mr. Pomeroy. Thank you very much. Thank you, Mr. Chairman.
Chairman Houghton. Thank you very much.
I have just got one question here because it is late. What
do you think about all of this, Ms. Olson?
Ms. Olson. I am a little biased. I think, as Janet does
that--Ms. Spragens does, that the low-income taxpayer clinics
are extraordinarily important. And the most important part of
it is the trust that taxpayers get back into the system, you
know, that they are getting a fair shake. It keeps people in
the system.
I wish that we had enough money to fund all of the ones
that are applying. I know that the Service's highest priority
in the next go-around is going to be with, you know, with the
applicants coming in, if there is any money, if some groups are
going out maybe because they are not performing in the way we
need or something like that or if we make those hard choices
about cutting the amount that we give--and I don't have any
inside track on that at this point--that we are going to the
areas that are geographically unrepresented, that we at least
get them in every single State. That is a very important
criteria for us at this point.
I have always had ambivalence about the funding of the tax
preparation. As Congressman Portman pointed out, I don't think
that was the original intent of the statute, to fund tax
preparation. I do know that that was a call that chief counsel
made within the IRS to interpret education and outreach as tax
preparation. And I think that a good fit would be to relook at
the statute and create a separate provision for tax preparation
and that we think about that as a different issue. But I don't
recommend defunding tax preparation now. I think that these
programs that are being funded have a great degree of value.
Chairman Houghton. Thank you. Mr. Gold.
Mr. Gold. One of the ways that programs preparation, which
is what we do primarily at Community Tax Aid, but we do
representation as well and can work together with controversy
clinics entirely--with Ms. Spragens' clinic, their students are
able--as with any law school, are admitted to practice only
before the IRS and Federal and the Tax Court. They cannot
practice before State courts. They had an issue with an offer
and compromise for both Federal and State, and we are working
cooperatively where one of our lawyer volunteers is handling
the State offer and compromise so that the taxpayer is indeed
getting a full, complete service with friendly cooperation and
it works out very, very neatly.
In terms of funding, by the way, our group has been very,
very--found it very, very difficult to get funds from the
accounting world where, with a growing number of large law
firms in the metro D.C. area, we are going to start seeking
funds from some law firms. But it has been very, very
difficult.
One other last thought and brief one that I would like to
leave you with is, for the 90 million taxpayers who fit in the
category of illiterate or functionally illiterate, for them
taxes are a foreign language; and we have to make sure that
they speak that language. A term like ``head of household'' or
``dependent'' has a highly technical meaning; and most of these
people don't have the slightest clue and find it very, very
difficult to understand how to comply. Even the booklet
explaining the earned income credit runs--I forget how many
pages this year--54 pages, something like that. It is close to
60 pages. That is a heck of a read for somebody who doesn't
read and comprehend and understand very quickly.
Chairman Houghton. Thank you.
Ms. Spragens or Mr. Heavner, have you got any final words?
Ms. Spragens. No, Mr. Chairman, I don't think so. Thank you
for the opportunity to----
Chairman Houghton. We thank you very much for being here
and--all of you--really appreciate it, the late hour.
How about you, Mr. Heavner?
Mr. Heavner. Mr. Chairman, I would like to thank the
Committee again for having us.
Just as a final thought that I didn't get to highlight,
that as we increase--I think it was Ms. Spragens who mentioned
the taxpayer Bill of Rights, and we have been seeking to
increase taxpayer rights with each consecutive step, and
opportunities for due process for taxpayers. Without the likes
of the clinics, all the clinics doing the different things they
are doing, how can we really have access to due process without
the continued efforts of the clinics?
So we thank you for your support and staying at this late
hour and hanging with us to hear our comments.
Chairman Houghton. Thank you.
[Whereupon, at 7:30 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of the Center for Law & Human Services, Chicago, Illinois
Why Federal Support is Needed to Expand Free Community-Based Income Tax
Assistance for Lower Income Taxpayers
Background
The growing complexity of federal tax law has created a significant
burden for millions of hard working, low-income taxpayers seeking to
comply with the tax code. For example, the Earned Income Tax Credit
(EITC) arguably the most important federal benefit program for millions
of working poor families and individuals, is explained in a 56 page
instruction booklet that includes up to six separate worksheets.
The Problem
Not surprisingly, taxpayers claiming the EITC rely on paid tax
preparation services at a significantly higher rate than the general
population. Paid tax preparers typically charge $100 or more to prepare
a tax return that includes the EITC, a significant financial burden for
low-income taxpayers. Many also pay up to $200 extra for a Refund
Anticipation Loan (RAL), a short-term loan that is aggressively
marketed to EITC recipients. In total, it is not unusual for low-income
taxpayers to spend up to 3% of their annual income on tax related
services.
Although the IRS provides in-kind support and training for the
Volunteer Income Tax Assistance (VITA) program, community-based
organizations must secure operating revenue from local sources. The IRS
does not currently provide any direct financial support for the
program. Local VITA programs are staffed almost entirely by volunteers,
many of whom contribute dozens of hours of their time during tax
season. Most VITA programs prepare simple returns and will not provide
assistance to millions of self-employed persons with 1099 income. VITA
programs rarely prepare prior year returns or amended returns for low-
income taxpayers who are due a refund.
The Treasury Department recently issued a report indicating a
relatively high non-compliance or error rate among taxpayers filing
EITC returns. Factors impacting the error rate include: the
administrative complexity of the EITC, literacy barriers faced by many
low-wage workers, the high cost of tax preparation services that drives
many people into preparing their own returns, and the lack of free tax
assistance in many communities. Many low-income taxpayers also fail to
file a return, leading the IRS to announce that up to 1.6 million
taxpayers had not claimed $2.4 billion in refunds from tax year 1997.
Under the capable leadership of IRS Commissioner Rossotti, the IRS
has greatly expanded its commitment to customer service. Hundreds of
IRS employees provide taxpayer assistance and education. During the
1999 tax filing season, IRS staff completed 850,000 federal income tax
returns. As the IRS implements its ambitious reorganization plan with
limited funding for the effort, there appear to be diminished resources
for taxpayer assistance.
The Solution
The many problems of low-income taxpayers present a clear and
compelling rationale for the IRS to expand its support for free
community-based income tax assistance. The current Low-Income Taxpayer
Clinic (LITC) program funds tax preparation assistance only to English-
as-a-Second-Language (ESL) taxpayers. A grant program can and should be
built on the experience and successes of the LITC program, while
remaining administratively distinct from it. A new funding initiative
such as this could be administered by the IRS and support cost-
effective programs operated by local non-profit sponsors, allowing them
to secure matching funds provided by private and public sources. An
initial investment in the amount of $6 million, matched by an equal
amount of local funds, will train and place sufficient volunteers to
complete as many as 480,000 tax returns.
A $6 million investment by the IRS could save the agency untold
millions of dollars by leveraging the resources of non-profit
organizations who are positioned to recruit thousands of new
volunteers. Grant supported tax preparation assistance programs would
be expected to provide professional supervision for volunteers, and to
further assure the taxpayers receive a full range of needed assistance.
For example, grant supported programs would complete prior year returns
for non-filers; amend prior year returns for taxpayers who made errors
or omissions; and complete relatively complex returns for self-employed
taxpayers.
Further, such a program could: 1) reduce the time IRS staff must
spend to field calls and deal with inquiries from low-income taxpayers;
and, 2) encourage more non-filers to join the more than 120 million
law-abiding American taxpayers.
Access to capable free tax preparation assistance will improve
overall compliance rates, and also improve levels of participation in
the EITC by eligible families. This initiative will also increase
opportunities for low-income taxpayers to file their returns
electronically as community based tax preparation assistance programs
will have an incentive to expand their currently limited technological
capacity. This, in turn, will further drive down IRS return processing
costs and further the agency's goal of expanding e-filing rates among
all taxpayers.
Such a program would also be welcomed by many states that have
modeled aspects of their state income tax on the federal tax code.
Recently, Glen L Bower, Director of Revenue for the State of Illinois
testified before the U.S. regarding tax complexity and the EITC. With
Illinois having recently joined twelve other states with state EITC's,
Director Bower called for the federal government to ``provide
additional resources to allow the IRS to assist taxpayers who cannot
afford to get to a (paid) preparer,--and assure Illinois and other
states receive accurate returns.''
Recently enacted tax legislation provides certain valuable new tax
benefits for lower income families, but unfortunately adds additional
layers of complexity--and new forms to be completed and filed. It is
incumbent upon Congress to expand support for free community based tax
preparation assistance for all lower income taxpayers. Such support can
bring tens of thousands of low-income workers into the taxpaying
"mainstream" by successfully addressing the obstacles and barriers they
face.
For more information contact: David Marzahl, Center for Law & Human
Services dmarzahl@centerforlaw or (312) 252-0280 Michael O'Connor,
[email protected] or (773) 262-2199
University of Missouri-Kansas City
School of Law
Kansas City, Missouri 64110
July 25, 2001
Allison Giles
Chief of Staff
Committee on Ways and Means
U.S. House of Representatives
Washington, D.C. 20515
Dear Ms. Giles:
We submit this letter in response to your invitation for comments
from participating institutions in the Low Income Tax Clinic Program.
The Graduate Tax Law Foundation of the University of Missouri--Kansas
City Law School established an LITC two years ago. The clinic has been
contacted by nearly 200 persons seeking assistance with federal tax
matters. It has entered into representation agreements with
approximately 75 persons. Almost all of the clients have serious
financial difficulties. For example, during the period January 1, 2001
to June 30, 2001, two-thirds of the single clients had yearly incomes
less than $16,000. The clients with two-member families often had even
lower yearly incomes--more than one-half of the families with two
members had yearly income of $15,000 or less. Such individuals could
not afford to obtain assistance through private lawyers or accountants.
Many of the clients are divorced mothers supporting children often
without any support from the child's father. It makes a tremendous
economic difference for these persons to receive an earned income
credit that was erroneously denied. We also have divorced mothers
seeking innocent spouse relief. The process by which the Internal
Revenue Service reviews innocent spouse claims is lengthy and many such
claimants would simply have to give up if the clinic were not
available. For example, the clinic assisted one client in making a
request to the Cincinnati Service Center. The service center then
requested additional information that was provided. Nearly one year
later the service center sent the request to a local Internal Revenue
Service office, which requested still more information. This taxpayer
was unemployed when the case was transferred to the local office and
could not have paid a representative to continue pursuing the claim.
Low income tax clinics permit such individuals to at least complete the
process of seeking relief.
This clinic also serves an educational function within the law
school by training law students in the tasks of interviewing clients
and making presentations before a federal agency. This type of hands on
experience is a valuable supplement to the student's academic training.
We hope that Congress will continue to fund low income tax clinics
and that, if possible, the amount appropriated for this purpose will
increase.
Respectfully submitted,
Edwin T. Hood
Faculty Advisor
Kansas City Tax Clinic
University of North Carolina at Greensboro
Greensboro, North Carolina 27402-6165
July 10, 2001
Dear Representatives:
The Department of Accounting at the University of North Carolina at
Greensboro has established a Low-Income Taxpayer Clinic with grants
received from the Internal Revenue Service. The Clinic has received
grants from the IRS since 1998. We are currently in the first year of a
three-year grant. The Clinic is the only Low-Income Taxpayer Clinic in
North Carolina and South Carolina. We are writing to provide to you
information on the number of taxpayers assisted.
The focus of the Low-Income Taxpayer Clinic at UNC-Greensboro is on
English as a second language taxpayers. For ESL taxpayers we provide
any type of tax assistance needed, including income tax return
preparation, filing for a taxpayer identification number, and help in
dealing with the IRS. In 1999, the Clinic assisted approximately 100
taxpayers. In 2000, that number rose to over 600. Since January 2001,
we have assisted more than 1,100 ESL taxpayers (see attached
spreadsheet). The Clinic has also reached thousands more with
informational brochures, presentations, and advertisements. During the
2001 tax season we began presenting information to non-resident
students at area colleges and universities to assist them in filing
their income tax returns. We estimate that we have reached over 500
non-resident students. The Clinic also provides the Department of
Accounting the opportunity for its students to receive hands-on
experience in working with clients, as well as the IRS.
Please feel free to contact us if you have any questions concerning
the Low-Income Taxpayer Clinic.
Sincerely,
Angel Tharrington, CPA
Low-Income Taxpayer Clinic
Low-Income Taxpayer Clinic
UNC-Greensboro
Assistance Provided
January 1, 2001-June 30, 2001
Estimated ESL Taxpayers Assisted
------------------------------------------------------------------------
Income Tax Returns
--------------------------------
Date Location (Federal
W-7's and Nonresident
State) Presentation
------------------------------------------------------------------------
2/4/2001 St. Julia's 85 42
Catholic.
Siler City, NC..
2/10/2001 FaithAction..... 20 11
Greensboro, NC..
Clemson 130
University.
Clemson, SC.....
2/11/2001 Christ the King 26 25
Catholic Church.
High Point, NC..
2/13/2001 A&T State 24
University.
Greensboro, NC..
2/17/2001 Blue Ridge 47 32
Community
Health Ser..
Hendersonville,
NC.
2/22/01 & 3/26/01 NC State 200
University.
Raleigh, NC.....
3/5/2001 Southeastern 45
Baptist
Seminary.
Wake Forest, NC.
3/9/2001 Queens College.. 15
Charlotte, NC...
3/10/2001 FaithAction..... 12 4
Asheboro, NC....
3/15/2001 Guilford College 15
Greensboro, NC..
3/18/2001 Catholic Social 33 4
Services.
Asheville, NC...
3/18/2001 Christ the King 9 29
Catholic Church.
High Point, NC..
3/20/01 & 3/21/01 UNC-Greensboro.. 120
Greensboro, NC..
3/31/2001 UNC-Wilmington.. 40
Wilmington, NC..
4/1/2001 St. Julia's 26 62
Catholic Church.
Siler City, NC..
2001 Applications & 19 43
Tax Returns We.
Receive Through
The Mail.
--------------------------------
Total........... 277 276 565
--------------------------------
Total ESL ....... ........ 1118
Taxpayers
Assisted Jan-
June, 2001.
-------------
Total Low-Income ....... ........ 10
Taxpayers
Assisted with
IRS Issues.
-------------
Total Taxpayers ....... ........ 1128
Assisted Jan-
June, 2001.
------------------------------------------------------------------------