Nina Olson: The Softer Side of the IRS
The national taxpayer advocate, who’s retiring soon, gives frustrated taxpayers a voice.
Since 2001, Nina Olson, the IRS’s national taxpayer advocate, has been on a mission: to make sure taxpayers’ rights are protected when they’re up against a government agency that many Americans find intimidating, if not downright terrifying. Under her tenure, the Taxpayer Advocate Service, created in 1996, has helped more than 4 million taxpayers resolve problems, ranging from frozen tax refunds to tax liens that threaten an individual’s livelihood.
The Taxpayer Advocate Service is designed to help taxpayers who “have a significant hardship as a result of IRS actions or are about to experience significant hardship,” Olson says. In some cases, the TAS may get involved even though “the IRS is doing nothing wrong, but it’s not acting fast enough, and because of that it’s going to create economic harm,” she says.
In recent cases, the TAS prodded the IRS to remove a steep penalty on an IRA rollover (it was the bank’s fault the taxpayer missed the 60-day deadline), tracked down a refund for a woman who needed money to pay for cancer treatments, and convinced the IRS to release a levy on a retiree’s Social Security benefits, which were her only source of income.
Olson is retiring on July 31. She sat down with Kiplinger’s to talk about her achievements during the past 18 years and the challenges that will await her successor.
What are some of the most common reasons taxpayers come to you? A few years ago, the number-one cause was identity theft. Refunds were being held up while taxpayers tried to prove to the IRS they were who they said they were. Now the biggest issue is frozen refunds because of mismatches between a tax return and the W-2 filed by the taxpayer’s employer. Matching is a way of finding fraud, because in the past, fraudsters would create a W-2 from a well-known employer and file a return, and the IRS might issue a refund. Now, if you don’t have a perfect match, the agency freezes the return, and taxpayers don’t get a refund. But this is a relatively new program, and last year it had major problems in terms of systems not working and refunds being frozen. That issue is swamping my employees right now.
In your annual reports to Congress, you have raised concerns about the complexity of the tax code. Under the Tax Cuts and Jobs Act, about 90% of taxpayers claim the standard deduction instead of itemizing. Will that make filing taxes less complicated for individual taxpayers? Giving people a higher standard deduction is obviously a simplification measure. Creating a child tax credit and eliminating the dependent exemption is also a move in the right direction. One of the things we’ve recommended for years is eliminating all these different things about family—you’ve got head of household, Earned Income Tax Credit and on and on. Our tax system, unlike most tax systems in the world, taxes income on a family unit. Most other tax systems do it on a single taxpayer. When you start taxing households or family units, it brings in enormous complexity.
In 2013, a federal district court struck down an IRS program to regulate tax preparers on the grounds that it lacked legal authority. Legislation to give the IRS authority to regulate tax preparers has been proposed but not enacted. Why do you believe tax preparers should be regulated? When I started preparing tax returns in 1975, only the largest tax preparation companies and largest accounting firms had tax preparation software, so you had to read publications and instructions in order to know how to fill out the return. The advent of software changed everything. Anybody and their brother could be a return preparer. In the early 1990s, I saw used car dealers in Richmond, Va., preparing tax returns and saying they could give you an advance on your refund. You could get your return prepared and drive away in a new truck.
In 2002, our first legislative recommendation was to require unregulated preparers to register with the IRS, take a test and have continuing education or even an exam every year that tests them on the law. It baffles me to this day that people think it’s fine for anybody walking around to be a tax preparer.
Since tax preparers aren’t regulated, what advice do you have for taxpayers who want to hire someone to do their tax return? You need to know if that person has a credential, such as an attorney, certified public accountant or enrolled agent. Preparers who are not an attorney, CPA or enrolled agent can represent you in an audit of a return they’ve prepared, which could be a conflict of interest, but they can’t represent you on appeal or on a collection matter.
I’ve always done my own returns. I believe that’s my duty to find out how painful it is.
When the IRS was barred from regulating preparers, it created a voluntary program. Unregulated preparers who want to distinguish themselves can join this voluntary program. They take a test and have continuing education. The IRS has a database (https://irs.treasury.gov/rpo) where you can look up a preparer’s name to see if he or she is a CPA, attorney, enrolled agent or one of these voluntarily certified preparers.
What do you consider your greatest accomplishments as the IRS national taxpayer advocate? One of my major accomplishments as national taxpayer advocate was the Taxpayer Bill of Rights, a tool to educate taxpayers that they do have rights before the IRS. Before I proposed the codification of the bill of rights, we did surveys that showed that less than half of taxpayers believed that they had rights, and of those, only 11% knew what those rights were. After the IRS adopted it in June 2014, I sent a message [to the staff] saying we can do a happy dance right now, but push up your sleeves, because in 10 minutes the real work starts: making sure the IRS is trained on these rights and that taxpayers understand these rights.
Do you do your own taxes? I’ve always done my own returns. I believe that’s my duty to find out how painful it is.
How to get help
If you have a tax problem and are wondering whether it qualifies for assistance from the Taxpayer Advocate Service, go to its website, http://taxpayeradvocate.irs.gov. You can type in a question, and the site will direct you to the appropriate IRS resources. If that doesn’t resolve your problem, the site will direct you to the office nearest you. The TAS has 79 offices in the U.S. and Puerto Rico.