Tax Reforms

While the average taxpayer can expect more accessibility to the U.S. Internal Revenue Service in the future, new proposals to reform the federal agency are at least a year away from implementation, say local tax experts and accountants.
Congress is considering IRS reform legislation, and House committee hearings were conducted this fall, indicating serious mismanagement and abuse of taxpayers by the IRS.
Under Tax Reform Bill III currently before members of Congress, the IRS is proposing that it increase telephone service to taxpayers, said Mark Soukup, a certified public accountant in Fort Collins who has presented seminars throughout the region on the 1997 Tax Reform Act.
"Last tax season, they only answered their phones three days a week. Now they˜re considering expanding it to five days a week for 12 hours a day and four hours on Saturday," Soukup said.
However, Congress would have to allocate funds to cover the cost of those extra hours, he noted.
The IRS also is proposing improved methods to allow taxpayers to file returns electronically so they can receive refunds faster, he said.
"They˜re so huge and their computers are antiquated. That˜s a big expense," he said.
Another proposal calls for the IRS to make taxpayers aware of their rights when dealing with the agency.
"It˜s been known that some agents intimidate taxpayers," Soukup said. To deal with this, agents would receive more training.
Soukup said another proposal provides for more locations at which taxpayers can obtain IRS forms. Currently, they˜re available only at postal stations, with some libraries and local government offices providing them as well.
Congress also is considering modifying the newly created position of Taxpayer Advocate to look more at specific taxpayer complaints rather than look at major issues confronting the IRS.
Soukup said the real political dynamo is the question of who would oversee the IRS — whether that position would continue to be decided by presidential appointment or, as proposed, by a bipartisan committee of Congress made up of lawyers and accountants that would serve as an oversight committee to the IRS.
"Clinton is fighting it heavily, and the Republicans are pushing it," he said of the proposal.
In 1996, Congress passed the Taxpayer Bill of Rights II, which gave the IRS more discretion in certain matters. Prior to passage of that bill, liens were loosened so that the IRS can now negotiate a settlement from a taxpayer facing a lien rather than demand payment in full, he said.
Offers in compromise also can be negotiated more easily under because of this legislation, he said. As a result, recent Congressional hearings cited that the IRS handled only 2,900 offers in compromise three years ago, while that figure has grown now to 39,000 a year, he said.
Many of the proposed changes would affect only complex issues and taxpayers dealing with IRS penalties, which is only about 1 percent of the population, he said.
"It˜s a tiny sliver of the population," he said. "The bottom line is that for the average person, he won˜t see much change except easier access to the IRS."
Myron Heulen, associate professor in the accounting department at Colorado State University in Fort Collins, said he supports a proposed civilian oversight board for the IRS.
However, he disagrees that the oversight commission should have the authority to appoint the head of the IRS, which is now a presidential appointment.
Heulen noted there is a measure gaining momentum in Congress that would shift the burden of proof in tax disputes from the taxpayer to the IRS.
"It˜s misguided in the extreme," Heulen said. "Shifting the burden of proof can mess up the system unbelievably and make it unworkable."
The taxpayer is the one with records, and he could burn his tax documents if there is a dispute over payment.
"It will invite massive cheating," Heulen said.
Many of the changes being proposed would shift much of the tax burden from the upper class to the middle class so that middle-income workers would pay more in taxes, he alleged.
"That is one of the unspoken goals," he said.
U.S. Rep. Bob Schaffer, R-Fort Collins, has called for support of the IRS Restructuring and Reform Act. He said the bill, which he cosponsored, will overhaul the agency˜s management structure and provide better customer service, protect taxpayers in their dealings with the IRS, and create new taxpayer rights.
Schaffer said the legislation is the first comprehensive reform of the IRS since 1952.
"Now is the time to seize the moment and reform the IRS as we know it," he said. He called the agency˜s current procedures "archaic."
"With this legislation, we can transform the agency into an accountable, taxpayer-considerate institution which works in a fair even-handed manner," he said.
The legislation is based on the bipartisan recommendations of the National Commission on Restructuring the IRS and seeks to solve problems. including the complicated tax code, poor taxpayer service, and poor management and oversight.
The bipartisan legislation is supported by the U.S. Chamber of Commerce, National Federation of Independent Business, and Americans for Tax Reform.
U.S. Treasury Secretary Robert E. Rubin said in late October that the agency˜s computer modernization program has been restructured, telephone service has improved, and electronic tax filing is increasing.
Rubin noted that a consensus has formed around the need for better oversight, improved access to expert advice from the private sector and more stable and predictable funding for the IRS.
"We have taken and will take further significant executive actions designed to achieve these goals, including commitments to 24-hour phone service by 1999, the formation of independent Citizen Advisory Panels, and the nomination of an experienced, private-sector CEO as IRS commissioner," he said.
Rubin said his department believes that the proposed Taxpayer Bill of Rights is on balance a workable plan it can support, though improvements should be made.
"We intend to continue to work with members of Congress to improve the bill as the process moves forward," he said.