Want to improve the IRS? SPEAK UP
By Andrea Price, TAP member representing Ohio
The Taxpayer Advocacy Panel is comprised of civic-minded citizen volunteers from all walks of life representing each state, D.C., Puerto Rico and an international member (citizens living, working or doing business abroad). TAP is a Federal Advisory Committee whose mission is to listen to taxpayers, identify taxpayers’ issues and make suggestions for improving the IRS service and customer satisfaction.
Everyone has something to say about taxes and the IRS. Please take a moment to give us your suggestions for TAP to consider by contacting one of the following:
TAP Ohio member: email@example.com
Call Toll-free at:1-888-912-1227
Should taxpayers tell the IRS how they want their tax dollars spent?
The National Taxpayer Advocate released the National Taxpayer Advocate 2020 Purple Book to Congress. In it, she presents a concise summary of 58 legislative recommendations that she believes will strengthen taxpayer rights and improve tax administration. Recommendation #3 REQUIRE THE IRS TO PROVIDE TAXPAYERS WITH A “RECEIPT” SHOWING HOW THEIR TAX DOLLARS ARE BEING SPENT.
Internal Revenue Code (IRC) § 7523 requires the IRS to provide taxpayers with very basic information regarding federal taxes and federal spending. Specifically, the IRS is required to include pie-shaped graphs in its instructions for Form 1040 that show the relative sizes of major budget outlay categories and major income categories. In the 2018 Form 1040 instructions booklet, the IRS published two graphs on page 112 depicting Major Categories of Federal Income and Outlays for Fiscal Year 2017.
Reasons for Change
IRC § 7523 was enacted for tax years beginning after 1990. The purpose was to help taxpayers understand the connection between the taxes they pay and the benefits they receive. Taxpayers who perceive that connection may be more compliant with their tax obligations.
However, the National Taxpayer Advocate believes the information required by IRC § 7523 is too cursory to achieve its objective. It would be more helpful to provide each taxpayer with personalized information regarding the taxpayer’s own contributions, such as the taxpayer’s marginal tax rate, effective tax rate, and tax benefits claimed.
In addition, the value of even this cursory requirement has diminished over time. In 1990, almost all taxpayers filed their tax returns on paper, so the instructions booklet was widely available and widely used. Today, about 90 percent of individual income tax returns are filed electronically, and the instructions booklet is much less visible. For those reasons, far fewer taxpayers see the Form 1040 instructions booklet today.
If the statute is modified, e-filing has the potential to enhance the value of the requirement. Specifically, tax software is capable of computing and displaying personalized tax information, including the taxpayer’s marginal tax rate, effective tax rate, and tax benefits claimed, and can show how much of each taxpayer’s tax payments go toward major categories of federal spending. If required by Congress and programmed by software companies, this information can be presented in far greater detail than was possible when the statute was enacted in 1990.
To further promote public engagement, once taxpayers are given information regarding their tax payments and their contribution to federal spending, taxpayers could be given an opportunity to voice their opinions about how their tax dollars should be spent in the future. This could be achieved by inviting taxpayers to “vote” on their tax returns regarding how much and on what programs the government should spend its money and by requiring the IRS to report the results of that “voting.” The “voting,” of course, would be non-binding. But this exercise in public engagement could help Americans gain a better understanding of the connection between the federal taxes they pay and the federal benefits they receive. And, as noted, when taxpayers have a clear understanding of the benefits, they receive in relation to the taxes they pay, tax morale and tax compliance are likely to increase. Read more at www.taxpayeradvocate.irs.gov.
Taxpayer Advocate Service (TAS) is an independent organization within the IRS lead by the National Taxpayer Advocate, Erin Collins. TAS mission is to protect your rights as a taxpayer and help you with tax problems you can’t resolve on your own.