The National Taxpayer Advocate Service (TAS) recently released its 2017 Mid-Year Report assessing the IRS’s performance during US taxes filing season and identifying priority issues – some of which we will recap below – for the coming fiscal year. Below we share the top-line findings and specific items of interest for US expats.
First Things First
At a high level, the IRS received positive remarks for its handling of this past filing season of US taxes. Despite facing resource constraints and a budget 20% less than fiscal year 2010, the agency processed nearly 130 million filed returns.
Another big area of improvement was in the reduction of identity theft as well as the matching of W2 forms against tax returns claiming refunds.
Despite the positive achievements of this year’s tax filing season, the report identifies several areas where improvements to the overall taxpayer experience could be made:
Declines in Taxpayer Service
In part due to budgetary constraints, the overall volume of taxpayer services provided by the IRS declined in the last fiscal year. The report highlights that IRS telephone assistors answered 25% fewer calls during fiscal year 2017 than in the previous year. It also forecasts that this decline will continue should the projected fiscal year 2018 budget proposal be passed.
Another policy highlighted was the IRS’s limitations on its employees to help taxpayers answer tax law questions. In effect since 2014, this policy restricts employees to only answer “basic” tax questions during the filing season, and employees cannot answer any tax law questions outside of filing season. The report’s recommendation was that the IRS reconsider this policy, arguing that helping taxpayers understand how to comply should be a core function of proper tax administration.
US Passport Revocations and Denials
Perhaps most striking is the issue surrounding potential passport revocations. In 2015, Congress passed legislation that authorizes the Department of State to revoke an individual’s existing passport or deny an outstanding passport application if the IRS identifies that person to be “seriously delinquent” with debt related to their US taxes.
What makes this issue troublesome to the TAS is that there are no processes in place to notify taxpayers of qualifying their tax debt as “seriously delinquent” prior to the actual certification. The TAS argues that this failure to provide notice of intent – particularly to those Americans abroad – falls short of due process requirements laid out in the US Constitution.
The report also cites the 1958 Kent v. Dulles case wherein the Supreme Court deemed international travel a “liberty which cannot be deprived without due process under the 5th Amendment.” Additionally, the report points out that this legislation may cause counter-productive effects: taxpayers whose passports have been revoked may be less likely to resolve their debts.
TAS will be actively monitoring the implementation of this legislation in the coming fiscal year.
Greater Transparency with the OVDP
The IRS’s Offshore Voluntary Disclosure Programs (OVDPs) allows taxpayers with exposure to potential criminal or substantial civil penalty to report foreign financial assets and pay all US taxes due without further punishment.
For years, taxpayers participating in the OVDPs have encountered frustrating issues in dealing with the agency around the enforcement of its rules. The TAS’s report states that much of the OVDP enforcement is handled by individual auditors on a case-by-case basis, many of whom refer to a set of legally non-binding FAQs on the IRS website.
The TAS will continue to advocate for full disclosure from the IRS of all OVDP-related rules and procedures during the next fiscal year to help taxpayers identify likely outcomes for their individual situations.
In the meantime, if you have any questions around this, we can help you with OVDPs and getting caught up with your taxes.
Other issues the TAS plans to focus on in the coming fiscal year include how the IRS approaches international tax administration, online taxpayer accounts, tax compliance barriers for ITIN holders and more.
Have Specific Questions Related to US Taxes?
We can help! Our dedicated team of CPAs and IRS Enrolled Agents have specific expat tax expertise to help Americans abroad navigate their US taxes in a way that makes sense for their individual situation – contact us today.