IRS May Take Your Call, Is Unlikely to Answer Your Question


NEW YORK (MainStreet) — After remaining on hold for 20 minutes with the Internal Revenue Service, you may not get an answer to your question. The surprise is not that you couldn't get a helpful response -- but that someone even answered the phone.

Last year, nearly four in ten calls (39%) to the IRS weren't answered, according to the Taxpayer Advocate Service's (TAS) annual report to Congress.

And what was bad last year is expected to get even worse this year. The IRS is cutting services even further. Through this year's filing season, the IRS will answer only "basic" tax law questions and will not respond to "more detailed" inquiries. (That is, if their representatives answer the phone.) After April 15, the IRS says it will refuse to answer any tax law question at all -- even basic ones.

"At the risk of vast understatement, it is a sad state of affairs when the government writes tax laws as complex as ours — and then is unable to answer any questions beyond 'basic' ones from baffled citizens who are doing their best to comply," says Nina E. Olson, head of the TAS.

A 2013 study by George Mason University says the Treasury fails to collect nearly $450 billion per year in unreported taxes.

"Because the tax code primarily relies on voluntary reporting of income with only a few enforcement efforts, an unanswered phone call can mean uncollected revenues," writes Jason J. Fichtner, a senior research fellow at George Mason University, in an analysis. "Economic literature suggests that simplification of the tax code by eliminating complex provisions and lowering marginal tax rates would increase income reporting."

The same study says Americans spend from $215 billion to $987 billion in accounting and economic costs.

"As of 2011, Americans spent 6 billion hours filing taxes," Fichtner says. "This is equivalent to an annual workforce of 3.4 million, a population that could be the third largest city in the United States. Summing the costs of paying accountants and the monetary value of time spent filing taxes, the total is estimated between $67 billion to $378 billion per year. The economic costs of taxation are still larger. $148 billion to $609 billion of economic growth cannot occur as a result of tax disincentives from tax provisions and marginal rates."

Olson, the head of the Taxpayer Advocate System, sums up the challenge for the IRS.

"Our system is based on self-assessment, but the tax laws are so complicated (and become more so each year) that computing the correct amount of tax poses a daunting challenge for many of our citizens, and they frequently require assistance," she says. "While some can readily afford to pay for the assistance they need, tens of millions cannot. For these taxpayers, paying for tax assistance creates a significant financial burden. I think we must acknowledge that service delivery is as integral to the IRS mission as collecting taxes and enforcing the tax laws, and fund it accordingly."

Or, rather than increasing funding to the IRS – perhaps simplifying the tax code?

--Written by Hal M. Bundrick for MainStreet

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