Saturday, December 12, 2009

Anassa kata, kalo kale, Ia ia ia Nike! Nina Olson!



National Taxpayer Advocate Nina Olson has an official Facebook fan page. Who knew? I just became the 214th fan!

I'm proud to say that the National Taxpayer Advocate, Nina Olson, was a member of my graduating class at Bryn Mawr College. Although our class was not very large (about 200 students in the class of 1975), I unfortunately do not have very clear memories of her, and I'm not sure she remembers me either. I was a math major. She was a fine arts major. I hope to meet her some day--perhaps I will make it to a reunion. The last one I attended was my 10th reunion, but 35th is coming up in May!

Still, the work she does is very important, and whenever I see her name, I smile. It's time to give her a shout-out with the Bryn Mawr cheer, hence the title of this post, (in Ancient Greek--what else would you expect from a college that sent the two of us out into the world--we're good at deciphering cryptic stuff like dead languages and the tax code!)

Anassa kata, kalo kale,
Ia ia ia Nike,
Bryn Mawr, Bryn Mawr, Bryn Mawr!

(If your ancient Greek is a little rusty, you'll find the translation at the bottom of this post. But you can probably get the basic idea if you remember Nike was the Greek goddess of victory.)

So, why am I cheering? What exactly do Nina Olson and the two-thousand-plus Taxpayer Advocate Service employees she oversees do?

Let's start with this list on their Facebook page:

If you’re experiencing problems with the Internal Revenue Service, you may be able to get help from the Taxpayer Advocate Service which Nina oversees. Here are ten things that every taxpayer should know about this independent organization within the IRS:

1. The Taxpayer Advocate Service is your voice at the IRS.

2. Our service is free, confidential, and tailored to meet your needs.

3. You may be eligible for TAS help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you think an IRS procedure just isn’t working as it should.

4. TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation.

5. TAS helps businesses as well as individuals.

6. TAS employees know the IRS and how to navigate it.

7. TAS will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved.

8. TAS has at least one local taxpayer advocate in each state, the District of Columbia, and Puerto Rico.

9. To contact TAS you can call your local advocate, whose number is in your phone book, or call the toll-free case intake line at 1-877-ASK-TAS1.

10. You can also visit TAS online at www.IRS.gov/advocate


As National Taxpayer Advocate, one key part of Nina Olson's job is to report directly to Congress about taxpayer concerns. In my opinion, she has done an outstanding and tireless job of communicating the need for a clearer, simpler, and fairer system of tax administration and compliance.

For a great example of her advocacy, see the op-ed she wrote in the Wall Street Journal last April, highlighting the concerns she raised to Congress earlier this year:

Every year taxpayers and elected officials complain about the tax law's complexity. But despite the exasperation, no significant simplification has occurred since the landmark Tax Reform Act of 1986. To the contrary, each new tax proposal is layered onto the existing code, rendering it more complex with every new act.

Consider the following:

- According to my office's analysis of IRS data, U.S. taxpayers and businesses spend about 7.6 billion hours a year complying with the filing requirements of the Internal Revenue Code.

- If tax compliance were an industry, it would be one of the largest in the United States. To consume 7.6 billion hours, such a "tax compliance industry" would require the equivalent of 3.8 million full-time workers.

- Compliance costs are huge both in absolute terms and relative to the amount of tax revenue collected. Based on Bureau of Labor Statistics data on the hourly cost of an employee, my office estimates that the costs of complying with individual and corporate income tax requirements in 2006 amounted to $193 billion -- or a staggering 14% of aggregate income tax receipts.

- More than 80% of individual taxpayers find the process of filing tax returns so overwhelming that they pay for help. About 60% of taxpayers pay preparers to do the job, and another 22% purchase tax software to help them perform the calculations themselves.

- Since the beginning of 2001, there have been more than 3,250 changes to the tax code -- an average of more than one a day -- including more than 500 changes last year alone.

- The tax code has grown so long that it's challenging even to figure out its length. A search of the code conducted in the course of preparing my last report turned up 3.7 million words. A 2005 study by the Tax Foundation, a tax research organization, found that the number of words in the code has more than tripled since 1975.

But most importantly, the complexity of the tax code leads to perverse results. On the one hand, taxpayers who honestly seek to comply with the law often make inadvertent errors, causing them either to overpay, or to become subject to IRS enforcement actions for mistaken underpayments. On the other hand, sophisticated taxpayers often find loopholes that enable them to reduce or eliminate their tax liabilities.

Examples of complexity in our current tax law abound. One significant problem is the ambiguity concerning tax breaks meant to encourage taxpayers to save for education and retirement. The number of such tax incentives has grown to at least 27. And the eligibility requirements, definitions of common terms, income-level thresholds, phase-out ranges and inflation adjustments vary widely. This undermines the intent of the incentives, since taxpayers can only take advantage of incentives if they understand them.

Another muddy area is the earned income tax credit (EITC), a refundable tax credit for the working poor. The current complexity of eligibility and substantiation requirements leads to large numbers of improper claims by taxpayers -- some intentional, but many inadvertent -- and thus to denials by the IRS. My office recently conducted a study of cases in which the IRS denied an EITC claim and the taxpayer then asked the IRS to reconsider the denial. In 43% of the cases, the IRS ultimately agreed that the taxpayer was entitled to some or all of the credit that the taxpayer had claimed on the original return, assuming complete documentation was presented.

About 100 tax benefits "phase out" as income rises, and the phase-out ranges and amounts are not uniform. More than 100 tax provisions are scheduled to "sunset," a practice often used to reduce the cost of making a tax break permanent. And the number of penalties in the tax code has increased to about 130 today from about 14 in 1954.

Small businesses are burdened with a particularly bewildering array of laws. They face a patchwork set of rules that govern the depreciation of equipment, onerous filing requirements for employment taxes, and a vague set of factors that govern the classification of workers as either employees or independent contractors that keep businesses and the IRS battling each other for years with no obvious "correct" answer.

And then there is the nightmare of the Alternative Minimum Tax. This hideously complex parallel tax structure effectively requires taxpayers to compute their taxes twice -- once under the regular rules, and again under the alternative structure -- and then pay the higher of the two amounts.

American taxpayers deserve a simpler and less burdensome tax system. But given the near universal sentiment that the tax code is in dire need of reform, why hasn't it happened? In my view, it's because elected officials believe the political risks of putting forward a proposal to vastly simplify the tax code outweigh the political benefits. Each tax break has a constituency, and constituencies that stand to lose benefits tend to organize quickly to protect their interests.


I hope some day that our elected leaders will have the wisdom to heed Nina Olson's words and simplify our tax code and reduce the burdens of compliance.

In the meantime, however, she is clearly not holding her breath waiting for Congress to act. Another important part of her job is doing everything within her power to reduce taxpayer compliance burdens.

She supervises over 2,000 employees who work for the Taxpayer Advocate Service to help hapless taxpayers who are ensnarled in red tape figure out how to navigate their way through the complex system.

Here's Nina herself explaining what the National Taxpayer Service does:



And her office has now created a new on-line Tax Toolkit, which is a beautiful model of clear and effective communication, with clearly written prose and videos explaining tax law.

What Congress writes in tax code might as well be Ancient Greek to most taxpayers lacking law degrees, but the National Taxpayer Advocate's office has done their best to translate it into clear language that ordinary taxpayers have a fighting chance to understand!

That's definitely worth one more rousing rendition of the Bryn Mawr cheer:

Anassa kata, kalo kale,
Ia ia ia Nike,
Bryn Mawr, Bryn Mawr, Bryn Mawr!

Translation:

Queen, descend,
I invoke you, fair one.
Hail, hail, hail, victory,
Bryn Mawr, Bryn Mawr, Bryn Mawr!

If you agree, consider becoming a Fan of the National Taxpayer Advocate's Facebook page.

If Congress knows that enough people are cheering for her, maybe they'll sit up, take notice, and listen.

What Nina has been saying for the last decade makes eminent good sense!

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