IRS's "free" advice often wrong

USA Today (Society for the Advancement of Education), April, 2004

Each year, tens of millions of people seek help from the Internal Revenue Service during tax filing season and, too often, they are sorry for it. Remember the wisdom of the proverb, "You get what you pay for." While IRS advice comes with no up-front charge, it often bears a substantial cost in the long run because the agency makes so many mistakes, cautions Daniel J. Pilla, executive director of the Tax Freedom Institute, and author of 11 books on taxpayers' rights issues and IRS defense strategies.

A January, 2004, report of the Treasury Inspector General for Tax Administration confirms that the IRS provided incorrect answers 20% of the time to questions posed by Treasury inspectors anonymously visiting 34 Taxpayer Assistance Centers (TAC) in 10 states. However, this figure is misleading since, in another 15% of the cases, the IRS provided a "correct" answer without first obtaining the background information necessary.

For example, a father might ask whether it is legal to claim his child as a dependent on his tax return. One simply might answer yes and be correct, but only in a very broad sense. Without knowing all the facts about that child, it is very possible that that the answer is no. In a situation where the parents are divorced and legal custody of the child rests with the mother, it is not allowable for the father to claim the child as a dependent unless the mother signs a written waiver granting the exemption.

The problem here is that most citizens are not familiar with all the rules. Consequently, taxpayers are unaware of what information to provide to the IRS as background for their questions. When this type of incomplete advice is factored in, the total inaccuracy rate rises to 35%.

Moreover, the report indicates that in about three percent of cases, IRS employees essentially told Treasury investigators to "do their own research." That is, rather than helping to find the correct answers, the IRS simply referred investigators to publications to locate the solutions for themselves. Considering the often convoluted and technical nature of this literature, this not only is unreasonable, it is a violation of the directives under which TAC employees are supposed to operate. Their job is to answer the questions posed by confused taxpayers, not send them off on a quest for responses potentially buried in thousands of pages of publications, asserts Pilla.

It is important to note that the questions asked by Treasury investigators were not esoteric tax law inquiries. All queries are pointed at narrow, relatively simple areas of law that TAC employees are trained in and are expected to know. In addition, when TAC employees are asked questions that are outside the scope of their training, they are required by operating guidelines to refer them to other, more qualified IRS personnel. However, in 31% of the cases, TAC operators answered questions outside the scope of their training, in violation of the regulations.

According to the National Taxpayer Advocate's 2003 Annual Report to Congress, the IRS is reducing the resources dedicated to providing taxpayer assistance, while at the same time beefing up its enforcement arsenal. The result is "a declining trend in providing services" to those in need and an "increase in taxpayer burden."

Why did the IRS fail to get it right, even in relatively simple areas of the law? The answer is provided by former Commissioner Charles O. Rossotti, in a statement addressing the reason for the error rate in the IRS's telephone assistance function: "Fundamentally, we are attempting the impossible. We are expecting employees and our managers to be trained in areas that are far too broad to ever succeed, and our manuals and training courses are, therefore, unmanageable in scope and complexity."