Taxpayer Advocate Service News
  1. NTA Blog: The IRS’s Continued Refusal to Exclude Already Open TAS Cases From the Passport Certification Program Violates Taxpayer Rights

    Subscribe to the NTA’s Blog and receive updates on the latest blog posts from National Taxpayer Advocate Nina E. Olson. Additional blogs from the National Taxpayer Advocate can be found at www.taxpayeradvocate.irs.gov/blog.

    In January, I wrote my third blog about the IRS’s new program to certify the seriously delinquent tax debts of taxpayers for the purposes of passport denial, limitation, or revocation. At that point, the IRS had just begun implementing the program, and I expressed serious concerns about how the IRS’s refusal to exclude taxpayers with already open TAS cases would infringe upon their rights. As of the writing of this blog, the IRS has still refused to exclude these taxpayers from certification. Today, I want to walk through what my office has been doing over the last few months to elevate this issue to the highest levels of IRS leadership and how the IRS has responded.  


    As background, Section 7345 of the Internal Revenue Code (IRC) authorizes (but does not require) the IRS to certify a taxpayer’s seriously delinquent tax debt to the Department of State for the purposes of passport denial, limitation, or revocation. A seriously delinquent tax debt is an assessed, individual tax liability exceeding $51,000 (adjusted for inflation) for which either a notice of federal tax lien has been filed or a levy has been made. IRC § 7345(b)(2) provides exceptions for current installment agreements (IAs), offers in compromise (OICs), and Collection Due Process hearings. Because the statute provides the IRS with discretion to not certify taxpayers who meet the definition of a seriously delinquent tax debt, the IRS has created some certification exclusions, such as for taxpayers in currently not collectible (CNC) hardship status and those with pending IAs and OICs. See IRM 5.19.1.5.19.4 for a full list.  

    The legislative history of IRC § 7345 says that Congress intended to “permit revocation of a passport only after the IRS has followed its examination and collection procedures under current law and the taxpayer’s administrative and judicial rights have been exhausted or lapsed.” The right to receive assistance from TAS is one such administrative right, which Congress expressly provided when it codified IRC §§ 7803(c)(A)(i) and 7811. Certifying taxpayers who have already come to TAS before certification and are actively working to resolve their tax liabilities will harm taxpayers who are voluntarily trying to come into compliance. Yet, one of the primary goals of the passport statute is to encourage taxpayer compliance. A Senate report states: “The Committee believes that tax compliance will increase if issuance of a passport is linked to payment of one’s tax debts.”

    On Jan. 16, 2018, one week prior to implementation of the passport program, I issued almost 800 Taxpayer Assistance Orders (TAOs) ordering the IRS not to certify taxpayers whom my office identified as eligible for passport certification and who had an open TAS case. The Small Business/Self-Employed (SB/SE) Operating Division Commissioner appealed these TAOs, and so I sustained the TAOs to the Deputy Commissioner for Services and Enforcement. Although the Deputy Commissioner agreed to exclude the taxpayers who were the subjects of the TAOs, she indicated that the exclusion of already open TAS cases would not apply prospectively to any new TAS cases – that is, any taxpayers who opened a case with TAS after Jan. 22 but before they were certified would be certified if they met the definition of a seriously delinquent tax debt and did not qualify for another exclusion.

    On April 6, I issued a Taxpayer Advocate Directive (TAD), which ordered the IRS to exclude TAS cases that were already open prior to certification and continue to exclude them while they remained open. TAOs and TADs have some key differences. IRC § 7811(a) provides the authority to issue a TAO requesting action with respect to a single taxpayer who is suffering or is about to suffer a significant hardship. The National Taxpayer Advocate can delegate the authority to issue a TAO, which she has done to certain TAS employees, including Local Taxpayer Advocates. Only the National Taxpayer Advocate, the Commissioner of Internal Revenue, or the Deputy Commissioner of Internal Revenue may rescind or modify a TAO that the National Taxpayer Advocate issues. TADs have a slightly different function. TADs mandate that functional areas of the IRS make certain administrative or procedural changes to improve a process or grant relief to groups of taxpayers, or even all taxpayers. Bases for granting relief include: protecting the rights of taxpayers, ensuring equitable treatment, and providing an essential service to taxpayers. Currently, the authority for issuing TADs is not derived from statute and is provided by Delegation Order 13-3. The authority to issue a TAD is granted solely to the National Taxpayer Advocate and cannot be redelegated. A TAD may only be appealed to the Deputy Commissioner for Services and Enforcement. For a discussion of why Congress should codify the TAD process, see my legislative recommendation included in the 2018 Purple Book.

    On April 17, the SB/SE Commissioner responded to my TAD, disagreeing with and appealing all requested actions within the TAD. The response stated: “Categorically excluding all open TAS cases from certification would result in the inconsistent application of the law to similarly situated taxpayers.” The IRS’s response also asserted that the purpose of the statute would be defeated if a taxpayer was excluded while working with TAS, but did not ultimately come into compliance.

    I elevated the TAD to the Deputy Commissioner for Services and Enforcement, reiterating my reasons for excluding already open TAS cases and responding to each of the arguments raised by the SB/SE Commissioner. Specifically, TAS taxpayers are not similarly situated as other taxpayers because by law, they must be experiencing or be about to experience a “significant hardship” as a result of IRS actions or inaction and thus should be treated differently. The IRS’s policy of excluding taxpayers who are working to come into compliance by submitting a pending offer in compromise or installment agreement, but not excluding taxpayers actively working with TAS to try to resolve their liabilities, results in the inconsistent treatment of taxpayers. The IRS’s refusal to exclude already open TAS cases violates the taxpayer’s right to a fair and just tax system, which states “[t]axpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS’s has not resolved their tax issues properly and timely through its normal channels.” Additionally, the IRS will create rework for itself because it will unnecessarily certify and then have to decertify taxpayers.   

    On May 17, the Deputy Commissioner rescinded the TAD in its entirety. Each of these documents will be published in the appendix to my forthcoming FY 2019 Objectives Report to Congress that will be published at the end of June. I also plan to raise the issue and bring the TADs to the attention of the Acting Commissioner of Internal Revenue, requesting that he reconsider the IRS’s decision not to exclude already open TAS cases.

    In late April, I also issued an Interim Guidance Memorandum (IGM) to all my employees, instructing Local Taxpayer Advocates (LTAs) to issue TAOs ordering the IRS to exclude from certification all taxpayers they identify as eligible for certification who do not meet another exclusion, and who have an open TAS case at the time of certification. Additionally, the IGM instructs LTAs to issue TAOs for taxpayers who were certified prior to coming to TAS and who will meet an exclusion as a result of TAS’s assistance. These TAOs will order the IRS to take timely actions that will result in the taxpayer meeting a criterion for decertification. I am also instructing the LTAs to issue TAOs ordering expedited decertification where the taxpayer qualifies for decertification, has an urgent need for a passport, and meets the expedited criteria set out in the IRM.

    In my next blog on passport issues, to be posted in June after we publish the Objectives Report to Congress, I’ll share some data regarding passport cases, including TAS cases, and provide an update on TAS’s ongoing advocacy for these taxpayers. 

    The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate is appointed by the Secretary of the Treasury and reports to the Commissioner of Internal Revenue. However, the National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

  2. NTA Blog: One Year Later, The IRS Has Not Adjusted Its Private Debt Collection Initiative To Minimize Harm To Vulnerable Taxpayers

    Subscribe to the NTA’s Blog and receive updates on the latest blog posts from National Taxpayer Advocate Nina E. Olson. Additional blogs from the National Taxpayer Advocate can be found at www.taxpayeradvocate.irs.gov/blog.

    Since the IRS implemented the private debt collection (PDC) initiative last year, I have been concerned that taxpayers whose debts are assigned to private collection agencies (PCAs) will make payments even when they are likely in economic hardship – that is, they are unable to pay their basic living expenses. As discussed in my 2017 Annual Report to Congress, this is exactly what has been happening. The recent returns of approximately 4,100 taxpayers who made payments to the IRS after their debts were assigned to PCAs through September 28, 2017 show:

    • 28 percent had incomes below $20,000;
    • 19 percent had incomes below the federal poverty level; and
    • 44 percent had incomes below 250 percent of the federal poverty level.

    As a refresher, the IRS uses 250 percent of the federal poverty level as a proxy for economic hardship in several situations, such as in administering the Federal Payment Levy Program (FPLP). FPLP is an automated system the IRS uses to match its records against those of the government’s Bureau of the Fiscal Service to identify taxpayers with unpaid tax liabilities who receive certain payments from the federal government. IRC § 6331(h) allows the IRS to issue continuous levies for up to 15 percent of federal payments due to these taxpayers who have unpaid federal liabilities. As explained in my 2014 Annual Report to Congress, the IRS excluded Social Security recipients whose incomes were below 250 percent of the federal poverty level after a 2008 TAS research study demonstrated that the FPLP program levied on taxpayers who were experiencing economic hardship.  

    In 1998, Congress first adopted the measure of 250 percent of the federal poverty level in IRC § 7526 to identify taxpayers who cannot afford representation in IRS disputes and are therefore vulnerable to overreaching by the IRS. The January 2018 Bipartisan Budget Act of 2018 adopts the measure to excuse some taxpayers from paying user fees to enter into installment agreements (IAs). Still more recently, the House of Representatives included a provision to exclude taxpayers whose incomes are less than 250 percent of the federal poverty level from referral to a PCA in the bipartisan Taxpayer First Act, H.R. 5444, which passed the House with a recorded vote of 414-0 on April 18, 2018.

    PCAs solicit full payment of the tax debt when they contact taxpayers, and if the taxpayer cannot immediately pay, the PCA can offer an IA. We took a closer look at the IAs taxpayers entered into, and I included in volume 2 of my 2017 Annual Report to Congress a TAS Research Study that reports our findings. Specifically, we studied the financial circumstances of 2,102 taxpayers who, between April 10, 2017 (when the IRS began assigning tax debts to PCAs) and September 28, 2017, entered into an IA while their debts were assigned to a PCA and made a payment on which the PCA received a commission. 

    All of the IAs set up by the PCAs were “streamlined,” which taxpayers can obtain without submitting financial information. Streamlined IAs can be for up to seven years, depending on the amount the taxpayer owes, as long as the term of the IA is within the statutory period for collection. (We discuss our concerns about allowing PCAs to offer seven-year IAs in my 2016 Annual Report to Congress.) 

    In addition to looking at these 2,102 taxpayers’ income levels, we checked to see how often their incomes were exceeded by their allowable living expenses (ALEs). ALE standards determine how much money taxpayers need for basic living expenses (for items like housing and utilities, food, transportation, and health care), based on family size and where they live. The IRS compares the taxpayer’s income with ALE standards to determine the taxpayer’s ability to pay his or her tax debt and at what level.

    Figure 1.1 shows what we discovered about taxpayers who entered into installment agreements and made payments between April 10, 2017 and September 28, 2017 while their debts were assigned to PCAs.

    Relationship of Income to Federal Poverty Level

    This pattern of taxpayers whose debts are assigned to PCAs entering into IAs and making payments they appear to be unable to afford is continuing. IRS data shows that since the inception of the program in April 2017 through March 29, 2018, of 9,751 taxpayers who entered into IAs and made payments while their debts were assigned to PCAs:

    • 24 percent had incomes below the federal poverty level - all of these taxpayers’ incomes were less than their ALEs;
    • 22 percent had incomes at or above the federal poverty level and below 250 percent of the federal poverty level; 80 percent of these taxpayers’ incomes were less than their ALES; and
    • Overall, 43 percent who entered into IAs had incomes less than their ALEs.

    On April 23, 2018, I issued a Taxpayer Advocate Directive (TAD) ordering the IRS not to assign to PCAs the debt of any taxpayer whose income was less than 250 percent of the federal poverty level. I ordered the IRS to respond to the TAD, either by agreeing or by appealing the TAD to the Deputy Director for Services and Enforcement by June 25, 2018.

    In the meantime, as the second quarter of fiscal year 2018 drew to a close, we continued to gather data about how taxpayers are faring in the hands of PCAs. With the PDC program more than a year old, we think it’s time to find out how often taxpayers default on IAs they enter into while their debts are assigned to PCAs. We plan to report our findings in my Fiscal Year 2019 Objectives Report to Congress, which will be published later this month.  

    The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate is appointed by the Secretary of the Treasury and reports to the Commissioner of Internal Revenue. However, the National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

  3. IRS Announces Webinar on the 2019 Low Income Taxpayer Clinic (LITC) Grant Application Process

    The IRS announced today that the Low Income Taxpayer Clinic Program Office will host two webinars on Tuesday, June 5, 2018, and Tuesday, June 12, 2018. The webinars are to provide potential applicants with information about the application requirements and process.

    The intended audience for this webinar include applicant’s proposing to open or expand the work of existing:

    • Clinical programs at an accredited law, business, or accounting school in which students assist in service delivery
    • Organizations described in IRC § 501(c) and exempt from tax under IRC § 501(a)

    This one-hour webinar will provide the following:

    • An overview of the LITC program;
    • An overview of the application forms in the 2019 LITC Application Package; and
    • Tips on completing the Application Package through Grants.gov.

    The sessions below are Eastern Standard Time:

    To register for a session you wish to attend, click on the date above and complete the registration process in the Webcaster system. Registration can be completed up until two hours before the session begins. The session will be held completely online via computer.

    The webinar will be conducted by Tamara Borland, LITC Program Director; Joceline Champagne Advocacy Group Manager, and William Beard, Senior Program Analyst.

    For more information about the LITC program, see IRS.gov.

  4. NTA Blog: The Flood That Didn’t Materialize When the IRS Removed the Two-Year Period for Requesting Equitable Innocent Spouse Relief and Granted Relief More Frequently

    Subscribe to the NTA’s Blog and receive updates on the latest blog posts from National Taxpayer Advocate Nina E. Olson. Additional blogs from the National Taxpayer Advocate can be found at www.taxpayeradvocate.irs.gov/blog.

    Innocent spouse relief, which has been available under IRC § 6015 since 1998 (and was available prior to that, in a more limited way, under IRC § 6015(e)), provides three avenues of relief. Section 6015(b) provides “traditional” relief for deficiencies. Section 6015(c) also provides relief for deficiencies for certain spouses who are divorced, separated, widowed, or not living together, by allocating the liability between the spouses. Section 6015(f) provides “equitable” relief from both deficiencies and underpayments, but only applies if a taxpayer is not eligible for relief under IRC § 6015(b) or (c).

    As I reported in my 2001 Annual Report to Congress, the IRS received 46,619 claims for innocent spouse relief in fiscal year (FY) 1999 (i.e., from October 1, 1998 to September 30, 1999). The IRS received 54,402 claims for relief in FY 2000. As I reported in my 2002 Annual Report to Congress, and as shown in the chart below, the IRS received 51,609 innocent spouse claims in FY 2001 and 50,616 claims in FY 2002. Thus, in the years immediately following enactment of IRC § 6015, the usual volume of receipts was in the neighborhood of 50,000 claims per year.


    Request for innocent Spouse Relief, FYs 2001 and 2002


    To obtain relief under IRC § 6015(b) or (c), the innocent spouse must request relief within two years after IRS collection activities began. The statute does not impose a period within which a taxpayer must request equitable innocent spouse relief. However, as many practitioners will recall, the IRS used to apply one of the regulations under IRC § 6015(f) which requires the taxpayer to request equitable relief within two years after the IRS initiates collection activity with respect to the taxpayer.

    In 2009, in the Lantz case, the Tax Court held invalid the regulation imposing the two-year time limit for requesting relief under IRC § 6015(f). The decision was reversed by the Court of Appeals for the Seventh Circuit. The Tax Court adhered to its position, and by mid-June of 2011, two additional courts of appeals, in separate cases (Manella and Jones), had reversed the Tax Court’s holding that the regulation was invalid. Several other cases with the same issue were pending in other courts of appeal.

    On July 25, 2011, the IRS announced that notwithstanding the appellate court decisions that upheld the validity of the regulation, the IRC § 6015 regulations should be revised to remove the two-year rule for requests for equitable relief. Under guidance that was issued pending modification of the regulations, taxpayers requesting equitable relief under IRC § 6015(f) after July 25, 2011 could do so without regard to when the first collection activity was taken. Requests for relief must be now filed within the period of limitation on collection in IRC § 6502 or, for any credit or refund of tax, within the period of limitation in IRC § 6511. The IRS filed motions for voluntary dismissal on July 25, 2011 in cases pending in the various appellate courts.

    So what happened to the volume of claims for innocent spouse relief as a result of removing the two-year time limit for requesting equitable innocent spouse relief? It decreased. According to a presentation by TAS and IRS panelists at the December 2012 Low Income Tax Clinic (LITC) grantee conference, there were 50,149 claims for innocent spouse relief in FY 2010; 48,891 in FY 2011; and 45,359 in FY 2012. That’s a decrease of almost 10 percent from FY 2010 to FY 2012. The volume of requests for relief remained under 50,000 per year thereafter.

    According to a panel presentation at the 2016 LITC grantee conference, for FYs 2014-2016, claims for relief were 45,431; 46,762; and 45,863, respectively. This data, together with data for FY 2013, is shown in the chart below.


    Request for Inncoent Spouse Relief, FYs 2010-2016


    Interestingly, the Treasury regulation imposing the two-year rule is still on the books. Proposed Treasury regulations to remove the two-year deadline were published on August 13, 2013, and public comment on the proposed regulations was invited. None of the four persons who submitted comments opposed removing the two-year rule, yet to date the regulations have not been finalized. I included in my 2017 Purple Book the recommendation that Congress codify the rule that taxpayers can request equitable relief under IRC § 6015(f) any time before expiration of the period of limitations on collection. I am pleased that on April 18, 2018, the House of Representatives, in a bipartisan bill passed with a recorded vote of 414-0, adopted the recommendation in the Taxpayer First Act, H.R. 5444.

    As noted, removing the two-year period for requesting equitable innocent spouse relief does not appear to have opened the floodgates to a deluge of innocent spouse claims. Not only that, the decrease in the number of claims occurred even as the IRS made other changes to the rules for innocent spouse relief that seem to have helped taxpayers. In January 2012, the IRS, in Notice 2012-8, issued a proposed revenue procedure to supersede Revenue Procedure 2003-61, the guidance previously used to analyze claims for equitable innocent spouse relief. The proposed revenue procedure expanded the equitable relief analysis by providing additional considerations for taxpayers seeking relief. The proposed guidance was used to evaluate claims pending its finalization, and was ultimately finalized as Revenue Procedure 2013-34.

    According to the 2012 LITC presentation, in FYs 2010 and 2011, immediately before Notice 2012-8 was issued, the most frequent outcome in innocent spouse cases was a complete denial of relief. For FY 2010, 56 percent of the determinations were full denials (meaning not even partial relief was granted); for FY 2011, 60 percent were full denials. For FY 2012, after the new guidance was issued, the most frequent outcome was full allowance; only 26 percent were full denials. The chart below shows the outcomes in innocent spouse cases for FYs 2010-2012.


    Outcomes of Requests for Innocent Spouse Relief, FYs 2010-2012


    In FYs 2013-2016, the granting of full relief was also the most likely outcome, although the number of fully denied claims crept up over that period. Complete disallowances accounted for 29 percent, 33 percent, 36 percent, and 42 percent of the outcomes in FYs 2013, 2014, 2015, and 2016, respectively. In FY 2017, however, full relief was granted only 39 percent of the time; 48 percent of determinations were complete disallowances. The chart below shows the outcomes in innocent spouse cases for FYs 2013-2017.


    Outcomes of Requests for Innocent Spouse Relief, FYs 2013-2017


    Thus, it does not appear that extending the time limit for requesting equitable innocent spouse relief made taxpayers more likely to file claims for relief.  Even granting relief more frequently does not seem to affect the number of claims. It would be interesting to know why taxpayers request relief less frequently now than they did in the past, but I am also concerned with understanding the increased frequency with which the IRS is denying the claims for relief taxpayers do submit. The Office of the Taxpayer Advocate will be exploring this issue in the year to come.

    The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate is appointed by the Secretary of the Treasury and reports to the Commissioner of Internal Revenue. However, the National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

  5. Success Story: TAS Advocates for Taxpayer Facing Economic Burden

    Every year, the Taxpayer Advocate Service (TAS) helps thousands of people with tax problems. This story is only one of many examples of how TAS helps resolve taxpayer’s tax issues. All personal details are removed to protect the taxpayer’s privacy.

    A taxpayer under audit requested TAS assistance because his tax refund was being held and he needed the money to make an urgent auto repair. He was unemployed and could not search for work without the use of his car. The taxpayer told TAS he sent the IRS documentation to support the tax benefits, including the Earned Income Tax Credit, claimed on his return months earlier, but he had not received a response and still hadn’t received his refund.

    The TAS case advocate reviewed the documentation the taxpayer submitted to the IRS. It turned out the taxpayer was claiming five dependents, but only two qualified; however, the IRS disallowed all five dependents instead of three. The case advocate provided clarifying documents that proved the two youngest children qualified as the taxpayer’s dependents. Although the process was stressful for the taxpayer, TAS worked with him to get the documentation the IRS needed and eligible benefits based on the two youngest children who were allowed. The taxpayer received his refund and was able to get his car repaired, aiding his search for employment.

    When working with the Taxpayer Advocate Service, each individual or business taxpayer is assigned to an advocate who listens to the problem and helps the taxpayer understand what needs to be done to resolve their tax issue. TAS advocates will do everything they can to help taxpayers and work with them every step of the way. Occasionally TAS features stories of taxpayers and advocates who work together to resolve complex tax issues. Read more TAS success stories.

    Learn more about whether TAS can help you:TAS eligibility.