U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

63–035 2011

THE NATIONAL TAXPAYER ADVOCATE’S 2009 

REPORT ON THE MOST SERIOUS PROBLEMS 

ENCOUNTERED BY TAXPAYERS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MARCH 16, 2010

Serial No. 111–43 

Printed for the use of the Committee on Ways and Means 

( 


anorris on DSK5R6SHH1PROD with HEARING
ii 

COMMITTEE ON WAYS AND MEANS 

SANDER M. LEVIN, Michigan, Acting Chairman 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK B. MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

DANNY K. DAVIS, Illinois 

BOB ETHERIDGE, North Carolina 

LINDA T. SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

JOHN A. YARMUTH, Kentucky 

DAVE CAMP, Michigan 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GINNY BROWN–WAITE, Florida 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

JANICE MAYS, Chief Counsel and Staff Director 

JON TRAUB, Minority Staff Director 

SUBCOMMITTEE ON OVERSIGHT 

JOHN LEWIS, Georgia, Chairman 

XAVIER BECERRA, California 

RON KIND, Wisconsin 

BILL PASCRELL, Jr., New Jersey 

JOHN B. LARSON, Connecticut 

ARTUR DAVIS, Alabama 

DANNY K. DAVIS, Illinois 

BOB ETHERIDGE, North Carolina 

BRIAN HIGGINS, New York 

CHARLES W. BOUSTANY, Jr., Louisiana, 

Ranking Member 

DAVID G. REICHERT, Washington 

PETER J. ROSKAM, Illinois 

PAUL RYAN, Wisconsin 

JOHN LINDER, Georgia 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also, published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


anorris on DSK5R6SHH1PROD with HEARING
iii 

C O N T E N T S 

Page 

Advisory of March 9, 2010 announcing the hearing ............................................. 2 

WITNESSES 

Nina E. Olson, National Taxpayer Advocate, Internal Revenue Service ............ 5 

SUBMISSIONS FOR THE RECORD 

Cheryl J. Latos, statement ...................................................................................... 59 


anorris on DSK5R6SHH1PROD with HEARING

anorris on DSK5R6SHH1PROD with HEARING
(1) 

THE NATIONAL TAXPAYER ADVOCATE’S 2009 

REPORT ON THE MOST SERIOUS PROBLEMS 

ENCOUNTERED BY TAXPAYERS 

TUESDAY, MARCH 16, 2010 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, SUBCOMMITTEE ON OVERSIGHT, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:00 p.m. in Room 

1100, Longworth House Office Building; the Honorable John Lewis, 

[Chairman of the Subcommittee], presiding. 

[The advisory announcing the hearing follows:] 


anorris on DSK5R6SHH1PROD with HEARING
2 

HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

March 9, 2010 

The House Ways and Means Subcommittee on Oversight today announced that 

it will hold a hearing on the National Taxpayer Advocate’s 2009 Report to Congress 

on the most serious problems encountered by taxpayers. The hearing will take 

place on Tuesday, March 16, 2010, in the main Committee hearing room, 

1100 Longworth House Office Building, beginning at 2:00 p.m. 

The National Taxpayer Advocate, Nina E. Olson, will be the only witness at the 

hearing. Any individual or organization not scheduled for an oral appearance may 

submit a written statement for consideration by the Committee and for inclusion in 

the printed record of the hearing. 

BACKGROUND: 

The Office of the Taxpayer Advocate was established by the 1996 Taxpayer Bill 

of Rights (P.L. 104–168). The purpose of the office is to provide an independent system to assist taxpayers in resolving problems with the Internal Revenue Service 

(IRS), to propose changes in the administrative practices of the IRS, and to identify 

potential legislative changes to resolve problems affecting groups of taxpayers. The 

office is under the supervision of the National Taxpayer Advocate (Taxpayer Advocate) and operates independently from the IRS. The Taxpayer Advocate must submit a report each year to the House Committee on Ways and Means and the Senate 

Committee on Finance. 

FOCUS OF THE HEARING: 

The Taxpayer Advocate will highlight key issues and recommendations from her 

December 2009 Report to Congress. The Taxpayer Advocate’s report contains sections on the most serious problems encountered by taxpayers; legislative recommendations; the most litigated tax issues; and certain research and related studies. The hearing will focus on issues raised by the Taxpayer Advocate that relate 

to services provided to taxpayers and fairness in the administration of our tax laws. 

Specifically, the hearing will review her concerns related to: the IRS’s proposed tax 

return preparer initiative; the unmet needs of low-income taxpayers; the decline in 

IRS toll-free telephone assistance; and certain IRS collection policies that unnecessarily harm taxpayers. The hearing will explore legislative and administrative solutions to the problems identified. Finally, the Taxpayer Advocate will update the 

Subcommittee on issues included in previous annual reports. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://democrats.waysandmeans.house.gov, select ‘‘Hearings’’. Select the hearing for 

which you would like to submit, and click on the link entitled, ‘‘Click here to provide 

a submission for the record.’’ Once you have followed the online instructions, submit 

all requested information. ATTACH your submission as a Word or WordPerfect document, in compliance with the formatting requirements listed below, by close of 

business Tuesday, March 30, 2010. Finally, please note that due to the change 

in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries 

to all House Office Buildings. For questions, or if you encounter technical problems, 

please call (202) 225–1721 or (202) 225–3625. 


anorris on DSK5R6SHH1PROD with HEARING
3 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://democrats.waysandmeans.house.gov. 

f 

Chairman LEWIS. Good afternoon. Welcome. This is a hearing 

on the Taxpayer Advocate report. The hearing today is now called 

to order. 

The National Taxpayer Advocate is a valuable resource for this 

Committee and we are pleased to welcome her here today. She is 

a voice for all taxpayers. Her office was created to help taxpayers 

resolve problems with the Internal Revenue Service. As we meet 

today, we are in the middle of the tax return filing season, and we 

are mindful that so many Americans are suffering during these difficult economic times. 

So, it is a fitting time for us to hear from the Taxpayer Advocate. 

This hearing will give us a chance to learn what problems taxpayers are facing and how we can help. Calls that are not answered, penalties that bankrupt businesses and liens that harm 

low-income taxpayers are only a few of the problems. Other problems include making taxpayers who offer to pay their taxes over 

time complete 100 steps to have their offers accepted. This is not 

right. It almost makes no sense. 

We must simplify the process to make it easier for taxpayers to 

meet their obligations. In some cases, the laws may need to be 

changed, and in other cases, the IRS may need to change its policy 

or rules. Either way, the time is now to address these problems. 

These issues are important to the Committee. They are important 

to the taxpayers. We must work now to address them this year; not 

next year, but this year. 

Now, I am pleased to recognize the distinguished Ranking Member, Dr. Boustany, for his opening statement. 

Mr. BOUSTANY. Mr. Chairman, thank you very much for holding this hearing and I thank you for yielding time. And, Mrs. 

Olson, thank you once again for appearing before our subcommittee 


anorris on DSK5R6SHH1PROD with HEARING
4 

to represent the interest of one of the groups most in need of Washington representation, average American taxpayers. 

You do a great service to our country and I thank you for your 

tireless advocacy on behalf of those taxpayers. We are holding this 

hearing today as we do every year to examine the most serious 

problems encountered by taxpayers in their dealings with the federal tax laws and the Internal Revenue Service. This year, however, the timing of the hearing is fortuitous in many respects, for 

if the House Democratic leadership is to be believed, then by the 

end of the week Congress might have enacted a piece of legislation 

that vastly expands the scope of the IRS’s responsibilities and fundamentally alters the relationship between the IRS and taxpayers. 

That piece of legislation is H.R. 3590, the Senate passed healthcare 

bill. 

I noticed that in this year’s report, Mrs. Olson, you included an 

extensive discussion on the risks and challenges involved in running social programs through the tax system. Jumping off from 

that discussion, I would point out that the Senate Healthcare bill 

creates by far the largest social program ever run through the IRS. 

While the Senate bill delegates enforcement of numerous parts of 

the health insurance system to the IRS, one of the most troubling 

expansions of IRS power is the power to approve a taxpayer’s 

health insurance as sufficient to meet the definition of minimum 

coverage required to be purchased by law. This is the so-called individual mandate. 

Under the Senate’s individual mandate, the IRS would be in 

charge of verifying that every American taxpayer has obtained acceptable health coverage for every month of the year. If the IRS determines that a taxpayer lacks acceptable insurance for even a single month, then the IRS would have the power to impose a new tax 

on that taxpayer, even auditing the taxpayer in assessing interest 

and penalties on top of the tax. This is an unprecedented new role 

for the IRS, one that will inject the IRS even further into the personal lives of American families. 

So, in a few moments I intend to ask you, Mrs. Olson, to share 

your thoughts on what problems might arise both between the IRS 

and taxpayers and within the IRS itself, if the House Democrats 

decide to send the Senate Bill on to the President and make it the 

law of the land. Mrs. Olson, I look forward to your testimony and 

your responses; and, Mr. Chairman, thank you very much, and I 

yield back. 

[The prepared statement of Mr. Boustany follows:] 

Prepared Statement of Charles Boustany, Jr. (R–LA), Ranking Member, 

Subcommittee on Oversight 

(Remarks as Prepared) 

Mr. Chairman, thank you for yielding time. 

And Ms. Olson, thank you once again for appearing before the Subcommittee to 

represent the interests of one of the groups most in need of Washington representation—average American taxpayers. You do a great service to our country and I 

thank you for your tireless advocacy on behalf of those taxpayers. 

We are holding this hearing today—as we do every year—to examine the most serious problems encountered by taxpayers in their dealings with the federal tax laws 

and the Internal Revenue Service. This year, however, the timing of the hearing is 

fortuitous. For if the House Democratic leadership is to be believed, than by the end 

of the week Congress might have enacted a piece of legislation that vastly expands 


anorris on DSK5R6SHH1PROD with HEARING
5 

the scope of the IRS’s responsibilities, and fundamentally alters the relationship between the IRS and taxpayers. That piece of legislation is H.R. 3590, the Senatepassed health care bill. 

I noticed that in this year’s report, Ms. Olson included an extensive discussion on 

the risks and challenges involved in running social programs through the tax system. Jumping off from that discussion, I would point out that the Senate health care 

bill creates by far the largest social program ever run through the IRS. While the 

Senate bill delegates enforcement of numerous parts of the health insurance system 

to the IRS, one of the most troubling expansions of IRS power is the power to approve a taxpayer’s health insurance as sufficient to meet the definition of minimum 

coverage required to be purchased by law. This is the so-called ‘‘individual mandate.’’ 

Under the Senate’s individual mandate, the IRS would be in charge of verifying 

that every American taxpayer has obtained acceptable health coverage for every 

month of the year. If the IRS determines that a taxpayer lacks acceptable insurance 

for even a single month, then the IRS would have the power to impose a new tax 

on that taxpayer, even auditing the taxpayer and assessing interest and penalties 

on top of the tax. This is an unprecedented new role for the IRS—one that will inject the IRS even further into the personal lives of American families. 

In a few moments, I intend to ask Ms. Olson to share her thoughts on what problems might arise—both between the IRS and taxpayers, and within the IRS itself— 

if House Democrats decide to send the Senate bill on to the President and make 

it the law of the land. Ms. Olson, I look forward to your testimony and your responses. 

Thank you, Mr. Chairman. I yield back. 

f 

Chairman LEWIS. Thank you very much, Dr. Boustany, for your 

statement. 

Now we will hear from the Taxpayer Advocate, Ms. Nina Olson. 

I ask that you limit your testimony to five minutes. Without objection, your entire statement will be included in the record. You may 

start. 

STATEMENT OF NINA E. OLSON, NATIONAL TAXPAYER 

ADVOCATE, INTERNAL REVENUE SERVICE 

Ms. OLSON. Thank you, Mr. Chairman, ranking member 

Boustany and Members of the Subcommittee. Thank you for inviting me to discuss the National Taxpayer Advocate’s 2009 Annual 

Report to Congress. 

First, I’d like to commend the IRS’s response to one problem I 

identified in 2002 and again this year: the need to improve oversight of the return preparation industry. Since 2002 there has been 

considerable congressional support for preparer regulation including legislation sponsored by Congressman Becerra. In January 

2010 under Commissioner Shulman’s leadership, the IRS issued a 

report setting out a blueprint to do the job itself and it is now 

working on implementation details. 

When fully implemented, I believe this initiative will improve tax 

administration sufficiently by helping taxpayers locate qualified 

preparers, establishing clear requirements of competence and ethics for preparers and disciplining and even shutting down unqualified and unethical preparers. Second, this year I designated the inability of the IRS to adequately answer taxpayer phone calls as the 

number one most serious problem for taxpayers. 

The IRS’s target for the current fiscal year is to answer only 71 

percent of calls from taxpayers seeking to reach a telephone 

assistor. Among calls that do get answered, the IRS projects the average wait time will be nearly 12 minutes, up from just over four 


anorris on DSK5R6SHH1PROD with HEARING
6 

minutes in fiscal year 2007. I encourage the subcommittee to support sufficient, additional funding for the IRS toll free lines so that 

the IRS can achieve an 85 percent level of service, an average wait 

time of five minutes. 

Third, my report designated the IRS’s lien filing policies as the 

second most serious problem for taxpayers. The IRS collection function has awesome powers to collect unpaid taxes, including the notice of federal tax lien. The mere notation of a federal tax lien on 

a taxpayer’s credit report typically causes the taxpayer’s credit 

score to drop by about 100 points, initially. It can increase borrowing, insurance and housing costs, and even impair the taxpayer’s employability. 

For small business tax payers, a lien can be a fatal blow. The 

lien notation remains on credit reports for seven years after the tax 

debt is paid in full. Thus, the decision to file a lien requires the 

IRS to balance the harm the lien will inflict on the taxpayer 

against the revenue the lien is likely to generate. Yet, the IRS does 

not require its employees to conduct that balancing. The revenue 

benefits of IRS lien filings actually appear quite limited. The IRS 

has increased lien filings by 475 percent over the last decade, while 

inflation adjusted collection revenue has dropped by 7.4 percent. 

In fact, despite the economic downturn, the IRS filed more liens 

in fiscal year 2009 than in any year since fiscal year 1994. Moreover, a recent task study found that on accounts against which a 

lien had been filed, the largest source of collection revenue and 

payments were refund offsets, which occur regardless of whether or 

not a lien has been filed. Based on the data we’ve seen, there is 

a strong possibility that the IRS is harming hundreds of thousands 

of taxpayers a year to collect $1 billion or less. 

The legislative history of the ‘‘Restructuring Act’’ shows that 

Congress wanted more managerial review of lien filings, but the 

IRS is now requiring less review. In many cases, the IRS generates 

liens without determining whether taxpayers have any assets or 

are likely to acquire any assets to which the lien would attach. For 

example, the IRS automatically requests liens for every taxpayer 

the IRS puts in currently not collectible hardship status and whose 

debts exceed $5,000. These are cases where the IRS itself has determined the taxpayer cannot pay basic living expenses if he or she 

pays the tax debt. 

I recommend that Congress require the IRS to consider a number 

of factors prior to filing the tax lien. We should not be unnecessarily harming taxpayers and impairing their future tax compliance for the collection of very few tax dollars. Fourth, I have similar reservations about the IRS’s current approach to the offers in 

compromise program. In the past I’ve expressed that concern that 

the IRS has made offers less and less accessible to taxpayers creating a category of permanent tax debtors and undermining IRS 

collection efforts as well. 

Consider this my last point. At the beginning of fiscal year 2009 

there were over four million taxpayers with delinquent accounts, 

yet during fiscal year 2009 the IRS accepted only 10,665 offers. 

That means roughly speaking that the IRS accepted one offer of 

every 375 taxpayers with a delinquent account. At the same time 

the IRS placed accounts of over 2.1 million taxpayers into currently 


anorris on DSK5R6SHH1PROD with HEARING
7 

not collectible status last year. The result of the IRS’s restrictive 

offer policy is that IRS did not collect any tax on many of these accounts. I appreciate the opportunity to raise these concerns and 

welcome any questions. 

[The prepared statement of Ms. Olson follows:] 


anorris on DSK5R6SHH1PROD with HEARING
8 


anorris on DSK5R6SHH1PROD with HEARING63035A.001
9 


anorris on DSK5R6SHH1PROD with HEARING63035A.002
10 


anorris on DSK5R6SHH1PROD with HEARING63035A.003
11 


anorris on DSK5R6SHH1PROD with HEARING63035A.004
12 


anorris on DSK5R6SHH1PROD with HEARING63035A.005
13 


anorris on DSK5R6SHH1PROD with HEARING63035A.006
14 


anorris on DSK5R6SHH1PROD with HEARING63035A.007
15 


anorris on DSK5R6SHH1PROD with HEARING63035A.008
16 


anorris on DSK5R6SHH1PROD with HEARING63035A.009
17 


anorris on DSK5R6SHH1PROD with HEARING63035A.010
18 


anorris on DSK5R6SHH1PROD with HEARING63035A.011
19 


anorris on DSK5R6SHH1PROD with HEARING63035A.012
20 


anorris on DSK5R6SHH1PROD with HEARING63035A.013
21 


anorris on DSK5R6SHH1PROD with HEARING63035A.014
22 


anorris on DSK5R6SHH1PROD with HEARING63035A.015
23 


anorris on DSK5R6SHH1PROD with HEARING63035A.016
24 


anorris on DSK5R6SHH1PROD with HEARING63035A.017
25 


anorris on DSK5R6SHH1PROD with HEARING63035A.018
26 


anorris on DSK5R6SHH1PROD with HEARING63035A.019
27 


anorris on DSK5R6SHH1PROD with HEARING63035A.020
28 


anorris on DSK5R6SHH1PROD with HEARING63035A.021
29 


anorris on DSK5R6SHH1PROD with HEARING63035A.022
30 


anorris on DSK5R6SHH1PROD with HEARING63035A.023
31 


anorris on DSK5R6SHH1PROD with HEARING63035A.024
32 


anorris on DSK5R6SHH1PROD with HEARING63035A.025
33 


anorris on DSK5R6SHH1PROD with HEARING63035A.026
34 


anorris on DSK5R6SHH1PROD with HEARING63035A.027
35 


anorris on DSK5R6SHH1PROD with HEARING63035A.028
36 


anorris on DSK5R6SHH1PROD with HEARING63035A.029
37 


anorris on DSK5R6SHH1PROD with HEARING63035A.030
38 


anorris on DSK5R6SHH1PROD with HEARING63035A.031
39 


anorris on DSK5R6SHH1PROD with HEARING63035A.032
40 

f 

Chairman LEWIS. Thank you very much, Ms. Olson, for your 

statement. At this time I will open the hearing for questions. I ask 

that each member follow the five-minute rule. If you, Ms. Olson, 

will respond with short answers, all members should have the opportunity to ask a question. 

Now, Ms. Olson, the number of offers in compromise accepted by 

the IRS has declined by 72 percent from 2001 to 2009. You reported that taxpayers must complete over 100 steps to apply for an 


anorris on DSK5R6SHH1PROD with HEARING63035A.033
41 

offer in compromise. Are all of these steps necessary? What can be 

done to increase the use of offers in compromise? 

Ms. OLSON. I think there’s one legislative thing that we need 

to repeal the requirement that taxpayer’s put 20 percent down before submitting an offer. Many taxpayers get their money for an 

offer from a source that is not the taxpayer, from a family member, 

from a church, from different people who will loan them money to 

resolve their tax debts, and they’ll be unwilling to give that money 

up front without knowing the offer is going to be accepted. 

The IRS itself needs to revise completely its offer procedures, so 

that what we are trying to do is get people through the door to 

begin a conversation about how to resolve this debt and get them 

back into compliance on a going forward basis. And, right now, we 

put too many obstacles in their way procedurally. 

Chairman LEWIS. Ms. Olson, last week the Internal Revenue 

Service announced new flexibility for IRS employees to consider an 

unemployed taxpayer’s current earnings and potential future earnings rather than prior year earnings. When negotiating an offer in 

compromise, should the IRS expand this policy for all fully-employed and under-employed individuals? 

Ms. OLSON. I do believe so. This policy has been in place since 

the 90s so the guidance last week just encouraged IRS employees 

to do what was already in the provisions in their own guidance. 

And I think that points up the problem with the offer in compromise process, which is that many employees, I think, believe 

that it’s an amnesty for taxpayers and they forget that we’re getting a promise from taxpayers that they have to comply for five 

years in the future or the whole debt is reinstated. It’s a win-win 

for everybody. We need to change attitudes in the IRS as well as 

the processes. 

Chairman LEWIS. All right. Now you reported that the IRS can 

offset up to 100 percent on an EITC recipient’s refunds to satisfy 

a debt. You believe that the IRS should not be allowed to offset the 

full amount of any future tax refund that is from the earned income tax credit. Why do you think an offset of up to 15 percent of 

the refund would be fair? 

Ms. OLSON. Well, I think that Congress is already using 15 percent, has set 15 percent as the offset against Social Security benefits if taxpayers owe past tax debts. And so it seemed to me that 

the population is very similar that Social Security has by and large 

a lower income population similar to the earned income tax credit. 

And so 15 percent was a reasonable amount. It made no sense to 

me to grab the entire earned income tax credit of people we’ve already determined are low income and will need public assistance 

in other ways. 

Chairman LEWIS. Thank you very much for your answer. And 

I turn to the ranking member for his questions. 

Mr. BOUSTANY. Thank you, Mr. Chairman. 

Ms. Olson, on page 87 of volume 2 of your report you state, I 

quote: ‘‘When social program delivery is grafted to traditional IRS 

activities, there arises a potential conflict with the IRS’s traditional 

mission.’’ Wouldn’t this healthcare bill that we have before us be 

the largest social program ever entrusted to the IRS? 


anorris on DSK5R6SHH1PROD with HEARING
42 

Ms. OLSON. I don’t know the answer to that specific question, 

because I don’t know its size relative to the earned income credit 

or some of the other programs we’ve been in. 

Mr. BOUSTANY. But certainly substantial. 

Ms. OLSON. But it is substantial, yes, sir. 

Mr. BOUSTANY. And should we be concerned by that given the 

potential for conflict in the mission to the IRS. 

Ms. OLSON. We should be concerned. That’s the reason why I 

wrote that piece to give guidance to Congress if it wanted to give 

the IRS social programs, here are some things that you should consider when you’re designing that program. 

Mr. BOUSTANY. Thank you. I see as I look at the bill, Sections 

1501, 1502, and 10106 of a bill, for example, create an individual 

mandate to buy health insurance and grant the IRS the authority 

to enforce that mandate. And given that your expertise in dealing 

with the relationship between the IRS and the individual taxpayer, 

I’d like to get your thoughts on what does this really mean. 

Will it really alter the relationship? Will the IRS be that much 

more involved in the everyday lives of American families in trying 

to deal with this health insurance mandate? 

Ms. OLSON. Well, we do have some experience in delivering 

some health insurance subsidies through the health coverage tax 

credit, which utilizes third parties to do the verification and state 

agencies to do the certification; and then the IRS is really a disbursement agent. Now, with the mandate and the penalty that’s attached, the concern that I had was that we exclude people who 

don’t have any filing requirement and don’t need a relationship and 

don’t have an otherwise relationship with the IRS. And we also 

make sure that we’re not taking active collection actions or lien filings against these people. 

And I did express those concerns to the Senate Finance Committee. I think they’ve been addressed at least in the Senate bill, 

but of course we have not seen the final legislation, nor has anyone. 

Mr. BOUSTANY. Right. And of course we have concerns about 

whether there will be liens, you know, associated with penalties. So 

I take that to mean that the IRS certainly will be much more involved with the individual taxpayer at a different level now than 

its current mission. 

Ms. OLSON. It may very well be. It’s similar to where we are 

involved in the earned income tax credit. 

Mr. BOUSTANY. Thank you. And on March 11th of this year the 

congressional budget office letter to Senate Majority Leader Reid 

estimated that the IRS budget would have to be increased by as 

much as $10 billion over the next decade to help administer the nation’s health insurance system. And when you consider this and the 

fact that the new system really doesn’t take effect until 2014 in 

many respects with regard to the mandate, that really means $10 

billion over the last six years or so of the budget window. 

So we’re talking now about more than a billion dollars annually, 

if you break it out. And given that the IRS currently has a budget 

of roughly, I think, $12 billion, it seems to me the IRS is going to 

have to get much bigger, and perhaps 10 percent bigger to enforce 

these health insurance laws. 


anorris on DSK5R6SHH1PROD with HEARING
43 

Ms. OLSON. I think the IRS is a victim of its own success in administering programs like make work pay or the first-time homebuyer credit, or the economic stimulus payment. And we’ve become 

identified as a very successful and efficient agency. I think from 

the IRS’s point of view if it has flexibility in administering programs and sufficient time to plan an advance, and to your point 

sufficient resources, it will do what Congress tells it to do. 

I think that has been the commissioner’s position. My point has 

been that programs need to be designed in a way that we don’t torment taxpayers and torment the IRS at the same time. Mr. BOUSTANY. I believe that $10 billion, which may be an underestimate, who knows, is not included in the score of the bill. So 

that’s another point to make. Do you think service levels will be 

affected by the implementation of this new function; you know, the 

phone calls? We already know there are some problems that we’re 

not meeting certain benchmarks. You’ve talked about customer 

wait times and so forth. Do you have any sense of how that will 

play out? 

Ms. OLSON. Well, it’s a simple answer. If the IRS gets the resources it needs to administer this program, then the service levels 

in the other areas won’t. If it doesn’t get the resources then there’s 

only so much we can do with the dollars that we have and other 

service levels will be impacted, and that’s very simple. 

Mr. BOUSTANY. Do you have a sense of where you think it 

might, what might really happen? 

Ms. OLSON. Are you asking me to predict what Congress might 

do? 

[Laughter.] 

Ms. OLSON. No. 

Mr. BOUSTANY. Well, if history is any guide we know that 

these resources are stressed. I thank you and I yield back, Mr. 

Chairman. 

Chairman LEWIS. Thank you. Now we turn to Mr. Pascrell for 

his questions. 

Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, I 

need to respond to my good friend from Louisiana—how under any 

circumstance I am amazed that weaving in of healthcare, the 

healthcare debate, is interesting. 

So, now that you’ve done that and you’ve set precedent in this 

hearing, I’ll get to the IRS in a second, because you are the main 

target or focus of today. Your organization has done a fantastic job, 

and I’ve said that before, but we know that individual and family 

spending on premiums and out-of-pocket healthcare costs will increase significantly, and spending is going to jump 34 percent by 

2015 and 79 percent in 2020. So what we’re left with is a picture, 

a perception of a huge dinosaur which we call the IRS unable to 

climb up the stairs and get away from another dragon of sorts. And 

the question is we pulled these facts out of the air. You know, what 

you’re saying makes sense, is stated in good faith. 

But you need to take a look at it in context to see what we are 

paying, what we will pay, if we do nothing, if we start off with a 

blank page, and to weave that into the tax issue. I find it very interesting. I’d be more concerned—— 

Mr. BOUSTANY. Would my friend yield? 


anorris on DSK5R6SHH1PROD with HEARING
44 

Mr. PASCRELL. Yes, absolutely. 

Mr. BOUSTANY. Well, I think this is a consideration, because 

we already know based on the CBO letter that there are going to 

be additional costs and additional burdens placed on the IRS and 

I think it’s critically important that those things be addressed and 

put out on the table. And, Ms. Olson has repeatedly testified year 

after year about the need for resources for IRS. We saw what happened with the implementation of stimulus. 

Mr. PASCRELL. And she’s been correct? 

Mr. BOUSTANY. And she’s been correct, and so I think if history 

is any guide we can expect there will be more demands and will 

service to the taxpayers’ suffer. 

Mr. PASCRELL. And if history is any guide, the numbers that 

I quoted will be something we need to face and we’ll be facing them 

another thirty years from now and when the numbers are even 

greater. So we need to do something—not to find a perfect solution—only God is perfect. But we need to find a solution that is 

workable and that will bring us closer to the goal line of having 

people not worry about how deep their pockets are to get 

healthcare and not throwing them out of healthcare coverage simply because they have a malady of some sorts. And I think you believe in the same thing. 

The question is how do we get to that point and that’s what the 

debate is all about, so you can’t demonize any of the health insurance bill. I mean there’s enough demons out there to go around. 

Now, let me ask you a question, if I may. 

Ms. OLSON. Certainly. 

Mr. PASCRELL. I’m very concerned about the fact of foreign 

businesses. In fact, you make a point of that in terms of 500,000 

tax returns were filed from a foreign address in 2007. I don’t have 

the numbers for 2008. They don’t understand, many of those taxpayers, that they have filing requirements, the complexity, et 

cetera, et cetera, et cetera. I’m really concerned about that, because 

how much lost revenue do you think the government is not able to 

take advantage of because of the fact that these folks aren’t filing, 

filing incorrectly, or we can’t catch up to them period. 

Ms. OLSON. I have never seen a revenue estimate that the IRS 

has produced. We put those numbers out to show that U.S. taxpayers abroad, and these are U.S. citizens abroad, you know, have 

no way to reach the IRS without incurring substantial costs to get 

answers to their questions and, to your point, being confused, may 

think they don’t have a filing requirement when in fact they do. 

And when they finally figure it out, they have penalties and interest, you know, from years and years and years. And they may 

have been paying taxes in their own—the country that they’re living in—that they didn’t have to owe, and then they can’t get it figured out. This is a very serious issue for us. 

Mr. PASCRELL. Oh, I think it is, and in terms of lost revenue 

here, we’re talking about hundreds of billions of dollars. 

Ms. OLSON. We may very well. 

Mr. PASCRELL. If you go back over 10 years, these are the 

things we should be trying to, you know, close loopholes, getting 

folks to own up to what happens. Same thing with American corporations that go offshore. I mean that’s revenue. It’s like someVerDate Nov 24 2008 01:12 Jun 10, 2011 Jkt 063035 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63035.XXX GPO1 PsN: 63035

anorris on DSK5R6SHH1PROD with HEARING
45 

body on my street who owns a home and doesn’t pay his property 

taxes. That means I have to pay more, because the town is waiting 

and depending upon expected revenue. If that revenue doesn’t come 

in, then I have to pay it. This is what we should be concerned 

about, instead of all the time catapulting the IRS. I mean I do that 

enough myself. But the point of the matter is this is a very serious 

issue, and I think we should get estimates about how much revenue the American people have had to shoulder because of individual problems, not filing, and corporations who simply are out to 

shaft the American people, legally. Thank you. We’ll have a second 

round? 

[Laughter.] 

Chairman LEWIS. It’s possible. 

Mr. PASCRELL. Thank you. 

Chairman LEWIS. Now we turn to Mr. Reichert for his questions. 

Mr. REICHERT. Thank you, Mr. Chairman. Well, I want to 

agree with my good friend Mr. Pascrell. You know, we need to 

focus on those things that the IRS has been doing for years, collecting revenue, closing loopholes, and going after people who 

aren’t filing their income tax; and, of course, holding corporations 

accountable, too. We’ve seen what can happen when we’re not able 

to do that. 

Accountability and responsibility and the IRS’s job absolutely 

key, but there are questions, though, how this new responsibility 

lays over all that you already have to do and how are you going 

to get it done. And I understand perfectly well you need more resources. If you need more dollars, you’ll be able to do the job, but 

we’re borrowing now and spending too much now. So the purpose 

for the questioning today, at least from our side and looking at the 

healthcare question, people want to know how this is going to affect me personally. 

So if Ms. Olson under Section 1501 of the Senate Healthcare Bill, 

if a taxpayer cannot prove to the IRS that he or she has minimal 

essential coverage as defined by the Democrats, what action could 

the IRS take? 

Ms. OLSON. Well, I don’t know that I have the expertise to answer specifically to that bill, but what I spoke to to the Senate Finance Committee was that my personal opinion was that we should 

not be allowing the IRS to take levies against wages or things like 

that, or file liens against the taxpayers in that situation. And I 

think what the section says is that they can take refund offsets. 

I would recommend that we carry over to that provision that you 

not take more than 15 percent of the earned income credit refund, 

because then you’re robbing Peter to pay Paul. So I think that 

there’s been restriction on IRS collection activity that would make 

sure that taxpayers were protected. 

I also think on the issue of whether the IRS is looking whether 

the taxpayer has qualified health insurance, as I noted before, in 

the health coverage tax credit. We actually contract out that decision and a different entity makes the determination whether that 

policy qualifies for the current health coverage tax credit; and that 

provision has been around for quite some time as the result of 

NAFTA and a few other arrangements where United States taxVerDate Nov 24 2008 01:12 Jun 10, 2011 Jkt 063035 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63035.XXX GPO1 PsN: 63035

anorris on DSK5R6SHH1PROD with HEARING
46 

payers lost jobs. And we really don’t have a lot of complaints about 

that. 

Mr. REICHERT. There would be an increased cost, though, 

to—— 

Ms. OLSON. Yes, that’s true. 

Mr. REICHERT [continuing]. Extend that program. What about, 

could the IRS conduct an audit of those people that don’t have a 

healthcare plan, choose not to have? 

Ms. OLSON. I have not seen, obviously, the final language of the 

bill, but if it’s anything like the health coverage tax credit, then no. 

We do not have the ability to conduct an audit; nor does the taxpayer have the right to go to the tax court to challenge our determination, because all we are really doing is disbursing funds. 

Mr. REICHERT. How many individual income tax returns were 

filed in 2008? Would you happen to know approximately? 

Ms. OLSON. In 2008 I think it’s about 140 million. We have 140 

million individual taxpayers and about 30 million corporation taxpayers. 

Mr. REICHERT. Okay. And under the bill, I’m sure you’re aware 

that the IRS would impose the individual mandate tax penalty for 

every month that a taxpayer fails to show the minimal essential 

coverage. So does that mean that the IRS is then going to be responsible for, and this goes back to Mr. Pascrell’s point, for following 140 or 150 million taxpayers a year every month? 

Ms. OLSON. Well, again, I haven’t seen the final bill but I think 

what the IRS would want, and I’m just speaking here from my own 

perspective, but I think what the IRS would want is flexibility as 

to when and how it would be making that determination. And if 

the bill were drafted appropriately it would be able to decide how 

it could best administer it without having to, you know, put the 

taxpayer through a lot. And the second point would be that we exclude people who have incomes so low that they have no return filing requirement at this time. We don’t want to pull them into the 

system, and I do think that the thresholds accomplish that in the 

Senate bill. 

Mr. REICHERT. What, if any, additional burden will small businesses bear under this plan? Additional paperwork? Time? Money? 

Ms. OLSON. Well, I can only speak for the tax provisions; and, 

there, there is the tax subsidy for small businesses. And I’m not 

sure again how that would be implemented, whether that would be 

implemented through the payroll system or as a credit at the end 

of the year that they would claim in their income tax return. 

Mr. REICHERT. Okay. Thank you, Mr. Chairman. 

Chairman LEWIS. Thank you. Now we turn to Mr. Higgins for 

his question. 

Mr. HIGGINS. Thank you, Mr. Chairman. 

Ms. Olson, first of all, let me say that your Western New York 

office has been very helpful to my office and our caseworkers in 

helping our constituents address issues with the IRS. We appreciate it very much. It’s an essential public service that you provide 

and we are grateful. 

On the issue of electronic filing, your report indicates that incentives are needed to increase the rate of electronic filing. A couple 

of things in answering that question: what is the percentage of 


anorris on DSK5R6SHH1PROD with HEARING
47 

those who file electronically versus those manually or through the 

mail; and, what are the incentives that you encourage? 

Ms. OLSON. Well, I think at this point it’s about a 60 percent 

electronic filing rate and we are increasing each year. I think that 

one of the big incentives that occurred this year, already enacted, 

is the requirement that preparers who prepare over, I think, it’s 11 

or more returns for a fee, have to file electronically. Because today 

about 67 percent of taxpayers use return preparers, and in small 

business it’s even more. So if we can get those preparers to file 

electronically, we can really get it up there. 

Chairman LEWIS. Did you say 11 or 11 percent? 

Ms. OLSON. Eleven or more returns. 

Chairman LEWIS. Thank you. 

Ms. OLSON. Right. 

Chairman LEWIS. Thank you. 

Mr. HIGGINS. Does your report reference any kind of target as 

to the percentage that you would like to see within a specified period of time? 

Ms. OLSON. Yes, we definitely recommended that the IRS shoot 

for—well, Congress has set the goal of 80 percent—and we encourage that you keep that goal. It’s a good incentive goal. We have 

looked at larger percentages. Just when Congress sets a goal, I 

think it organizes the IRS, even if they miss the deadline. It makes 

them act. 

Mr. HIGGINS. 80 percent by? 

Ms. OLSON. Well, I think Congress had said originally 2007, 

and obviously the IRS missed it. And, I think it’s been extended to 

2012, but I’m not sure on that. 

Mr. HIGGINS. Is it a 60 percent increase? 

Ms. OLSON. The goal was 80 percent to reach. 

Mr. HIGGINS. Right. Is that a significant increase? 

Ms. OLSON. Oh, from years ago it’s a huge increase. It’s actually 

very impressive in my mind that they got there. 

Mr. HIGGINS. So progress is being made toward that goal? 

Ms. OLSON. Progress is being made. I think now, and I think 

that you’ll get a big leap with this return preparer mandate. 

Mr. HIGGINS. Great. Thank you for your work. I have no more 

questions. 

Ms. OLSON. Thank you. 

Mr. HIGGINS. Thank you. 

Chairman LEWIS. Thank you. Now we turn to Mr. Becerra for 

his question. 

Mr. BECERRA. Thank you, Mr. Chairman, and we could probably hold an Oversight hearing once a week with Ms. Olson and 

all of us would be much the better for it; and, certainly, the taxpayers would. So, Ms. Olson, thank you for the work that you do. 

I’m not sure when we establish the office by statute, but it was one 

of the best things that Congress did, is to have an oversight. The 

year was 1996, Congressman Kind tells me. That’s what we did to 

have some oversight over the IRS to not only get on top of it but 

also to pat it on the back when it does the right thing. We’re trying 

to get people to voluntarily pay their taxes, so thank you so much 

for the work that you’ve done. 

Ms. OLSON. Thank you. 


anorris on DSK5R6SHH1PROD with HEARING
48 

Mr. BECERRA. The number one most serious problem you’ve 

identified is the fact that more and more people aren’t getting 

through, at least not on a timely basis when they make a phone 

call to the IRS on that toll free line and part of it, we know, is because of the mass increase in volume as a result of the 2008 stimulus, the economic recovery package and so forth. So, I think we 

have to give the IRS some slack, because, in fact, they increased 

their ability to respond to calls given the increased number. 

But, my understanding is that they’ve called for an increase in 

the budget to help reduce the amount of people that don’t get 

through on the telephone, toll-free line. But, they’re taking the 

money it seems from a very good program, or they’re trying to give 

the money to a very good program, telephone access through the 

toll-free line, but they’re taking it from programs that are just as 

valuable, if, perhaps, not more valuable. My understanding is 

they’re taking almost half the money they’re going to put to increase the ability to service calls from a program that would help 

provide tax counseling to our elderly. 

Ms. OLSON. Right. 

Mr. BECERRA. The elderly are people who are trying to do the 

right thing, probably on fixed incomes, may not file correctly if they 

don’t get assistance; or, may end up having to pay exorbitant 

amounts to tax preparers who take advantage of them, which 

doesn’t seem to make sense to take money out of that program to 

put it into another very good program. They’re taking money out 

of the low-income taxpayer clinics, which once again help people 

who might be taken advantage of, exploited, and have to pay exorbitant fees to probably file simple tax returns or who may end up 

filing incorrect returns. 

And then the voluntary income tax assistance clinics, which are 

oftentimes handled by law students and others, are giving a free 

service for Americans trying to help do the right thing. And, by the 

way, I understand they’re taking quite a bit of money out of your 

office as well. Do you have any understanding why the IRS would 

want to take money out of an office that has been one of the champions? You go to bat for taxpayers every day, we’re essentially killing the messenger. 

The IRS is killing the messenger for pointing out what they have 

to do better or to try to do better in an area you’ve pointed out. 

I don’t get it. Do you have an explanation for why the IRS would 

take money out of your office and other good programs to try to pay 

for another good service? 

Ms. OLSON. I have no explanation. 

Mr. BECERRA. Okay. 

Ms. OLSON. I’m not sure that it’s the IRS that did it. I just really, honestly, have no explanation. 

Mr. BECERRA. Okay. Well, I know that we’re going to have an 

opportunity to speak to the Commissioner soon. We’ll ask him, and 

I know everyone’s got budget constraints—and so no one needs to 

pre-judge. But I would certainly hope that the Commissioner will 

have an opportunity when he’s here to explain how we can work 

with him to try to make sure that we figure out a way to do this 

without having taxpayers pay—having taxpayer Peter pay so that 

taxpayer Paul can get through on the phone line. It just is silly. 


anorris on DSK5R6SHH1PROD with HEARING
49 

I hope that we can also follow-up with you on this issue of liens 

and offers in compromise. Give me a sense—These offers in compromise, essentially, it’s a settlement. We’re talking about settlements with taxpayers who are willing to come forward, willing to 

try to pay, but they’re trying to do it under terms that they can 

afford. Most of the time you’re talking about middle-income, modest-income families. They’re saying, ‘‘Okay. You’re right. I made a 

mistake. I want to pay. Help me come up with a schedule so I can 

pay.’’ What’s the problem? 

Ms. OLSON. Well, again, I think that the IRS is being hidebound by rules and procedures and it’s keeping people who maybe 

came in with the wrong offer amount; but, if you had a conversation with them and you talked to them about what we needed to 

see, they might find a way to come forward with that information. 

But the problem is that the procedures sort of keep people out. 

Mr. BECERRA. How many offers in compromise were there that 

were accepted last year? 

Ms. OLSON. 10,665, which is pitiful. 

Mr. BECERRA. And how many delinquent tax accounts does the 

IRS have that it thinks it can collect on? 

Ms. OLSON. Well, it had four million that were delinquent and 

it put two million last year in currently not collectible, which it 

gave up on. So there are millions of people that might participate 

if we just drop some of these bureaucratic rules. 

Absolutely. 

Mr. BECERRA. Thank you. 

Chairman LEWIS. Now we turn to Mr. Kind for his question. 

Mr. KIND. Thank you, Mr. Chairman, and thank you Ms. Olson 

for being here. We always look forward to your testimony and I just 

want to also express my personal appreciation for the work that 

you do and the National Taxpayer Advocate. So I have a close 

friend of mine, Mary Jo Warner from Lacrosse, Wisconsin, who 

serves on the advisory board. And I’m always calling her and asking her thoughts and advice on a whole host of issues. So we do 

look forward to your report as far as what efficiencies and improvements can be made. I think there’s a shared interest in this Committee and throughout the Congress in doing that. 

Let me just touch upon a couple of subjects just to get your feedback on. The report was clear as far as the IRS toll-free service opportunity and decline. And you have established goals on that, but 

another area of concern that I have is the quality of the information that’s available; and, what more can be done when people who 

actually do get through and actually speak to someone for assistance to improve the quality of the information that they can then 

use without further mistakes being made. Do you have any recommendations on what more can be done? 

Ms. OLSON. Well, I think that the IRS needs to be a little bit 

more ambitious in what it’s willing to answer. It declares many 

issues out of scope. And so if you call, they shunt you off to someone else and each time you delay the taxpayer from getting an answer, the taxpayer may get frustrated, drop out, get the wrong answer; you know, claim the wrong answer. And I think that just 

takes a lot of attention. The IRS has to really commit to training 

its employees on more than just its core issues. 


anorris on DSK5R6SHH1PROD with HEARING
50 

Mr. KIND. Yeah, and I think it indicated in the report an about 

85 percent service level and roughly a five-minute waiting time, 

nothing more frustrating than calling and trying to hopefully get 

through, and ultimately not getting through. So it’s a terrible problem that we have to address. And then the e-filing and the goal 

that really ramped that up as Mr. Higgins was questioning about 

earlier. In the area of lower-income taxpayers, what more can be 

done as far as outreach and assistance and education to help them 

take better advantage of e-filing? 

Ms. OLSON. Well, I think that first of all the problem with lowincome taxpayers is that e-filing is often linked with refund anticipation loans. And so I think that’s where the return preparer regulation project really comes in. We have a slide show on one of our 

websites that shows a return preparation site that is run in a dog 

grooming parlor; and you just have to ask what the qualifications 

are. 

Mr. KIND. Is it low-income tax clinics? Is that another? 

Ms. OLSON. These are not a clinic. This is just a for profit business that is grooming your dogs and preparing your taxes at the 

same time. And you just have to say what are your qualifications 

for doing that, really. And these are where low-income taxpayers 

go to get assistance, and then they are sold these loans and these 

people don’t know how to prepare returns properly. So we really 

need to get qualifications in place, for instance. 

Mr. KIND. What about low-income tax clinics specifically geared 

for this? 

Ms. OLSON. Well, the clinics do controversy representation or 

educate taxpayers about the rights. And the clinics, I administer 

that grant program. In 2008 they took 16,000 cases that were tax 

disputes with the IRS for low income tax payers. And in the first 

half of the year of 2009 they had 14,000. So you can see what the 

economic downturn has done in people. 

You know, almost by half of the year they had almost as many 

cases as they did for the whole year the previous year, and we just 

need more VITA sites. We need additional funding for the VITA 

site so they can go out to communities that are hard to get to; you 

know, that sort of thing. 

Mr. KIND. All right. Let me also just shift your focus momentarily on the tax refund processing that’s going on. It’s my understanding that it’s basically a presumption to try to get the refund 

out, even before information can be checked and verified. And 

you’re advocating in the report that we ought to shift that a little 

bit to a trust, but verified type of system. Is that right? Is that a 

fair way to describe it? 

Ms. OLSON. Well, I think so. We get information returns like 

W2s and 1099s. They’re supposed to be sent out to the taxpayer, 

most of them, by January 31st. But the IRS doesn’t get them in 

a workable format until August and we’re basically saying we’re 

shipping out refunds or freezing refunds, because we think they’re 

suspicious and holding them, when in fact if we could get the third 

party information in very early when the returns are coming in, we 

could get good refunds out, very, very quickly, and save the public 

fisc a lot of money by not shipping out refunds that shouldn’t go 

out. 


anorris on DSK5R6SHH1PROD with HEARING
51 

So it requires study, because it means we’re going to have to 

really think through this. And so this is another one where if Congress set a deadline, Congress said IRS come back in a year. Treasury, come back in a year. Tell us what needs to be done to get this 

done; and then we could decide how to proceed. 

Mr. KIND. Yeah, because right now you’ve got early preparers 

obviously getting their returns and anticipating a refund, but some 

of the information doesn’t have to ultimately be in until what, the 

end of March or early sometime? 

Ms. OLSON. That’s correct. Right. That’s correct. 

Mr. KIND. Okay. All right. Well, thank you. Thank you again for 

the work that you and the group do. We appreciate it. 

Ms. OLSON. Thank you. 

Mr. KIND. Thank you, Mr. Chairman. 

Chairman LEWIS. Thank you. Now we return to Mr. Etheridge 

for his question. 

Mr. ETHERIDGE. Thank you, Mr. Chairman. And Ms. Olson, 

thank you for being here. Let me ask you a couple of questions, because in your role as a National Taxpayer Advocate I would be interested in your comments regarding the IRS’s ability to deal with 

the growing complexity of the Tax Code. Let me just share with 

you some of the things I’m thinking about, because I think we’re 

trying to do the right thing. 

We have expended the tax credits for education. We have provided credits for energy efficiency among other things; and these 

are very valuable. I am fully supportive of them and pushing forward for years, but I think my question to you is: are there means 

to help people make the decisions to go to college, to understand 

the credits are there; how to buy a home, or at least work with 

folks so they can understand that; reduce their energy use through 

energy efficiency means and share with us in that whole area, because your office talks to thousands of taxpayers? And my question 

is do you believe that most of the public is aware these credits are 

available to them? 

And let me just layer on top of that the other question so I won’t 

have to ask it, please share with us the steps that you’re taking 

to make sure that people do get the credits that they really deserve 

that we intended then to have to make a difference in energy policy, educational opportunity and a whole long list of things. 

Ms. OLSON. Well, the first thing as far as do taxpayers know 

about these things, I think they hear about them in the press and 

the media. The problem is that the media talk about them in very 

general ways, so taxpayers think, oh, I’m qualified for this and request them when in fact they may not, because the requirements, 

the eligibility requirements are very detailed. And, you know, the 

IRS could probably do better with provisions online where people 

could go in and do Qs and figure out whether they really are qualified. 

Mr. ETHERIDGE. Excuse me. Do you have work sheets where 

you can go on and look at? 

Ms. OLSON. Certainly. 

Mr. ETHERIDGE. It seems to me. 

Ms. OLSON. The IRS does have work sheets and we could probably do a better job of making them more electronic so that people 


anorris on DSK5R6SHH1PROD with HEARING
52 

could get at them easily. But I think that we really, you know, this 

is where tax reform comes in, because sometimes the complexity of 

it undermines the very policy goals that Congress is trying to 

achieve by these provisions. 

One thing we recommended in this study that we publish this 

year was that Congress mandate that IRS come back with a report 

about the effectiveness of the program. Did it do what Congress 

wanted it to do? And that could be it didn’t do it, because taxpayers 

didn’t know about it or were confused about it. Or IRS made it too 

hard to get it, or, it was just too confusing. And if Congress had 

that information, they could better design the credits in the future. 

Mr. ETHERIDGE. Okay. Thank you, Mr. Chairman. I yield back. 

Chairman LEWIS. Thank you very much. We turn now to Mr. 

Davis for his question. 

Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman. And 

thank you and your office, Ms. Olson, for the tremendous work that 

you do. I don’t know how much some district offices make use of 

taxpayer advocates but mine certainly does. And, we are often 

pleased with response and pleased with the assistance that people 

are receiving. 

One of the areas that I have some interest in is the whole business of tax lien policies. In terms of how the Internal Revenue 

Service is handling and implementing those policies at this point, 

for example, after review of a taxpayer’s case, the IRS may determine that the outstanding tax liability is currently not collectible. 

These cases, of course, involve taxpayers who are experiencing in 

many instances, serious economic hardship. Does it really make 

sense for the IRS to use automatic federal tax liens in these cases, 

even though it’s already determined that the individuals are not 

going to be able to pay? 

Ms. OLSON. Absolutely not. It makes no sense whatsoever to 

me. I’m not saying that the IRS might not want to file a lien in 

some case where somebody’s maybe got a lot of real estate that 

they can’t sell because of the economy and we want to protect the 

government’s interest, but no one’s making that determination. No 

one’s looking at the facts. No one’s looking at whether the taxpayer 

has been complaint. All of their life they had a heart attack. They 

got behind in one year and they will make it up very quickly. There 

is no reason to destroy somebody’s credit for that, which will impair their ability to pay taxes in the future. 

Mr. DAVIS of Illinois. And, I guess some of this also just relates 

to the question that one of my colleagues just raised relative to offers in compromise, and whether or not there is realistic in some 

instances acknowledgment of what those offers really are and how 

a situation could be resolved; and in many instances I guess they 

just kind of go over periods of time and ultimately the resolution, 

of course, is not going to be in the interest of the taxpayer, nor are 

they often by then in the best interest of the Internal Revenue 

Service, because there’s no value, seemingly. 

Ms. OLSON. IRS figures show that we get on average 17 cents 

on the dollar from an offer in compromise, whereas, we have 10 

years to collect the debt in general. And in year two, we only collected about 11 to 13 cents on the dollar through our normal collection activity; and, in year three, we collect virtually nothing. So 


anorris on DSK5R6SHH1PROD with HEARING
53 

from that perspective an offer is a very good deal for the government as well as a very good deal to give the taxpayer a fresh start. 

Mr. DAVIS of Illinois. Let me ask you another question. I’ve been 

trying to understand how the differences exist in auditing the way 

that everybody in the country audited relative to statutes of limitation except people in the Virgin Islands who seem somehow or another to fall outside what the norm would be. Could you explain 

that to me or do you think that’s a fair situation for them? 

Ms. OLSON. Well, I think that the way the Internal Revenue 

Service has interpreted the statute right now, they are saying that 

going forward, if you file a return with the Virgin Islands, that will 

start the statute of limitations. But they have carved out a group 

of taxpayers. So it’s sort of like this one group has a special statute 

of limitations just for them where they have no statute of limitations, essentially. And I am very troubled by that and I’ve written 

about that extensively and made some recommendations both to 

the IRS and to Congress to close that loop. The idea of creating just 

a special statue of limitations for 243 taxpayers bothers me greatly. 

Mr. DAVIS of Illinois. Do you think it would require legislation 

to actually change that? 

Ms. OLSON. Some strong encouragement to the IRS might, but 

it may very well require legislation, I’m afraid. 

Mr. DAVIS of Illinois. Thank you very much. Thank you, Mr. 

Chairman. 

Chairman LEWIS. Thank you. Now we turn to Mr. Roskam for 

his questions. 

Mr. ROSKAM. Thank you, Mr. Chairman. Ms. Olson, thank you 

for your time today. I had a quick question. I think I wanted to return to an area of inquiry that Mr. Reichert had with you and I 

understand you’re not completely versed on the Senate bill and all 

of the drama. But there are some top lines that are unambiguous 

that everybody that’s been watching the news knows about, so I 

don’t want to drag you into the weeds. 

It’s interesting because the IRS is going to have a more significant role by definition, based on the increased tax liability for noncompliance. You’d agree with that. Right? 

Ms. OLSON. Hm-hmm. 

Mr. ROSKAM. Okay. So it’s clear that the Senate version of the 

bill doesn’t have a criminal penalties provision, which is a good 

thing. It doesn’t have the ability of the IRS to put a levy on property, which is a good thing, I would argue, but it doesn’t completely 

take away all the tools that the IRS has. Could you for the benefit 

of the committee or the subcommittee, could you tell us what other 

tools the IRS has at its disposal in case of non-compliance? 

Ms. OLSON. My understanding is what they’re limited to doing 

is offsetting people’s refunds. It is not clear to me whether they can 

file a lien. If they could file a federal tax lien I’d be concerned 

about that, but my understanding is they can’t. So my understanding is they can only offset people’s refunds. Now, 80 to 85 percent of taxpayers get refunds in their income tax returns, so if 

you’re expecting something, you may not get it if you have a penalty on there. 

Mr. ROSKAM. And sort of implicit in that, if a taxpayer came 

to you as the advocate and said, look. I feel like I’m being unfairly 


anorris on DSK5R6SHH1PROD with HEARING
54 

manipulated by the IRS. I’m in fact being audited by the IRS. 

Wouldn’t you be in a position to say, well, that sort of comes with 

the territory? The senate bill doesn’t explicitly take away the IRS’s 

audit authority here. And wouldn’t you then recommend to the taxpayer that’s not an area where we’re going to concentrate on taking 

the IRS on? 

Ms. OLSON. Well, no. I always am willing to take the IRS on 

anything, but I would say that it’s not clear to me under the Senate bill whether the IRS has the authority to audit anybody on 

anything really, other than is this an eligible insurance policy, or 

do you have the required coverage. If you are auditing, then I think 

that the taxpayer does need rights to be able to challenge the IRS. 

Mr. ROSKAM. I agree with you wholeheartedly, and I agree with 

you in terms of your interpretation; but, just to go back and sort 

of revisit, I think the point you were making a minute ago the IRS 

has. I mean, to your point, I just want to make sure I’m clear. The 

IRS would have the ability to have that question of whether the 

coverage is adequate pursuant to the code. That’s an auditable 

question. Isn’t it? 

Ms. OLSON. If the bill is structured in that way, and I don’t now 

for a fact whether it is. If Congress says IRS, you are going to 

make the determination, you are the determiner, and the bill 

doesn’t take it out of the normal procedures to get tax court jurisdiction and things like that, then the IRS could audit it. It could 

be under some bills it could be a math error in which we say this 

doesn’t fit the requirements; and, if you don’t like it, come in and 

tell us and we’ll put you through our normal procedures. Could be 

very simple, yes, no, and it’s how you all write it. It’s not what the 

IRS is going to do. The IRS will do whatever you write. 

Mr. ROSKAM. Isn’t the fact—and I appreciate your response. 

Isn’t it true that since it’s placed in the Tax Code, since the mandate is placed in the Tax Code that there’s an implicit audit authority there? I mean it’s not resident in some other part of the 

statutes. It’s in the Internal Revenue Code. 

Ms. OLSON. Unfortunately, I don’t think that’s true, because we 

have the health coverage tax credit where we have no audit authority, and that is in the Internal Revenue Code. So we don’t have 

that. We don’t audit anybody on that issue. 

Mr. ROSKAM. Wouldn’t you argue that in order to take away 

the ambiguity that has been demonstrated by this conversation for 

the past couple of minutes, Congress should affirmatively put in 

place that the IRS in fact doesn’t have the authority, because at 

best, people like me are interpreting it and saying, well, it looks 

like there’s authority. There’s people like you that are saying, well, 

maybe, maybe not. Isn’t the best remedy to put it in the same category of things like no criminal penalties, no liens, and no audit 

authority? Isn’t that in fact the best way to go? 

Ms. OLSON. Clarity is always helpful. 

Mr. ROSKAM. Thank you. I yield back. 

Chairman LEWIS. Thank you very much. Ms. Olson, I want to 

ask you a question. I know it’s not in keeping with your report, but 

let me just ask you. Do you have any counterparts to your knowledge on the state level? 


anorris on DSK5R6SHH1PROD with HEARING
55 

Ms. OLSON. There are many states that have created taxpayer 

advocates: California, Pennsylvania; New York has one. Every day 

I’m finding more taxpayer advocates throughout the United States, 

state advocates. And in May, I think, or September of next year, 

we are actually—or this year, rather. In Albany we’re going to have 

a conference of state taxpayer advocates. 

Chairman LEWIS. Well, do you know about how many states? 

Ms. OLSON. At this point, I don’t know. I could find out for you, 

sir. 

Chairman LEWIS. The reason I’m raising this question, I just 

noticed a few days ago there was a national news report that said 

on the state level many states are holding up the tax refund, because they want to hold onto their money because of budget shortfalls. That doesn’t seem to be fair or right. 

I hope if they decide to do this, they’re going to at least be prepared to pay some interest to the taxpayers. I’d just like to know, 

but you may not want to get involved in some other person or some 

other states if you have an opinion about that? 

Ms. OLSON. Well I mean these are provisions. If the Internal 

Revenue Service proposed that I would be very unhappy and would 

be vocally opposing that or at least ensuring that taxpayers got 

their interest, you know, paid out to them. And we also have the 

authority and the ability to override, like refund offsets and things 

like that where the taxpayer has economic hardship. And so that 

is something you would want to occur whether it’s in the 

healthcare penalty area or the income tax credit area, or maybe if 

someone were holding back a check for one reason or another, the 

ability to override where there is a need. 

Mr. PASCRELL. Yeah. 

Chairman LEWIS. Mr. Pascrell. 

Mr. PASCRELL. Mr. Chairman, I just wanted to clarify. I know 

that there was work done to address what the gentleman just said, 

working on legislation to disallow the IRS to audit under these circumstances or pretense, which ever you want to call it, so we are 

sensitive to that issue. 

I hope we are as sensitive to that issue, Mr. Chairman, as we 

are to 46 million people not having any coverage in the United 

States of America; and, the only way, having gone through several 

options, this Committee, right here, to begin the process of covering 

that many people is to make sure there is a leveling off and everybody has to have all hands on deck. 

So you cannot escape the process, because we are all intimately 

involved with the health of this nation as I understand it. But I 

have another question for you which I hope that you will answer 

as you’ve done all the others responded to all the questions. Our 

unemployment is now 9.7 percent and it kills you. It kills me to 

see so many people losing their homes, struggling to pay for their 

children’s educations at the same time to bring bread home on the 

table; and it’s straining to put a meal for the whole family on that 

table. It’s not an easy proposition if you’re out of work. 

So we find ourselves in the midst of the tax season. It could be 

troubling time for many. Many of us were faced with a multitude 

of financial difficulties, as more and more people lose homes, et 

cetera. One of the economic hardships many of our citizens in 


anorris on DSK5R6SHH1PROD with HEARING
56 

working class communities, like the people I represent in the 

eighth district in New Jersey, are vulnerable to unscrupulous individuals who take advantage during tax season, particularly. 

The report, Ms. Olson, that you presented to us notes that the 

IRS’s collection of penalties assessed against preparers is very low. 

Yet, we know to the contrary examining other evidence that the 

amount of violations is very high. So far so good? 

Ms. OLSON. Hm-hmm. 

Mr. PASCRELL. So, in 2009, the IRS collected only 22 percent 

of the collectible preparer penalties. Why? 

Ms. OLSON. I have no answer to that. I think, you know, it’s 

silly to impose penalties if you don’t collect them, and how are they 

going to be a disincentive against certain behavior if you don’t collect them. We have said in the report that the IRS needs a robust, 

you know, return preparer strategy. 

Mr. PASCRELL. Right. 

Ms. OLSON. And needs to do shopping visits, you know, posing 

as a taxpayer as GAO has done and the Inspector General has 

done on a routine basis. 

Mr. PASCRELL. Who can prepare taxes? 

Ms. OLSON. Anyone. 

Mr. PASCRELL. So, you don’t have to have a certificate or have 

it be stamped or anything like that. Anybody can prepare your 

taxes. 

Ms. OLSON. Now that is changing. The IRS has determined that 

it has the authority to acquire people who are not attorneys, accountants, or enrolled agents. 

Mr. PASCRELL. Well, a lot of attorneys don’t know how to file 

either. 

Ms. OLSON. A lot of attorneys, I know. But we have a bar. 

Mr. PASCRELL. So I mean why would we leave them out? 

Ms. OLSON. Right. There’s a bar to requiring them to take a test 

to practice before the Federal Government. 

Mr. PASCRELL. Well, would you agree with me that many attorneys are not trained and are not capable of helping you, Ms. Olson, 

file your tax? 

Ms. OLSON. Certainly. That’s not their area of expertise. 

Mr. PASCRELL. Okay. So there’s a lot of folks that fall into that 

category. 

Ms. OLSON. Absolutely. We think that most preparers fall into 

the category called ‘‘unenrolled preparers,’’ who are anybody. You 

know, not an attorney, not a CPA, not an enrolled agent. And the 

IRS is going to start in April of next year, imposing a testing requirement, so that you have to demonstrate your competency to 

prepare returns before you get permission to prepare returns. And 

these are things that I’ve recommended since 2002; that we will be 

doing a major advertising campaign to alert taxpayers to look for 

those people who are registered with the IRS and have either 

passed a test, or are attorneys, CPAs, or enrolled agents but who 

are registered with the IRS before they pay any money to get a return prepared. 

Mr. PASCRELL. And if I just may ask one more question, in the 

low-income areas, let’s say a company that’s been doing this for 


anorris on DSK5R6SHH1PROD with HEARING
57 

many years; let’s say, H&R Block. Can they hire anyone, even 

though they may not have any experience to fill out your taxes? 

Ms. OLSON. Today, yes, they can, anyway. 

Mr. PASCRELL. Thank you. Thank you very much, Mr. Chairman. 

Chairman LEWIS. Thank you. We didn’t mean to go for a second 

round. I want to yield now to Dr. Boustany for clarification. 

Mr. BOUSTANY. Right. Thank you, Mr. Chairman. In following 

up on Mr. Roskam’s line of questioning, you made comparisons to 

the healthcare tax credit, which is one being a voluntary program 

and the other, we’re talking about, the mandatory tax, is a mandatory program. And it seems to me that if you’re going to have compliance in a mandatory program, then the IRS would probably have 

to do a significant degree of auditing. Would you agree with that? 

Ms. OLSON. Sir, any time that you need compliance you need to 

have somebody looking at the requirements. 

Mr. BOUSTANY. I mean given that it’s a mandatory program? 

Ms. OLSON. Right. That’s correct. 

Mr. BOUSTANY. And also because of the way the program is 

structured with other parts of the healthcare plan, the way it’s devised, it depends on that mandate. So I would beg to differ and 

would think again given the compliance needs, audits will be necessary. And those on our side have concerns about how this will 

play out with individual taxpayers. 

Ms. OLSON. It’s how you write the bill. Again, my point about 

the health coverage tax credit was actually I think there are entities that are looking at this, but the certification is being done on 

the state level. So the compliance is really being done at that level 

and the IRS, again, is just a disbursement agent. And that could 

also be done in terms of the penalty where someone else is making 

the determination, and the IRS is being told that this is not an eligible plan, and therefore all we are doing is imposing the penalty, 

once a determination has been made elsewhere. 

That’s what I was trying to say. It doesn’t have to be the IRS 

making that determination. I cannot comment on the bill because 

it’s not a final bill and we’re trying not to do that. These are my 

concerns. These are the things that I’ve seen. I could also say that 

there are other countries around the world that have faced the 

growth of programs in the Tax Code through the Tax Code, and 

how they have addressed it is by specifically recognizing that what 

is a trend in the world tax administrations today is using tax administration, not just for core tax responsibilities, but also for these 

other provisions. 

And in that way they’re explicitly recognizing that we’re using 

the agency that touches so many taxpayers to do these other 

things, and then they’re funding it in that way. That is a policy decision. It is not my decision, and it really rests in you all deciding 

whether that’s what you want to do. 

Mr. BOUSTANY. And your work requirement is going to grow if 

this does become law. 

Ms. OLSON. Certainly. Certainly. 

Mr. BOUSTANY. The needs for advocacy. 

Ms. OLSON. Certainly. 

Mr. BOUSTANY. Thank you. I yield back. 


anorris on DSK5R6SHH1PROD with HEARING
58 

Ms. OLSON. Thank you. 

Chairman LEWIS. Ms. Olson, I’d like to thank you for your testimony, for your views, and sharing your views with us. Members of 

the Committee appreciate it. We wish you the best. Just before we 

adjourn, I think we would like to pause and say happy birthday to 

a young Mr. Ron Kind of Wisconsin. Today is his birthday. 

Ms. OLSON. Happy birthday. 

Mr. KIND. Thank you, Mr. Chairman. Thank you. It’s not the 

years. It’s the mileage, as I’m sure you’re well aware. 

[Laughter.] 

Mr. KIND. A lot of miles on these old bones, already. So, it’s an 

honor to serve with all of you, especially in this place at this time 

with the challenges that we face. Thank you. 

Chairman LEWIS. Well enjoy the birthday and celebrate. 

Mr. KIND. Okay. 

Chairman LEWIS. There being no further business before the 

Committee, the Committee is adjourned. 

[Whereupon, at 3:12 p.m., the subcommittee was adjourned.] 

[Submission of the record follows:] 


anorris on DSK5R6SHH1PROD with HEARING
59 


anorris on DSK5R6SHH1PROD with HEARING63035A.034
60 

Æ 


anorris on DSK5R6SHH1PROD with HEARING63035A.035