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Meet the 'Voice of the Taxpayer': Nina Olson Has Your Back on Tax Reform

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Nina Olson (Bloomberg / Getty Images)Think that you're on your own if you want your tax-reform concerns heard in Washington? Well, you're not. Since 1979 there's been an official advocate who has the ear of Congress, regularly making a stink on taxpayers' behalf, aiming for a fairer, simpler, system.

What started as the Office of the Taxpayer Ombudsman was replaced in 1996 by the Office of the Taxpayer Advocate. Since 2001 it has been headed by Nina Olson -- "the voice of the taxpayer."

Every year Olson presents a report to Congress, outlining areas in the tax code that are in urgent need of reform. It might not come as a surprise that Congress hasn't rushed to implement all suggested tax reform changes immediately. Thus, many items are repeated from year to year.

Here are some of the key concerns raised by the taxpayer advocate in the just-released 2012 report:

Tax-Code Complexity and Cost of Compliance

The tax code has grown over the years to what now encompasses almost four million words. It's so complex that 59 percent of individuals pay tax pros to prepare their returns (and another 30 percent use tax-prep software). This is an extra cost borne by taxpayers. The cost is not just financial -- individuals and businesses spend more than 6 billion hours each year on taxes.

Olson cites this as the biggest tax-reform target we face, explaining: "The existing tax code ... obscures comprehension, leaving many taxpayers unaware how their taxes are computed and what rate of tax they pay; it facilitates tax avoidance by enabling sophisticated taxpayers to reduce their tax liabilities and provides criminals with opportunities to commit tax fraud; and it undermines trust in the system by creating an impression that many taxpayers are not compliant, thereby reducing the incentives that honest taxpayers feel to comply."

Underfunding the IRS

According to Olson, the IRS collected $2.5 trillion in fiscal 2012, on a budget of less than $12 billion -- that's a 214:1 average return-on-investment. Yet this money-generating entity has been facing budget cuts, not increases.

As a nation with significant financial troubles, taking money away from an entity that brings in desperately needed money seems counterintuitive. Olson writes: "Last year, the IRS Commissioner estimated in a letter to Congress that proposed reductions in the IRS budget would case tax collections to fall seven times as much." The flip side of that coin? Hire more IRS workers, and collect far more in tax revenue than you spent hiring them. As Olson states, "No business would fail to fund a unit that, on average, brought in $7 for every dollar spent."

Prolonged Problems Helping Victims of Identity Theft

Not only is identity theft a big and growing problem for many Americans, but when their finances are hijacked, it can also cause massive headaches with taxes.
Olson says that the IRS isn't responding with sufficient urgency to the problem. She points out that with cases of tax-related identity theft rising some 650 percent since fiscal 2008, the average victim is having to wait more than six months for IRS resolutions to problems (such as receiving refunds due). This is a very serious hardship for lower-income taxpayers in particular, where a delayed refund of several thousand dollars is critically needed. In addition, less money for the IRS means fewer problems solved and questions answered, and longer waits.

The AMT

The Alternative Minimum Tax was enacted in 1969 to prevent high-income taxpayers from avoiding taxation. It's not working well, though, as about 7,000 millionaires in 2011 paid no income tax at all. Meanwhile, the AMT is very complicated, and due to some of its peculiarities, it can ensnare middle-income taxpayers.

As part of the fiscal cliff deal, Congress finally agreed to a permanent "patch" for the AMT, indexing it for inflation so that it won't hit most of those middle class taxpayers, now or ever. But Olson's recommendation is far simpler: Repeal it.

See What Your Advocate Is Fighting For

It's easy to be discouraged about the effectiveness of government, so take some comfort in your Taxpayer Advocate, who's fighting the good fight for individuals. If you'd like to learn more, read the report, or check out a nifty set of infographics summarizing it.

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vlddanny

Nina needs needs to push politicians to let her push aggressively and more than once a year to close the IRS and go to a flat federal tax. To start collecting taxes on the trillion dollar per year underground economy. Do it before another word is said about the need to raise taxes on the 50% getting taxed. Tax all using a flat federal tax on purchases first!

Government was broke and needed money (a crisis), so the IRS was formed. Now we say Happy Birthday to the 100 year old IRS that really was dead at birth. Government is still broke and needs money, in a bigger way.

IRS and the tax code got bigger and more complex. It served to grow government. Another never waste a crisis success story for both parties. They used the tax code to divide the nation for political reasons, to grow government, and to make profits for their cronies. They will unite to fight a flat federal tax on purchases. To keep us divided. To benefit them and their cronies.

February 05 2013 at 11:18 AM Report abuse rate up rate down Reply
jdyhyt

I am a taxpreparer and although I see alot of tax loopholes for the rich I also this time of year see alot of the working class cashing in on the FREE system. When I see one or both parents set at my table with 8 to say 15 thousand in income and 2 to 4 children and they receive all their tax money back that isn't bad. BUT when they receive 6 or more thousand extra back earned income credit and child tax credit IT SUCKS. When I have to ask the required questions and find out that they are gettin 6 hundred or more food stamps a month...medicaid for their children...housing assistance and one of them is going to school on government free money (up to 12 thousand a year..most of that to live on) so they get free daycare, I almost choke. I don't mind my tax money helping but you shouldn't be able to live better than I can!!! Oh by the way don't blame this on Obama I have been doing taxes for over 10 years and it has always been this way. No one should be able to dip into all these free buckets. No woder our country is in debt.

January 25 2013 at 9:29 PM Report abuse rate up rate down Reply
Charlie

March 15, 2013 EVERY member of the House and Senate and the White House staff will do their own taxes. They can use the various software programs but not a CPA etc. After 2 years of doing this the tax complexity will change. If proposed to these people do they have the courage to reject the idea?

January 25 2013 at 7:00 PM Report abuse rate up rate down Reply
jpalospark

GET RID OF OBAMA,GET RID OF THE GOVERMENT ALL 535 OF THEM, AND YOU WILL GET RID OF THE PROBLEM!!! NO TAX'S

January 25 2013 at 3:06 PM Report abuse rate up rate down Reply
Tom Harrell

I"m Glad she has a JOB.
I"m Glad they all have JOBS in Washington.
Especially while More and More of the TAXPAYERS Lose theirs and the people who have ALREADY lost theirs, the last 10 years have GIVEN UP trying to Find one. (A DECENT one, anyways).
Want more Tax REVENUE ?
Put those 12 MILLION people back to WORK.

January 15 2013 at 5:52 AM Report abuse -1 rate up rate down Reply
janeswizzle

There isn't any tax reform, just more taxes. This administration sucks, and it's being run by a bunch of jackwagons.

January 15 2013 at 3:25 AM Report abuse rate up rate down Reply
Burt

They treat us all like fools! no pun intended! Refuse to pay taxes, sign petitions write your congress people, march, have a parade...do something!!! They just take our money and throw it away and want more

January 15 2013 at 12:08 AM Report abuse rate up rate down Reply
1 reply to Burt's comment
l0caputa1

I have thought the same thing. It feels like 1776 all over again. No taxation without representation! This lady certainly does not represent me and neither do the congress people and senators in office. They only care about the next election and their many lucrative side deals. Maybe next time around we elect someone from the private sector who knows how to make money and not just spend ours. America needs to make more money, not employ more IRS workers!

January 25 2013 at 12:37 PM Report abuse rate up rate down Reply
Burt

Since 1979? not much has happened since then, she must not be trying very hard and I didn't send here there.

I do my own taxes and they are easy...

January 15 2013 at 12:06 AM Report abuse rate up rate down Reply
hrhjonii

I don't see this is helping the atxpayer much at all...

January 14 2013 at 11:17 PM Report abuse rate up rate down Reply
jwyola

Uh Huh..

January 14 2013 at 10:18 PM Report abuse rate up rate down Reply