Nov. 2009

National Taxpayer Advocate 'Truly an Independent Voice'

By T. Steel Rose, CPA

Nina Olson is the National Taxpayer Advocate, an appointment she has held since 2001. Olson heads a nationwide staff of 2,200. She reports to the commissioner of Internal Revenue on behalf of the Taxpayer Advocate Service. As a tax attorney and the only IRS employee authorized to make legislative proposals directly to Congress, Olson identifies the top 20 problems taxpayers face annually and analyzes how the IRS can ameliorate those problems. She delivers her recommendations to Congress twice a year. "I am truly an independent voice inside the IRS," Olson says.

Independence carries tremendous responsibility. Olson is known to be passionate and thorough in carrying the mantle for the American taxpayer. At times, the tax preparer community has expressed reservations about her appreciation for their interests. Tax preparers prepare 61 percent to 65 percent of filed tax returns. Olson has referred to this as an "astonishing" number of returns that require assistance in preparation. She has surprised practitioners by taking positions contrary to the tax preparer profession. She was an early standard-bearer for tax preparer registration and testing and has carried the torch for practitioner penalties. She also has recommended that fill-in forms be made available to all taxpayers on the IRS Web site.

Olson couldn't have been as effective as she has been for the past eight years without a certain amount of controversy. She served as a tax practitioner for 27 years before joining the IRS in a role that has grown stronger over the years by the strength of her enormous efforts.

While living in North Carolina after her Bryn Mawr graduation, Olson ran an accounting and bookkeeping business. She obtained a law degree from North Carolina Central University and then a master's degree in law and taxation at Georgetown University Law Center.

Olson made three specific recommendations in her recent 2009 report to Congress. First, she stated that the IRS should work with the Treasury Department to recommend legislation to regulate federal tax return preparers — including registration of unenrolled preparers, a basic examination to ensure a minimum level of competency among paid preparers and continuing professional education requirements.

Second, Olson called for additional IRS enforcement actions directed at return preparers who fail to perform due diligence or consciously facilitate noncompliance.

Third, she recommended the mandatory use of PTINs by preparers in order to enable the IRS to identify return preparers who submit unreasonably high rates of inaccurate returns.

In 2008, the General Accountability Office, GAO, also recommended the use of single identification numbers for paid preparers. And more recently, the director of the IRS Office of Professional Responsibility commented on the use of preparer identification numbers. It remains to be seen, however, whether licensure, certification and continuing education requirements — as well as single identifying numbers — will be part of the commissioner's final recommendations regarding preparer oversight, which are planned to be presented by year-end.

Several bills have been introduced over the years containing proposals to regulate tax return preparers, and in 2005, the House Committee on Ways and Means, Subcommittee on Oversight, held a hearing at which representatives of five organizations testified with respect to the regulation of return preparers. All agreed that some type of regulation was necessary.

CPA Magazine asked Olson to comment on the possibility of the adoption of some of the top 20 issues of the recent Taxpayer Advocate Service (TAS) report to Congress.

CPA Magazine: Considering the state of Oregon as a working example, how do you see tax preparer regulation taking place?

Olson: Although acknowledging the Oregon plan includes an entrance exam, regulation should emphasize continuing professional education and a public information campaign. The [public information] campaign would inform taxpayers that they could not be exempted from the negligence penalty by relying on the advice of a preparer who was not registered. I realize the large group of unenrolled preparers provides a service in smaller communities that others might not want to operate in. That is my background.

CPA Magazine: What about the issue of bringing the IRS to SB/SE taxpayers beyond the Internet?

Olson: Studies need to be done on the SB/SE taxpayer division. Only the wage and investment division has prepared a far-reaching survey. If a survey were done, we might learn that the Web is limited by not having any give-and-take dialogue. Most [SB/SE taxpayers] use preparers, but they might want to deal with the IRS face-to-face.

CPA Magazine: What do tax practitioners need to know to expedite their clients' audits?

Olson: A lot of appeals cases occur because the IRS did not provide audit findings used to determine the selection of audit cases. Appeals might be the only conversation the taxpayer has with the IRS. The ideal is to get resolution early. If the IRS implemented what it has learned from the [appeals] process, the IRS would be a better place.

CPA Magazine: What is the success rate of the dispute resolution possibilities at the IRS Nationwide Tax Forums?

Olson: There is an 89 percent resolution rate.

CPA Magazine: What is the demand for experienced CPAs at TAS?

Olson: There is some hiring for entry-level CPAs.

CPA Magazine: What is the current status of Offers in Compromise (OIC)?
 
Olson: The IRS is out of touch with the suitability of OIC. It remains uncertain.

CPA Magazine: What is the best way our readers can help?

Olson: We meet with CPAs and the AICPA. When we meet CPAs at town halls for taxpayers, they are vocal. CPAs can help by logging-in and posting to SAMS. This is a source for advocacy issues at a grass-roots level. They can send e-mails directly to my office or their local advocate. I applaud CPAs and the AICPA for engaging to improve the system.

CPA Magazine: What do you expect in terms of tax preparer registration?

Olson: My goal is not to put the unenrolled agent out of business. They might open an office where no one else wants to. I operated this way from 1975 to 1991 before I went to law school. There is a need for ethics and standards of practice.
   
CPA Magazine: A recently issued five-year plan calls for working with tax partners; and identifying issue resolution teams, central points of contact and dissemination of frequent errors to tax partners. What is the status of this initiative?

Olson: If you continue with the perceived problems, you will be hearing from the IRS.
The IRS needs to see how each division is implementing what it finds out to use in their operations. The devil is in the details.

CPA Magazine: The Whistleblower office is used when one has firsthand knowledge. How has it affected taxpayer advocacy? Have there been abuses?

Olson: These are complex cases that are still evolving. Can it really bring in billions of dollars? It needs more scrutiny.

CPA Magazine: Audits have doubled to the 1.3 million level. In reference to the report by Professor Leslie Book concerning tax preparer regulation, when would a backlash occur by auditing more small businesses and tax preparers?

Olson: Les is saying that tax preparers are over-audited. The IRS is saying that tax preparers are encouraging noncompliance. [Tax preparers] do not need to be painted with a broad brush on noncompliance. Preparers are a fundamental right to maintain the balance. For example, [the IRS] should not be able to bypass a power of attorney. It limits the preparer's ability.

CPA Magazine: What is your biggest challenge?

Olson: To get the IRS to pay attention to taxpayers, to not presume they are wrong.

CPA Magazine: You recently achieved a major effort in the elimination of IRS collections by private collection agencies. What comes next?

Olson: The statute for using private collection agencies survives. The question now is, "What happened?" We can now study the data to determine its results.


Since this interview, the IRS suspended until Sept. 30 its efforts to collect penalties from some listed tax transactions referred to as Small Biz Tax Shelter Penalties.

The problem is the disproportionate penalties as high as $300,000 on some small-business owners. These taxpayers never intended to set up tax shelters. They thought they were engaging in legal activities, such as setting up pension plans for their employees.

The suspension came in response to complaints from Olson and from members of Congress. Olson appears diligent in making the case for the taxpayers.

For more information and a list of the 74 Local Taxpayer Advocates by state, see www.irs.gov/advocate.