National Taxpayer Advocate Identifies IRS Issues

The IRS's cutbacks in taxpayer services could erode voluntary compliance with the tax laws and lower tax revenues, National Taxpayer Advocate Nina Olson has told Congress in her annual report. Olson also discussed tax-related identity theft, services to taxpayers living abroad, user fees, tax-exempt organizations, and identified the top 10 most litigated tax issues.

Compliance and tax revenues

Ninety-eight percent of all tax revenue collected by the IRS is paid voluntarily, Olson reported. Less than two percent is collected through direct enforcement action. If the IRS would collect 10 percent less in enforcement revenue, tax revenue would drop by less than $6 billion. If voluntary payments would decrease by 10 percent, tax revenue would drop by more than $280 billion Olson said.