How Did We Get Here? A New Series …

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These days, the news has been filled with stories about the disastrous state of the IRS this filing season and how this is attributable, in part if not in entirety, to underfunding of the IRS over the last decade.  Now, I agree the IRS needs more funding to accomplish its dual mission of collecting revenue and administering social benefit programs.  In fact, in the 2006 National Taxpayer Advocate Annual Report to Congress, I proposed a legislative recommendation to completely revise the budget procedures with respect to the IRS, based on the recognition that unlike other branches of the federal government, one dollar spent on the IRS actually raises more than one dollar for the public fisc – i.e., it pays for itself and more.  But lately, the “lack of resources” has become the response to any and all shortcomings or critiques of the agency.


I heard this “no resources” mantra almost every day of the 18 years I served as NTA, coming in response to perfectly actionable recommendations TAS employees made to their counterparts in IRS functions.  This response is actually pretty insulting, both to the nonprofit and private business sectors, and even to IRS employees.  I’ve founded and run two small nonprofits in my lifetime, The Community Tax Law Project and the Center for Taxpayer Rights, and we never had enough resources to do what we wanted and needed to do, yet somehow we did amazing things.  This is true for small and medium sized businesses just trying to stay afloat in an uncertain economy.  And by justifying poor organizational performance with the excuse of “no resources,” the IRS stifles the creativity and curiosity of IRS employees – why bother trying new approaches if you don’t have the resources to implement them?  How self-defeating, and how insulting to the rest of us.

Again, the IRS does need more funding.  It also needs better direction and oversight on how it spends that funding, because, frankly, its track record on spending infusions of cash hasn’t been impressive.  But it also needs to better utilize the resources it has.  The problems that seem to be so immediate today – massive backlogs in mail and return processing; low levels of telephone service; low audit rates; e-filing and identity authentication  – have been simmering for decades.  The pandemic just exacerbated the issues.

But here’s the good news.  As Little Finger told Varys in Season 3 of Game of Thrones, “Chaos isn’t a pit. Chaos is a ladder.”  I’m not saying we should adopt the approaches of Little Finger or the other vying factions in that series, but we should use this chaotic filing season to analyze the root causes of what brought us to this place and to envision what we want our tax system to look like when we emerge.

So, occasionally, over the next several months, I’ll be exploring various issues in a series of posts called, How Did We Get Here?  In some ways, these posts will be deeply personal, because in writing them, I will draw not only from my published writings, including the Annual Reports to Congress and my congressional testimony, but also from my diaries and notes of meetings held with IRS personnel and others over the last two decades.   In doing so, I hope to show that all is not lost.  During this period, many people, inside the IRS and outside it, made perfectly reasonable suggestions that, if adopted, would have moved the IRS a little closer to modern tax administration and made the impact of covid less severe.  Each of the recommendations were relatively modest, but taken as a whole, over time, would have been transformative.  And that is precisely what the IRS needs at this point – a transformation.


  1. Robert Kantowitz says

    To some degree, this cannot be separated from the complexity of the Code and Regulations, which is driven in part by an ideology that taxpayers will always scheme to get around any rule and almost no loophole is too small to close with a complicated compliance measure. Enforcement has a dilemma: waste resources and chase all taxpayers for even small amounts (there was a case recently where a taxpayer was denied procedural relief because that required three years of being clean and one year he had a $7 deficiency – that’s right, seven dollars!) or let the word out that taxpayers can play games as long as the amount is small, which has its own issues.

    The answer, in part, in my view, which I often raise in bar association reviews of proposed provisions but that the purists always shout down, is generous safe harbor and hurdles based not only in the insignificance or inadvertence of the amount but on the burden of compliance for a small taxpayer with relatively few transactions.

    One of my first investments was a pipeline partnership in the 1980s. It was in street name, so I never got a K-1; instead, I got charts to calculate the relevant amounts based on when I had invested and when I had sold. A couple of hours later, I concluded that I had less than $5 of taxable income. Most taxpayers would just have tossed the whole package in the trash. Why not allow taxpayers to elect that if your AGI is under $500K and your total basis in passive partnership investments is under $100K, you can make an election to treat the passive partnership investments all as if they were C corporations and report only cash dividends and no basis adjustments? Numerous other examples come to mind. But that requires both changes in law and changes in the IRS’s attitude.

  2. Abe Warshenbrot, EA says

    MS. Olson is correct. The misallocation of resources starts at the top and that is where the problems originates. Comparison to small businesses is right on target but even comparing to States Departments of Revenue is an eye opener. During the pandemic I have dealt with many states’ revenue departments. None of them has been degraded as the IRS. With a small pause at the beginning they pulled their organizations back in a very short time. There were glitches but all in all they did a remarkable job. 60% of my dealing with states were with NC Department of Revenue and on a scale pf 1 to 10 they get a 10 while the IRS gets a zero. Why could not the IRS answer letters (including the current Taxpayer Advocate) while all the States did? What happened to all the letters we sent? Were they destroyed? If not-where are they? Why did the people who answered the phones (when they did) give back wrong information? It all points to mismanagement and the difference between the private sector and government- there is no consequences if a government’s employee errs or does nothing. If anyone can find an answer to that issue he should receive the Nobel Prize.

  3. George Constantine Gretes says

    The problems will soon be dramatically compounded. There are hundreds of thousands of 2020 tax returns that have not been processed. Many of those taxpayers applied their 2020 refund to their 2021 tax liability. When those taxpayers file their 2021 returns and claim the refund from 2020, the IRS will not have given those taxpayers credit for the 2020 refund. Thus, the 2020 problems will roll forward into 2021 and we preparers will be wasting more time trying to have corrections made.

  4. Sandeep Singh says

    It has never been more difficult to accomplish the most routine and simple tasks with The IRS. There is a 2-3 hour long wait time to talk to an IRS agent – and that’s on the practitioner “priority” line. And if you get to the wrong agent, he or she will either not help resolve the issue, or, ocassionally, simply hang up. CP2000 notices are the new Notices of Deficiency because no matter how a taxpayer responds, she will ultimately receive a NOD, forcing even simple matters into Tax Court.

    There is some legitimacy to the lack of resources excuse but I fear the real issue is the culture of the organization. Everyone is just trying to pass the buck and put the monkey on someone else’s shoulder.

  5. Apparently some people like it the way it is. Want it to stay that way? Keep hiring a CPA to be the Commissioner, instead of someone with a management track record. The mis-management will never end. The gov would rather live with a problem it cannot solve, than accept a solution it refuses to understand. Please, sir, go away and don’t bother us. We know $500.00 hammers are all over the place, just like they should be.

  6. IRS will never be fixed —it must be replaced.
    Why does any real professional continue to make excuses for this broken, broken fiasco?
    Even someone as awesome as Nina Olsen is unable to make the vital progress necessary to serve the Citizens of our great country.
    Why our Congress trusts them with handling all their tax revenue is beyond comprehension.

    The Real Revenue agency for the United States should be top notch, high tech, and set the example for the business world in efficient customer service and above all A C C U R A C Y. Move the court business back to the real court system. If the District Court judges as well as the Supreme Court Justices cannot figure out who the real taxpayers are and who are not, they should not be judges. It is a huge part of our legal system.

    • In the “old days,” say, the 1960’s, talented graduates from good law schools were willing to take a 20 percent discount on their entry level pay to get government experience and work for the public good. Today, the discount is about 60 to 70 percent. What talented graduate from a good law school would want to take such a pay cut to join such a dysfunctional organization? Not going to happen. Dearth of talent can not be fixed. And without talent, funding or culture… the IRS is doomed.

      If the U.S. is ever to going to get a functional tax system, it starts with Congress thoroughly simplifying the current tax code, getting the IRS out of the welfare payment business and finding alternative ways of raising revenues (VAT!) — all with the ultimate goal of allowing machines and algorithms to take over the bulk of the administration. Instead of building rockets-to-nowhere, wouldn’t it be nice if the tech visionaries-billionaires were to devote their brains and resources to develop a framework for a low-touch, high-compliance tax infrastructure? Maybe, Elizabeth Warren could have lunch with Elon Musk, patch things up and see if they could some real good working together.

  7. The most damaging hemorrhaging is the IRS’ loss of experienced staff. Employees are leaving in droves and young graduates don’t want to work for the IRS. Why graduate from law school or get an accounting degree (often with crippling student debt) and take a gamble on a tiny 48K paycheck when that same graduate can hustle and make partner in a CPA firm or a Law firm or even open their own practice and make mid-six figures in less than 10 years? Solo practitioners and even very small accounting practices have more income potential in the first few years than working for the IRS. Maybe offering some type of loan forgiveness coupled with better salaries will attract young talent, which the IRS desperately needs.

  8. The most fundamental problem is that Congressional action is held in check by people whose ideology is basically anti tax and more fundamentally, anti government. To put it another way, they are vandals on a destructive mission. Of course the IRS is an unpopular agency, since nobody likes paying taxes, and it is made more so by its increasing disfunctionslity. But I’m afraid that until the anti government, destructive ideology is defeated this viscious downward spiral won’t be reversed. Perhaps that is something that responsible leadership can agree on regardless of other disagreements, but I’m not optimistic given the present climate. We need good government, we need a Congress that believes in good government, (and in government, period) and we need an effective IRS that is part of it. One of the most telling remarks I’ve read is from someone who illustrated how the IRS used to attract bright and high quality young people and has trouble doing that now. That doesn’t bode well.

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