IRS Hasn’t Completed Mandated Complexity Reports in Almost 20 Years

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Posted by Isabelle Morales on Tuesday, May 25th, 2021, 6:00 AM PERMALINK

In defiance of federal law, the IRS routinely fails to complete an annual report on ways to reduce tax complexity. The agency has done the report just twice – in 2000 and 2002.

The Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) was a law created to reduce corruption in the IRS, improve taxpayer services, and make the agency more efficient. One of the provisions in the RRA is a directive to complete a tax law complexity report every year. These reports are supposed to contain the IRS's specific recommendations on how to make the tax code easier to comply with. 

When the agency completed these reports, the recommendations helped Congress make improvements to the tax code, which in turn made the IRS’s job easier. 

There is no reason the IRS cannot complete this task. When asked why they were not doing this report in 2015, the agency was unable to provide an answer. When National Taxpayer Advocate Nina E. Olson asked what it would cost to complete the report, the agency replied that it would just take two full time employees working for about a year: 

“In response to a request for an estimate of the resources the IRS would need to produce the complexity report, the IRS’s Research, Analysis and Statistics (RAS) function stated that “as an order of magnitude” a paper that examined the relationship between tax complexity and income tax compliance required about two full time employees working for about a year.” 

Two employees working on this report would be a wise use of IRS resources.

The text of the RRA clearly spells out that the IRS "shall" complete this report every year and "shall" include recommendations to reduce the complexity of the code and report provisions, that add undue complexity to tax laws, for repeal or modification:

SEC. 4022. TAX LAW COMPLEXITY ANALYSIS. 

In general – The Commissioner of Internal Revenue shall conduct each year after 1998 an analysis of the sources of complexity in administration of the Federal tax laws… The Commissioner shall not later than March 1 of each year report the results of the analysis conducted under paragraph (1) for the preceding year to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate. The report shall include any recommendations— 

(A) for reducing the complexity of the administration of Federal tax laws; and 

(B) for repeal or modification of any provision the Commissioner believes adds undue and unnecessary complexity to the administration of the Federal tax laws. 

Meanwhile, IRS employees spend hundreds of thousands of hours per year on union activity. 

In fiscal year 2013, IRS employees spent over 500,000 hours on union activity. Somehow, however, they cannot manage the resources to follow the law, particularly a law designed to make life easier for taxpayers.  

The IRS has failed to complete this task under both Republican and Democrat administrations. In 1998, when the RRA was passed, lawmakers were attempting to solve corruption and inefficiency that, of course, existed then. It seems, no matter if the IRS is coming from a budget cut or a budget hike, the agency still fails to complete basic tasks.  

Photo Credit: Marco Verch Professional Photographer

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