Everyone has something to say about taxes and the IRS.
Please take a moment to give us your suggestions for TAP to
consider by contacting one of the following:
TAP Ohio member:
tapohioandreaprice@gmail.com
Call Toll-free at:1-888-912-1227
Website:
www.improveirs.org
Should taxpayers tell the IRS how they want their tax
dollars spent?
The National Taxpayer Advocate released the National
Taxpayer Advocate 2020 Purple Book to Congress. In it, she
presents a concise summary of 58 legislative recommendations
that she believes will strengthen taxpayer rights and
improve tax administration. Recommendation #3 REQUIRE THE
IRS TO PROVIDE TAXPAYERS WITH A “RECEIPT” SHOWING HOW THEIR
TAX DOLLARS ARE BEING SPENT.
Present Law
Internal Revenue Code (IRC) § 7523 requires the IRS to
provide taxpayers with very basic information regarding
federal taxes and federal spending. Specifically, the IRS is
required to include pie-shaped graphs in its instructions
for Form 1040 that show the relative sizes of major budget
outlay categories and major income categories. In the 2018
Form 1040 instructions booklet, the IRS published two graphs
on page 112 depicting Major Categories of Federal Income
and Outlays for Fiscal Year 2017.
Reasons for Change
IRC § 7523 was enacted for tax years beginning after 1990.
The purpose was to help taxpayers understand the connection
between the taxes they pay and the benefits they receive.
Taxpayers who perceive that connection may be more compliant
with their tax obligations.
However, the National Taxpayer Advocate believes the
information required by IRC § 7523 is too cursory to achieve
its objective. It would be more helpful to provide each
taxpayer with personalized information regarding the
taxpayer’s own contributions, such as the taxpayer’s
marginal tax rate, effective tax rate, and tax benefits
claimed.
In addition, the value of even this cursory requirement has
diminished over time. In 1990, almost all taxpayers filed
their tax returns on paper, so the instructions booklet was
widely available and widely used. Today, about 90 percent of
individual income tax returns are filed electronically, and
the instructions booklet is much less visible. For those
reasons, far fewer taxpayers see the Form 1040 instructions
booklet today.
If the statute is modified, e-filing has the potential to
enhance the value of the requirement. Specifically, tax
software is capable of computing and displaying personalized
tax information, including the taxpayer’s marginal tax rate,
effective tax rate, and tax benefits claimed, and can show
how much of each taxpayer’s tax payments go toward major
categories of federal spending. If required by Congress and
programmed by software companies, this information can be
presented in far greater detail than was possible when the
statute was enacted in 1990.
To further promote public engagement, once taxpayers are
given information regarding their tax payments and their
contribution to federal spending, taxpayers could be given
an opportunity to voice their opinions about how their tax
dollars should be spent in the future. This could be
achieved by inviting taxpayers to “vote” on their tax
returns regarding how much and on what programs the
government should spend its money and by requiring the IRS
to report the results of that “voting.” The “voting,” of
course, would be non-binding. But this exercise in public
engagement could help Americans gain a better understanding
of the connection between the federal taxes they pay and the
federal benefits they receive. And, as noted, when taxpayers
have a clear understanding of the benefits, they receive in
relation to the taxes they pay, tax morale and tax
compliance are likely to increase. Read more at
www.taxpayeradvocate.irs.gov.
Taxpayer Advocate Service (TAS) is an independent
organization within the IRS lead by the National Taxpayer
Advocate, Erin Collins. TAS mission is to protect your
rights as a taxpayer and help you with tax problems you
can't resolve on your own.
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