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Recommendations to Congress

The Annual Report to Congress includes recommendations for new federal tax laws or changes to current ones.

The National Taxpayer Advocate (NTA) places a high priority on working with the tax-writing committees in Congress. In addition to submitting legislative proposals in each Annual Report, the NTA meets regularly with members of Congress and their staffs and testifies at hearings on the problems faced by taxpayers to give Congress an opportunity to receive and consider the taxpayer’s perspective.

Recommendations to Congress


Alternative Minimum Tax: Repeal it Permanently

The Alternative Minimum Tax (AMT) does not achieve its original goal – to ensure wealthy taxpayers pay at least some tax. By one projection, about 1,000 millionaires will pay no federal income tax in 2013. The AMT penalizes middle income taxpayers for having children, getting married, or paying state and local taxes, and is unnecessarily complicated and burdensome, even for those who are not subject to it. Many taxpayers must fill out a lengthy form only to find they owe little or no AMT after all.

To prevent high-income people from reducing their tax rates, Congress has made the tax code more complicated, and penalized taxpayers who live in high-tax states or have children. Congress should permanently repeal the AMT.

Read the full recommendation


Refund Claims: Broaden Timeframes for Filing

The IRC suspends the period for filing for a refund when a taxpayer can show he or she was financially disabled. This doesn’t protect taxpayers who lack the capacity to file a refund claim. To qualify, the taxpayer must have a “medically determinable” physical or mental impairment, which does not always give the IRS the most accurate and useful information. A taxpayer getting regular counseling and treatment from a licensed psychologist or a social worker can’t submit a letter from either professional, even though they might be most familiar with the case. It also requires that the taxpayer be unable to manage his or her financial affairs due to a physical or mental impairment. These requirements have led the IRS to dismiss otherwise compelling evidence and deny relief to taxpayers.

The NTA recommends Congress amend the IRC to provide that an individual is financially disabled when he or she has a physical or mental impairment, determined by a licensed medical or mental health professional, which materially limits the individual’s management of his or her financial affairs.

Read the full recommendation



Premium Tax Credit: Lower the Affordability Threshold

The ACA provides a premium tax credit to subsidize insurance purchased at marketplace Exchanges when coverage is deemed unaffordable.

A plan is considered unaffordable (and therefore a taxpayer is eligible for the credit) if the employee’s contribution is greater than 9.5% of household income. However, this 9.5% affordability threshold is always based on the cost of a self-only plan, regardless of what type of coverage the taxpayer needs. If a taxpayer needs family coverage, the employee’s contribution could be almost 50% of household income – but ACA provisions consider this 50% affordable – and the taxpayer does not get the credit, since affordability is based on the cost of a self-only plan.

The NTA recommends Congress clarify that the 9.5% affordability threshold pertains to the type of insurance the taxpayer needs, whether self-only or family coverage, and not base affordability in all cases on a self-only plan.

Read the Full Recommendation


Two-Year EITC Ban: The IRS Should Bear the Burden of Proof

The IRC authorizes the IRS to ban taxpayers from claiming the EITC for two years if the IRS determines they claimed the credit improperly. The IRS often ignores the statutory requirements for imposing the ban, ignores its own Chief Counsel guidance, and bypasses its own procedural safeguards to impose the ban. For the vulnerable population of low income taxpayers who are otherwise eligible for EITC, being deprived of the credit for two years can be a serious hardship.

A taxpayer can petition the Tax Court for a review of the ban, but it is not clear who bears the burden of proof. We consider it unfair to ask a taxpayer to prove the IRS improperly imposed the ban.

The NTA recommends amending the IRC to clarify that the IRS has the burden of proof when proposing to impose the two-year ban on claiming EITC.

Read the Full Recommendation


Tuition Reporting: Allow TIN-Matching by Colleges

Although the tax code requires colleges and universities to file information reports with the IRS reflecting tuition from students, these educational institutions are not permitted to verify Taxpayer Identification Numbers (TINs) with the IRS before filing. Colleges and universities must rely on student information – not IRS verification – and can face up to $1.5 million in penalties for errors.

The NTA recommends allowing the IRS to alert colleges of mismatches so they can resolve with students prior to filing information reports. This recommendation reduces unnecessary burden and work for eligible educational institutions, the IRS, and taxpayers.

Read the full discussion