disappearing brick-and-mortar offices undermine voluntary compliance, raising irs costs.
by rick telberg
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in case you haven’t noticed, the internal revenue service has been retreating from local communities.
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today it has outreach offices in only 33 states and the district of columbia. private sector tax preparers are about as close to the irs as most taxpayers can get.
that’s not close enough, according to national tax advocate nina e. olson. the irs’s lack of geographic presence in both service and enforcement functions can lead to a decline in compliance.
“a lack of geographic presence can have a negative effect on taxpayer morale,” olson’s reports says, “which in turn may decrease voluntary compliance and increase taxpayer burden.”
the lack of local presence also deprives the irs an understanding of local communities and individual taxpayers, which can result in missed opportunities to meet taxpayers’ unique needs.
the olson’s taxpayer advocacy service conducted a survey of sole proprietors in 2012 and 2013 to identify factors that influence compliance. the survey revealed geographic areas with clusters of high or low compliance. people in low-compliance communities tended to be suspicious of the tax system and its fairness. local norms, it turned out, were the most influential factors in compliance.
this phenomenon—the suspicion, the clustering, the local norms—presents a ripe justification for local irs assistance centers and mobile offices. face-to-face communication would go a long way toward putting a human face on the irs. it would also give the irs an opportunity to understand what it is that leads a given community to be relatively negligent in tax compliance.
the report cited the approach of her majesty’s revenue and customers in the united kingdom. recognizing the importance of in-person outreach, the hmrc provides mobile advisors who, by appointment, make appearances not only government and community locations but also taxpayers’ homes and businesses. the canada revenue agency provides in-person guidance to identify emerging issues provide pro-active guidance which, in the long run, avoids the need for audits later.
granted, some of the hmrc and cra services could be provided by private sector tax preparers, but
- a) the practitioners aren’t necessarily going to go into low-compliance communities that aren’t likely to produce many new clients, and
- b) the practitioners aren’t going to be methodical in reporting community attitudes and emerging issues.
the report also says “the irs is slow to find innovative ways to maintain and create local presence in communities.”
“slow” is putting it nicely. by all appearances, the irs has been finding ways to retreat from communities, surrendering to the temptation of low-cost automated online assistance. but low cost doesn’t make up for low effectiveness.
tax practitioners can cover some of the local gaps left in the vacuum the irs is leaving in its community absence, but it isn’t the practitioners’ job to make the irs look like an agency of humans nor to tease out the causes of poor compliance. those are jobs for the government, and for the sake of fair and consistent revenue, the government should make an effort to renew its presence in communities.