IRS sees success in low-income taxpayer clinics

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The Internal Revenue Service points to some of the successes of pro bono clinics that represented nearly 20,000 taxpayers in 2020 who faced a tax dispute with the agency, despite the pandemic.

the Annual Report on the Low Income Taxpayer Clinic program, released Wednesday by the IRS, shed light on how the program has helped people who have struggled with economic challenges during the pandemic as well as their tax debts. The report outlines how LITCs provide representation, education and advocacy for low-income or English as a Second Language (ESL) speaking individual taxpayers.

The report comes at a time when taxpayers of all income levels are struggling to pay their taxes amid changes to tax laws through the various pandemic relief programs of recent years like the CARES Act. and the US Bailout Act. The chronically underfunded IRS agency has been particularly short-staffed and has been trying to deal with a backlog of millions of unprocessed tax returns and amended tax returns from last year, with few availability to answer telephone calls or respond to correspondence from taxpayers concerned about tax collection notices they receive. Under pressure from lawmakers and tax experts, the IRS announced on Wednesday that it would suspend many of the automated notices its computer systems send to taxpayers about collections, balances owing and unfiled tax returns (see the story).

The LITC program is a federal grant program administered by the Taxpayer Advocate Service, led by National Taxpayer Advocate Erin Collins, who also asked the IRS to stop robo-notices during a congressional hearing on Tuesday (see the story). LITCs represent individuals whose incomes are generally at or below 250% of the federal poverty guideline and who are trying to resolve their tax issues with the IRS, including tax audits, appeals, and litigation. collection of taxes. LITCs can represent taxpayers in court as well as before the IRS. They can also give taxpayers information about their rights and responsibilities in different languages ​​for ESL taxpayers. LITCs offer services for free or for a small fee. They receive grants from the IRS but work independently to assist and advocate on behalf of taxpayers.

The clinics struggled during the pandemic, but still managed to help nearly 20,000 taxpayers in 2020. “In March 2020, shutdown orders came into effect in the United States, requiring clinics to change how and where they were operating,” Collins wrote in the report. “The IRS sent workers home, shutting down much of the IRS and making it even more difficult to resolve taxpayer cases. Compounding the challenges, Congress passed the CARES (Coronavirus Aid, Relief, and Economic Security) Act, giving the IRS responsibility for providing more than 160 million Economic Impact Payments (EIPs). LITCs suddenly needed to be experts on the new law and resolve disputes that arose when taxpayers were not receiving the benefits to which they were entitled. The LITCs continued to provide high quality representation and education services to taxpayers despite these circumstances.

In 2020, LITCs helped taxpayers get more than $5.8 million in tax refunds and reduced or corrected taxpayer debt by more than $116 million. They also brought over 2,900 taxpayers back into payment compliance.

Through outreach and education activities, LITCs have attempted to ensure that individuals understand their rights as US taxpayers by hosting more than 1,000 educational events attended by nearly 134,000 people. Approximately 1,500 volunteers contributed to the success of the LITCs by donating more than 42,000 hours of their time. Almost 65% of the volunteers were lawyers, accountants or registered agents.

LITCs have used different approaches to advocate on behalf of taxpayers, including collection alternatives to resolve issues administratively within the IRS, litigate cases in the United States Tax Court and other federal courts , and raise systemic issues through the Taxpayer Advocate Service’s Systemic Advocacy Management System.

The report cites an example of how a LITC helped a taxpayer in need. A low-income taxpayer who worked at a local grocery store for minimum wage was the sole breadwinner in her family of four, but had never filed a federal tax return. The IRS sent her statutory deficiency notices for four tax years, advising her that she owed several thousand dollars based on unreported income. Unsure of what she could do to fix the problem, she sought help from a LITC. The clinic assessed the case and explained that it needed to challenge the notices in US Tax Court. The LITC assisted her in filing a petition in the Tax Court and argued that the taxpayer did not owe tax but should instead repay, as she was eligible for the tax credit on the earned income and child tax credit. She eventually received over $16,000 in tax refunds.

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