Searching for the Taxpayer's Best Friend

Need help cutting through IRS red tape to unsnarl a bureaucratic tangle?

In many cases, one of the best places to go is a little-known unit within the Internal Revenue Service known as the Taxpayer Advocate Service, or TAS, which has about 75 offices around the country. Its mission: to help taxpayers resolve problems with the IRS -- and to identify problems affecting groups of taxpayers and propose administrative and legislative changes.

TAS can help taxpayers get a missing refund, for example, or resolve an improperly imposed penalty that couldn't be cleared up through regular channels. It can also assist taxpayers who face a financial hardship caused by an IRS action such as taking someone's wages or other property.

In recent years, more people have been seeking help from TAS staffers, in part reflecting the IRS's intensified focus on tax-law enforcement. TAS received 247,839 cases in fiscal 2007, up 47% from 168,856 only three years earlier, says Nina Olson, the IRS National Taxpayer Advocate and head of TAS. This year, TAS expects to receive somewhere between 250,000 and 260,000 cases, says Kenneth Drexler, senior adviser to Ms. Olson.

Among those who got help after running into an IRS brick wall is Stephen DeFilippis, owner of West Suburban Income Tax Service in Wheaton, Ill., and an enrolled agent, a private-sector tax specialist authorized to practice before the IRS. The IRS audited two of his clients, a married couple from Illinois, who had deducted about $10,000 in charitable donations, mostly to religious groups.

The IRS agent asked for proof of each gift, says Mr. DeFilippis. He says he sent the IRS all the required documentation, but the IRS agent wouldn't accept any of it.

So Mr. DeFilippis says he reached out to TAS. After a few weeks, he says, the IRS agreed to accept all the donations his client had deducted and issued a "no change" letter, which means the audit was over with no change in the amount of tax owed.

The TAS staffer "did a great job," Mr. DeFilippis says. "She understood the situation and she was able to get the result."

Clearing Up Snafus

TAS staffers can be especially helpful in clearing up nightmarish computer snafus that may seem simple but can linger for years. Alan Straus, a New York City tax attorney and certified public accountant, says a man who later became his client had been late in filing tax returns several years in a row. He says the IRS mixed up the payments and applied them to the wrong years. As a result, the taxpayer received underpayment notices from the IRS for some years.

Mr. Straus says he turned to a TAS staffer who had been helpful on other occasions -- and who helped to fix the problem. "The man was very, very happy," Mr. Straus recalls. "It turned out he didn't owe anything."

Ms. Olson's unit also can intervene and issue a "taxpayer assistance order" when someone is suffering, or about to suffer, a financial hardship as a result of the way the IRS is administering the law.

These orders aren't issued often, but sometimes they can be lifesavers. Martin P. Hacker, a CPA and partner at Cohen Hacker Rothstein & Pearl LLC in Hackensack, N.J., says a TAS staffer recently helped to remove a levy the IRS had placed on the bank account of a New Jersey man. The IRS had said the man owed $23,000 in interest and penalties. Nina Olson "is really on the side of the taxpayer," says Mr. Hacker.

An IRS official says the agency can't comment on any of these specific cases because of privacy protections.

Errors and Delays

Although lawyers and accountants tell similar stories of TAS staffers rescuing taxpayers from bureaucratic hell, critics say the quality of help can be uneven, and that even helpful and sympathetic TAS staffers make mistakes.

In a recent report, the Treasury Inspector General for Tax Administration said TAS "needs to improve its processing" of "economic burden" cases, those in which taxpayers are asking for TAS help because some IRS action or inaction is causing -- or potentially creating -- a financial hardship. The report said more than half of the cases it sampled contained "errors and delays," adding: "We found evidence of untimely actions, technical errors and procedural errors."

An informal survey by the National Society of Tax Professionals found many of those who responded were "disappointed" they couldn't get the kind of help from TAS they had expected, says Beanna J. Whitlock, executive director.

In response, Ms. Olson says that "taxpayers overall are being well served" despite a surge in TAS's workload in recent years, and that about 85% of taxpayers surveyed by an independent research group reported being satisfied or very satisfied with TAS.

"Because TAS is often the taxpayer's last realistic chance to get a dispute resolved, TAS holds its case advocates to very high standards with respect to case quality, including timeliness, accuracy, completeness and educating the taxpayer," she says. But she agrees there is "room for improvement" and says TAS is "working on a number of initiatives to improve case processing and reduce delays and errors."

If you decide to ask for help from TAS, here are a few pointers from lawyers, accountants and other tax advisers:

Don't expect instant relief. TAS staffers "can be very helpful, but you need patience," says Mr. Straus, who heads the New York State Society of Certified Public Accountants committee on relations with the IRS. Mr. Drexler of TAS says the median case takes about 50 days to resolve, although more complex cases can take "considerably longer." He also notes that the number of TAS "case advocates" has declined to about 1,080 at the end of fiscal 2007 from 1,242 at the end of fiscal 2004.

Be clear, concise, have plenty of documentation to support your case, and keep good notes on all your dealings with IRS staffers. If there is a lengthy history, consider including a timeline. Whenever you deal with someone at the IRS, be sure to get that person's full name and badge number.

Be persistent -- and if you don't get the treatment you think you deserve, hire a tax professional with experience in dealing with TAS. The pro may know just the right buttons to push.

Don't bother calling TAS with tax-law questions or advice on how to save taxes. That's beyond the scope of TAS's mission, a spokesman says. (For more details, go to www.irs.gov/advocate or call 877-777-4778.)

The Biggest Problem

Ms. Olson, who was appointed National Taxpayer Advocate in 2001, says TAS is "independent within the IRS." She says she serves at the pleasure of the Treasury secretary, now Henry Paulson. Part of her job requires her to report directly to Congress twice a year. At midyear, she gives Congress her objectives for the coming fiscal year. Around year end, she delivers a much thicker report to Congress that identifies problems in tax administration and recommends administrative and legislative solutions.

That report includes her list of the 20 or so most serious problems facing taxpayers. The No. 1 problem in her latest report: "The Impact of Late-Year Tax-Law Changes on Taxpayers."

• Email: taxreport@wsj.com