PODCAST: National Taxpayer Advocate Erin M. Collins Wants to Help

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Links mentioned in this episode:

• Amazon Raising Annual Fees for Amazon Prime Membership (opens in new tab)
• 40 Best Amazon Prime Benefits to Use in 2022 (opens in new tab)
• Erin M. Collins, National Taxpayer Advocate, bio page (opens in new tab)
• Taxpayer Advocate Service qualifier tool (opens in new tab)
• Where's My Refund? How to Track Your Tax Refund Status (opens in new tab)
• How to Cut Your 2021 Tax Bill (opens in new tab)

Transcript

David Muhlbaum: Did you know there’s someone at the IRS whose sole purpose is to help taxpayers deal with the agency? If that sounds like an oxymoron, that’s just because you haven’t met Erin Collins, the current taxpayer advocate. She’ll join us to explain what her office does, how it can help you, and why the IRS is struggling to get refunds out. Also, Amazon is raising prices; what can you do? All coming up on this episode of Your Money’s Worth.

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David Muhlbaum: Welcome to Your Money’s Worth. I’m kiplinger.com senior editor David Muhlbaum, joined by my co-host, senior editor Sandy Block. How are you doing, Sandy?

Sandy Block: I’m doing great. Welcome back from whatever wilderness you were in the last few days.

David Muhlbaum: I was in Utah, experiencing the rising cost of rental cars. So yeah, that’s an inflation story, you know. Everyone’s got an inflation story these days. Have you seen the price of milk, gas? Oh my God, whatever. But now we have a price increase for the way we live now, and that is to say by ordering things online.

Sandy Block: You mean Amazon?

David Muhlbaum: Yeah, exactly. That’s a shorthand. I mean, the price of Amazon Prime is going up from $119 to $139 (opens in new tab). So that’s a 17% increase if you’re paying annually. And that covers a lot of people. I don’t know that it’s more people then who buy milk or gas, but it’s 150 million or so here in the United States. That’s a lot of people who are going to be affected.

Sandy Block: Right. And I mean, I know the headline definitely caught my attention because 17% sounds pretty steep. But since we brought inflation into this, we need to be careful about our statistics. That’s not a year-over-year increase like we talk about with the price of milk or gas, which seem to go up every month or whatever. The last Amazon Prime increase was quite a while ago.

David Muhlbaum: Yeah. Yeah. It was 2018. So our editor Bob Niedt, he knows Amazon backward and forward. And in fact, he forecast this increase a few weeks ago. So, Amazon has operated on a four-year cycle for price increases. And the last one was from $99 to $119. Now, you know on a percentage basis, that was a bigger jump.

Sandy Block: Right. We’ve got our calculators out, but let’s move on from crunching numbers. What are those 150-plus million people supposed to do other than just roll their eyes and suck it up?

David Muhlbaum: Yeah. I imagine most people are going to shrug and pay it. Probably in part because they’re going to get auto renewed at the new rate. And well, there you go.

Sandy Block: Right. And that’s I think what a lot of these subscription services really count on, is inertia. You’re not even paying the bill. You’ve got it on your credit card. It goes on, and they’re just hoping that you’ll just move on, but if you really don’t want to give up free shipping, maybe one way to live with this increase is to go deeper into the Amazon ecosystem and make sure that you’re actually getting what you’re paying for, because there’s a whole lot more to Amazon Prime, as I plan to discover for myself, than just free shipping. There’s videos, there’s music, there’s movies, there’s all kinds of stuff

David Muhlbaum: Yeah. So forth indeed. I mean, that’s just the thing that Bob has written about in his piece on best Amazon Prime Benefits to Use (opens in new tab), beyond the entertainment. You mentioned there’s also this try before you buy, which lets you pick up to six items of clothing, shoes, accessories. You can see if they fit or well, look good, and then bring it back for free or send it back for free. And he also gets into how to manage a Prime membership to get the most out of it. Like, you can share benefits with something called Amazon Household. So maybe you don’t need as many accounts, that sort of thing.

Sandy Block: Right. And one of the things that I discovered even before this price increase, I don’t go to Whole Foods all the time, but I did happen to go into one this week. And I used my prime membership. And I saved a couple bucks on some overpriced fish. So that’s the kind of thing you need to be thinking about. But the other alternative is, you could quit. What wasn’t around last time there was an increase was Walmart Plus. They’ll give you free next day or two-day delivery, prescriptions and gasoline discounts, some other perks for $84 a year. So maybe they’ll pick up some disgruntled Amazon people who aren’t into inertia.

David Muhlbaum: Yeah. Well, until they raise their price, maybe? I doubt it. That would not make much sense. But you know who is also likely to raise their membership fee this summer (opens in new tab)? Costco. That’s another one of Bob’s forecasts.

Sandy Block: Oh no. Well, I don’t go to Costco anymore because I always spent too much when I did; we go to BJ’s. But you are a dedicated Costco customer, aren’t you?

David Muhlbaum: Yeah. Truth. My dogs have been on Nature’s Domain salmon meal and sweet potato dog food for well, as long as I’ve had dogs. So I don’t think they’re going to let me switch.

Sandy Block: Well, maybe your dogs won’t let you switch to Old Roy, but I think these increases in subscription prices present a good opportunity for everyone to review their subscriptions, make sure you’re actually using all of the ones that you signed up for. If there are cheaper alternatives or maybe you can get more out of the subscriptions that you already have, because they really do count on you not doing that when they raise these prices.

David Muhlbaum: Be a conscious shopper. Yes, thank you for the actionable personal finance advice, Sandy.

Sandy Block: That’s what we’re here for.

David Muhlbaum: That’s right. Anyway, coming up on our main segment, we will talk to Erin Collins, the national taxpayer advocate about what her office does, what it can do for you as a taxpayer and how this filing season is shaping up. Stick around.

Meet the National Taxpayer Advocate, Erin Collins

David Muhlbaum: Welcome back to Your Money’s Worth. For our main segment today, we’re joined by Erin Collins, the national taxpayer advocate (opens in new tab). Now that’s a pretty cool title, don’t you think? So here’s the history. A law called the Taxpayer Bill of Rights created this job almost 30 years ago. And the advocate has a staff of about 1,600 and a mission to be a voice for taxpayers, as well as report to Congress on what kind of job the IRS is doing. So that’s kind of a policy-wonk description of the taxpayer advocate’s place in the Washington ecosystem. But they have a very real, very tangible role in helping individual taxpayers all over the country. And we definitely want to get into what they can and can’t do for you. So, welcome Erin.

Erin Collins: Thank you so much for having me today.

Sandy Block: I want to thank Erin not for just coming today, but for being a great source for us since she took the job a while back. And you’ve given us a lot of insights on what’s happening in the IRS and what people can expect when people are filing their taxes, which frankly isn’t really good. That’s important to our audience because they come to us for a lot of information about filing their taxes and I think that’s been even more critical in the past couple of years when people have gotten lots of stimulus checks, child tax credits, and other sorts of new wrinkles in the tax system. The other thing we want to talk about is if people need help with their taxes. They have to be careful about who they go to because basically anybody can call themselves a tax preparer in the current system. So, on that note, Erin, can you explain a bit more about how your office, the Taxpayer Advocate Service operates? I think people might find it a little confusing that while it’s technically part of the IRS and funded with taxpayers’ dollars, it’s actually meant to advocate for taxpayers.

Erin Collins: Yeah. We have a unique role that we play in tax administration with respect to assisting taxpayers. So we wear multiple hats. As you indicated, the position was created over 20 years ago. And what we do is we represent individual taxpayers with their unique problems that they have with the IRS. But we also look at what we call systemic issues. Those are issues that impact multiple taxpayers, where we can provide administrative recommendations to the IRS for change as well as proposed legislative recommendations to Congress to change the law on behalf of taxpayers. But I think most people that work with our local TAS offices, they’re working with our case advocates to fix a particular problem.

And I think what a lot of people don’t focus on is what our authority is. We advocate, hence in our name, Taxpayer Advocate Service. So we do not have the delegated authority to actually implement the correction or the change. And that was specifically created so we could be an independent organization. We can give it a fresh or fair new look from what the IRS has previously done. And then we work with our colleagues or our counterparts in the IRS and recommend the correction or the fix.

David Muhlbaum: But there’s not a real equivalent at other federal agencies, is there? I mean, you know some have ombudsmen and that sort of thing, but this is so much more involved and aimed at private citizens, businesses too.

Erin Collins: Yeah. So again, we do. It’s a unique role. I think most people are familiar with what I would call the classic ombudsman. And those are individuals that conduct investigations, make recommendations. We do wear that hat, but we also have the ability to advocate specifically for taxpayers, both systemically across the board for all taxpayers, but again, we can help individuals with a particular challenger problem they’re having with the IRS.

David Muhlbaum: Okay. Let’s dig in a little bit to what that particular problem might be. Which ones you can solve, which ones are not your purview. And I noticed on the website, you have this really cool thing, the TAS Qualifier Tool (opens in new tab). And we’ll put a link into that, which is basically, it literally tells you, it answers the question that I’m asking you now: "Does your problem fit?" But since not everyone’s going to go there right away, could you give us some sense of what problems are in your purview and what problems are not.

Erin Collins: Sure. So we have what we call two buckets. One is for financial hardship, and the second bucket is our systemic, when you have an issue with the IRS system. So the first bucket for example, take a situation where collections is knocking at the door and a taxpayer is having issues making ends meets. They can’t pay the rent or they’re having trouble. And what we can do is assist and work with our collection folks to possibly suspend the collection activity, or even possibly get an offer in compromise or installment agreement.

Erin Collins: So we can work with the taxpayer with that specific problem. The other challenge taxpayers are facing right now, and it’s been a very difficult two years for the taxpayers with respect to the filing season is when the system isn’t working as it’s intended. It’s broken. Unfortunately, the filing season with all the additional backlogs, and the challenges, and the delayed of the processing of those claims, we’ve created millions of taxpayers that in essence fit in that second bucket. And as you alluded to, we have typically 1,600, 1,700 employees. We can’t help 2, 3, 4, 5 million taxpayers at a time. So we try and limit what we can do to get the most result. And where’s the best use of our resources? So as you said, if you go into the tool, you’ll see it gives you options as to whether or not your case qualifies to work with us and contact a local taxpayer advocate.

Sandy Block: So I think Erin, from what I understand about what you all do, tthe axpayer advocate office is not there if you have a question about whether you should itemize or not, or whether you’re eligible for the child tax credit, the IRS has a lot of websites for that. But as you alluded to, and this is something we want to dig into, you’re probably not going to have a lot luck calling the IRS for help. Can you talk to us a little bit about what taxpayers can expect during the upcoming tax season? Because last season was pretty awful in terms of customer service. Hardly anybody could get through to the IRS. A lot of refunds were delayed. What should we expect this year?

Erin Collins: Yeah. If we’re talking about the filing season, I do have concerns that the IRS has, as we call it, they’ve dug themselves into a hole from the last two filing seasons. And they still have not dug out of that hole. So it’s going to potentially impact the smooth or quick processing of the current filing season. So we do have concerns. And as you alluded to, Sandy, although we are IRS employees, we’re not really main IRS. So the typical questions and problems, that’s really more in the purview of IRS. Although we do a lot of outreach and lot of education, that’s really not our main role. So again, when the system isn’t working, that’s really where taxpayers should reach out to us. But yes, they should make the effort to try and work with the IRS. But as you pointed out, the level of service on the phone this past year, it was about one in 10 calls were answered, which is just unacceptable.

Erin Collins: So taxpayers are being forced to try and self-help. irs.gov has a lot of useful information, but unfortunately, it’s sometimes difficult to find. And if you’re trying to get specific information on your delays, on your refund, the tool the IRS has, Where’s My Refund (opens in new tab), doesn’t answer the question if you have a delay.

Sandy Block: And Erin, following up on that, I know from personal experience that Where’s My Refund does not work very well, but given this situation that the IRS has a huge backlog of returns from last year, from 2020 that they haven’t even processed, what is the most effective way that a taxpayer can avoid a delay or a problem during this tax filing season?

Erin Collins: Yeah. I think, although we realize that there is a percentage of our population for whom filing electronically is not an option, but for those who have the ability, make every effort to file electronically. Paper returns, those are where they have the most delays. Paper is not a friend to the IRS. So number one, you want to file electronically. Number two, if you can request a direct deposit, so provide your bank information. And number three, triple check for errors. Last year, part of the delay that was caused for all taxpayers was individuals that put inconsistent information on the return from IRS records. So for example, you use your last pay stub to put your income, not your W2. And your pay stub may include two or three days from the month of January. So that information may not match the IRS’s records. If you received a stimulus check or the six monthly payments that you receive for the advanced child tax credit, that should match IRS records.

If it doesn’t, it will be pulled out of the system and manually processed. So last year again, we had at least 13 million returns that had to be manually processed, which caused a 35 million backlog at the end of the filing season. So we do not want to have a repeat of that backlog going forward. So if taxpayers can really try and make sure that the correct information is on the return and they file electronically, they should not have a delay and it should be processed within that 21 days that the IRS projects that you’ll get your refund.

Sandy Block: I want to dig a little bit deeper Erin, as to why there was such a backlog last year, you mentioned the stimulus checks. And I also think that the pandemic’s effect on the IRS itself had a role in that. Maybe you could talk a little bit about why some people still haven’t gotten their 2020 refunds yet.

Erin Collins: Yeah. It actually started at the onset of the pandemic. The IRS shut down, basically all the facilities across the country. And think of the volume that the IRS receives. And in essence, it’s over 200 million tax returns every year. So what happened was when the pandemic first started, they got in a hole, and it’s been two years now and they still are not out of the hole. They still have a backlog month after month after month. So if we don’t get through the backlog, we’re never going to get ahead. So this year, absolutely the IRS has to not only be timely with respect to the current filing season, but we’ve got to get that backlog resolved and get the payments to the taxpayers who are still waiting for those refunds from last year.

David Muhlbaum: That gives me an idea for a modest proposal. So, if you don’t pay your taxes or behind you pay, not only, but interest on the amount that’s outstanding. What if the IRS were to pay you interest for a refund they haven’t processed, assuming it’s not your fault?

Erin Collins: You are great on tax administration because golly gee, you can get interest if the checks are delayed.

David Muhlbaum: Oh, this exists?

Erin Collins: So thank you for that recommendation. But yeah. But unfortunately that doesn’t make people happy. The interest rate’s incredibly low. And so, yes, maybe you’ll get an extra $5, but people want the money now. A lot of these returns that were filed or were filed before, possibly April of last year and they still have not received their payment. And again, that’s just unacceptable.

David Muhlbaum: Well, as Sandy knows my own personal tax situation is such that I’ve never been in a position to receive such a reward. I am a little curious though, is the interest rate the same as you pay for owing?

Erin Collins: Now you’ve stumped me. I want to say the answer is yeah.

Sandy Block: I don’t think it is.

Erin Collins: I think when you have... There are exceptions, like if the size of the company. There’s all sorts of different criteria, but they’re close, but again, neither one is anything to write home about.

David Muhlbaum: Right. Right. Got it. Okay. Well, we certainly appreciate your guidance about filing electronically and that’s what more and more people do each year. But there’s a subset who are going to want help filing whether it’s electronically or on paper. That is to say they don’t have a tax problem. Well, not at least yet. They just want someone to do their taxes for them. So assuming someone doesn’t meet the guidelines of... And Sandy, these are the two programs you wrote about the Volunteer Income Tax Assistance Program or the Tax Counseling for Elderly Program. (opens in new tab) We’ll put some links in to explain what those are about. How do you recommend people go about finding a tax preparer? Like, do you all have guidance on that?

Erin Collins: Yes. And it’s also on irs.gov, but real quick, going back to the VITA and what we call the TCE, that is limited with respect to your income. And I believe it’s $56,000 a year ...

David Muhlbaum: Or your age.

Erin Collins: Right. So if you’re above that amount, unfortunately, you don’t qualify for that. But IRS has on their website, I think it’s https://www.irs.gov/chooseataxpro (opens in new tab). And then actually, it’s a very useful tool. It helps you select a qualified or federal tax preparer. So it includes a list of licensed or certified, or folks with credentials. So for example attorney, CPA, enrolled agents, and it also includes a directory of those individuals that take annual CPE and also get certified. And it’s listed by name, city, and the criteria.

Erin Collins: So it’s a great directory and it’s a great tool if you’re looking to find a particular person. But you really should choose that preparer carefully. We read about the scams, the IRS is very well aware. So you know, ask a friend, ask somebody you trust, get referrals, check out their credentials. Some people go into the Better Business Bureau, see if there’s complaints. And then taxpayers also have the ability to what I call self-help. There are a number of companies out there that do tax preparation software which will walk you through as you’re preparing the returns. So there are options for taxpayers out there to get help with respect to preparing their returns.

Sandy Block: And to follow up on that, Erin, you and I have talked about this just when you refer to scams. I know you’ve advocated for some kind of minimum competency requirements for tax preparers. But right now, basically David or I could put a sign on our door and charge people to prepare tax returns, which would not be a good idea, but we could do that. Is that not the case, Erin, is that why you have to be extra careful?

Erin Collins: Yeah. I think, again, there are some good intentioned folks out there that are helping their neighbors or families or loved ones, but they may, no offense, not be familiar with the tax laws. I’m more concerned about those who are unscrupulous, people who are taking advantage of taxpayers. And unfortunately there are many of those individuals out there. There’s something that’s referred to as a PTIN. I think it’s your professional tax identification number (opens in new tab) is what it stands for. If your return preparer doesn’t have a PTIN that would be a red flag to you because the taxpayer or the preparation folks have to put that on the return, at the bottom of the return if you sign it and also your return preparer signs it. So if the person doesn’t want to sign it, there’s probably a reason and you might want to get up and walk away.

Sandy Block: So Erin, one thing that I’ve reported on through the years. And if anybody stays up late, who watches late night TV will see ads saying, "We can reduce your IRS debt. We can make your IRS tax bill go away." And I think what they’re referring to is a legitimate program called offer in compromise (opens in new tab). But, it’s a lot harder to get that than some of these commercials imply. And a lot of these companies, as I understand it, just basically charge you a fee and then never get the offer. Could you talk a little bit about that?

Erin Collins: Yeah. Again, if you are going to use someone to assist you in the offer in compromise program, you want to make sure that they are on the up and up, so to speak. You don’t want people who can over promise pennies on the dollar and under deliver, and then charge you on top of it. So again, these are companies, there are a lot of legitimate folks out there. A lot of firms that do offer in compromise and assist taxpayers. And then there’s the others that we would prefer you not go to. So IRS tries to identify if there’s potential problems. In fact, I know we are currently as an organization or agency looking at that issue across the board so that we can make sure we get useful information out to taxpayers. But yes, you can do it yourself. You can do it with the assistance of TAS or you can get a professional to help you. But be wary of those who make very large promises and have a price tag attached to it.

Sandy Block: I think anytime you hear pennies on the dollar it’s probably a big red flag, right?

Erin Collins: Yeah. And you know I hate to say it, there are some taxpayers who may end up pennies on the dollar based on their financial situation, but it’s not a standard you can apply across the board.

Sandy Block: Right.

Erin Collins: So again, be careful, the old saying, "If it’s too good it to be true, it probably is."

David Muhlbaum: So Erin, this question of trust, who can you trust to help you with your taxes? Do you or your advocates ever, or your staff ever find essentially pushback, because at the end of the day, you’re an IRS employee? And as we discussed, there is this independence built into your office, but, you might have to do some convincing of people, right?

Erin Collins: Well, yes, that’s hence the term advocacy, but I don’t believe we’re advocating for positions that we do not believe are correct. So if a taxpayer comes to us and wants to argue that the moon is purple, we would probably not recommend we take that position with the IRS because A) we think it’s wrong and B) it would not be successful. So we work with the taxpayer to get the best possible facts and position when we work with the IRS. So in essence, I would like to think of us as trusted, sort of, advisors or trusted advocates because really that is what we’re doing for the taxpayers. We’re working with the IRS and pushing what we think is the correct position.

David Muhlbaum: Excellent. Maybe you could put another T in the acronym, you could be "Trusted Taxpayer Advocate Service" because we’re all about acronyms here. On that acronymic, Washington note, I’m curious if since you sometimes deal with things that are systemic problems with the IRS, rather not the problem of the individual taxpayer but a group of taxpayers, do you find yourself being pulled into the policy debates of how taxation should be implemented? That is, when it ends up in congressional testimony, how we all argue about that here.

Erin Collins: Well, it depends how you define that, but we push for administrative change. I lead the policy up to the Hill and Treasury, but I guess we push for policy in the sense of, we want fair treatment of taxpayer and we want the system to be fair and fairly implemented. So in that sense, if that’s a policy, yes, we do push for that. If it’s whether or not the tax rate should be 20% versus 30%, we normally stay out of that debate.

Sandy Block: But on that note, Erin, I know you don’t get involved in what tax rate should be and that sort of thing. But you do advocate for the IRS in terms of funding. You and your predecessor Nina Olson have argued for many years that the IRS is underfunded. Nobody wins votes by saying they want to give money to the IRS, but why is that important? And why is the IRS so underfunded?

Erin Collins: Yeah. I think the challenge is, and I look at not necessarily the IRS, but the impact to taxpayers. So what is the impact of underfunding the IRS with respect to service, with respect to fairly administering the tax laws. And that has been a real challenge for a number of years because the budget that Congress has every year has gone down about 20% over the last 10 years. Unfortunately, that means so have the IRS employees. I mean, you can’t have more employees without more budget. And the challenge is IRS has picked up additional work. So over the years and especially over the last two years, Congress has entrusted the IRS to do three rounds of the stimulus payments. They’ve done the monthly advance child tax credit payments, as well as a number of business benefits that they’ve done.

So they’re overtaxing, so to speak, the IRS’s abilities to process just not only the normal filing season, but all the additional work, with fewer employees and fewer budgets. So unfortunately service and taxpayers are paying the price. And when you think about, if you want to step back and look at the politics of this, the IRS brings in and I think the numbers about and 95% of the entire nation’s budget. So the monies that go through IRS and Treasury is what funds everything else that Congress does. So when you think about how important the IRS is, without a functioning IRS, it’s going to impact the function of our country of what we can do.

Sandy Block: Erin, that’s a great way to wrap up this conversation, and we really want to thank you for coming on to our podcast and for all the things that you do. Thanks again.

Erin Collins: Thank you so much.

David Muhlbaum: Thank you, Erin.

David Muhlbaum: That will just about do it for this episode of Your Money’s Worth. If you like what you heard, please sign up for more at Apple Podcasts (opens in new tab) or wherever you get your content. When you do, please give us a rating and a review. And if you’ve already subscribed, thanks. Please go back and add a rating and review. If you haven’t already to see the links we’ve mentioned in our show, along with other great Kiplinger content on the topics we’ve discussed, go to kiplinger.com/podcast (opens in new tab). The episodes transcripts and links are all in there by date. And if you’re still here because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.