Complexity of individual tax law ranked second, followed by complexity of business tax law, clarity and tone of IRS correspondence, and inability to access the toll-free number.

Rounding out the top ten problems cited were:

• Burden on small businesses
• Administration of Earned Income Tax Credit
• Lack of one-stop service
• Lack of acknowledgement of correspondence and payments
• Penalty administration
• Processing issues with the Offers in Compromise Program

"The difficulty of administering and complying with complex tax laws is a recurring theme throughout this report," Henry Lamar, Acting National Taxpayer Advocate, noted in the report's forward.

"While many of the issues discussed are fully within the power of the Internal Revenue Service to prevent or correct, the complexity of the tax law presents problems for taxpayers and the IRS that defy simple solutions," he said.

Lamar replaced W. Val Oveson, who stepped down from the post in the fall and recently joined PricewaterhouseCoopers as a managing director in the firm's State Tax Consulting Practice in Salt Lake City.

"Although we have added a few new issues to the list of the top 20 problems faced by taxpayers, and dropped a few old ones, the list remains substantially unchanged since our first report in 1996," Lamar added.

This year's report includes 10 new legislative recommendations for changes to the tax law, plus 27 previous recommendations. Among the new recommendations submitted are changes to the tax credit for the elderly and disabled, military death benefits, and retirement plan rules. Priority recommendations from previous years that were resubmitted include: the Earned Income Tax Credit, Alternative Minimum Tax, penalties and interest, and expansion of authorities for the IRS to correct errors.

The report also names the 10 most litigated tax issues during the past fiscal year. Filing status issues, independent contractor vs. employer issues, and penalty issues led the list for fiscal 2000.

The Taxpayer Advocate Service resolved more than 256,000 cases last year, according to Lamar.

The full report can be viewed in the Taxpayer Advocate Service section of the IRS Web site at www.irs.gov.

-- SmartPros News Staff

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