Today technically is George Washington's Birthday, but we've come to call it Presidents Day in honor of all our commanders in chief, like these four greats on Mount Rushmore National Memorial. (Image courtesy Mount Rushmore Facebook page)

How are you celebrating George Washington's birthday?

Yep, that's what today officially is, despite all the Presidents Day sale signs in retailers' windows.

Technically, America's first president was born on Feb. 22, 1731. However, since 1971 we've celebrated his arrival day on the third Monday of his birth month thanks to a law that took effect that year mandating most federal holidays be observed on Mondays.

Then, being a culture that likes to expand things, the commemoration of the Father of our Country's birthday was unofficially broadened to recognize other commanders in chief.

Lincoln's legacy: At first, it was redubbed Washington and Lincoln's Birthday Day.

That sort of made sense. Abraham Lincoln was born on Feb. 12, 1809, and did serve during what is arguably the worst time in our country's history, the Civil War.

That's OK with me. Our 16th president also is, like Washington, a notable national father, in the case the father of our tax system.

OK, Lincoln didn't actually write the tax code. But he recognized the need for taxes to help finance the Union's fight against the Confederacy. In August 1861, he signed into law the legislation that created the United States' first federal income tax.

Soon, the rest of the residents of the Oval Office were invited to George's birthday party, giving us what we now call Presidents Day.

Some commanders in chief are more loved than others, so I leave you to your personal preference as to which U.S. presidents you honor today.

Presidential tax release tradition: Another area in which most modern-day presidents have participated is the release of their tax returns.

For almost 40 years, it was an election year ritual for candidates for the highest elected office in the United States to show at least some of their 1040 filings to the voters.

The table below, taken from written testimony submitted by Dr. Joseph J. Thorndike, Director of the Tax History Project, Tax Analysts, to the House Ways and Means Committee Oversight Subcommittee shows the history of recent presidential candidate tax filing openness.

That tradition ended in 2016. Donald J. Trump opted to keep his tax returns private, saying they were under Internal Revenue Service audit.

Audits no excuse: Tax experts have repeatedly noted that IRS examination of returns is not a reason for Trump or anyone to keep their filings secret. While the IRS is bound by privacy laws not to divulge, in most cases, a private citizen's tax data, that person can do so on their own if they wish.

Trump obviously wishes not to do so.

Despite some pre- and post-election feints about eventually — maybe, some day, perhaps, or not, because still audits — making his taxes public, 45 has essentially decided not to, apparently ever, release his taxes.

In addition to not showing us his taxes during the campaign, Trump also has never revealed the first return he filed after moving into the White House. (Neither has Vice President Mike Pence released his 2017 tax return, although he did reveal his 2015 tax year filing during the 2016 campaign.)

And Trump still can fall back on the specious under audit excuse since as a matter of course, the IRS routinely audits presidential tax returns every single year.

House throws first tax return review punch: Trump is likely to continue the rope-a-dope strategy now that Democrats are in charge of the House of Representatives and making serious noise about getting their hands on Trump's taxes.

Democratic leaders argue that his filings could produce information critical to Congressional oversight into Trump's global business operations and any possible public-private conflicts of interests.

The House Ways and Means Committee Subcommittee on Oversight convened a hearing on Feb. 7 to get expert testimony about proposed legislation and existing laws that could help them acquire Trump's tax returns.

H.R. 1, the first bill introduced by Democrats after taking control of the House in January, contains a provision that would require presidents and vice-presidents to disclose their tax returns.

As far as Trump's taxes, however, the Democrats are relying on a 1924 law that allows for the chair of the House Ways and Means Committee — that's now Massachusetts Democratic Rep. Richard Neal — to make a written request to the Secretary of the Treasury for the returns.

The ability to request returns under this law is not limited to those filed by the occupants of the Oval Office. The W&M chair can ask for any filer's taxes and the law says the Treasury chief "shall furnish" that information to members of the tax-writing committee for them to examine behind closed doors.

During the Oversight hearing, University of Virginia Law School professor George Yin testified that he doesn't see any "wiggle room" in the law for the Treasury secretary to refuse Neal's request for Trump's returns.

But if the Trump administration refuses the request, Yin said, "We would be in uncharted territory."

More tax and political fights ahead: When Republicans controlled Congress for most of the first half of Trump's tenure, they had the same tax return request ability, but chose not to use it.

In fact, the then GOP led Ways and Means Committee repeatedly shot down Democratic efforts to use the tax return request law.

Now, however, Neal said he plans to request Trump's tax returns.

Once the W&M members get the filings, the full committee could then vote to release the returns to the entire House or provide a summary of their review of the 1040s to their Capitol Hill colleagues.

Trump and his attorneys obviously will fight the request.

Also expect Treasury Secretary Steven Mnuchin to take as much time as he can before handing over Trump's taxes.

Perhaps by Presidents Day 2020, we'll have an idea of what Donald J. Trump has sent to the IRS in recent years.

Or not.

Realistically, Trump's filings could drag out well into the 2020 election year or even beyond his first term. But whatever the timetable, you can be sure that the debate over Trump's taxes is not going away.

You also might find these items of interest:

• Getting a glimpse of Trump's 2005 state tax return
• 'Taxation without representation is tyranny' & 12 other notable tax quotes
• 1st White House petition of Trump era seeks peek at 45th president's tax returns

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NASCAR's 2019 season started today with the auto racing series' biggest event, the Daytona 500. Congratulations to Denny Hamlin and Joe Gibbs Racing for taking the checkered flag in the Great American Race.

Things aren't so clear-cut, though for the expired tax break for motorsports speedway improvements and more than two dozen other assorted tax benefits.

These tax breaks expired in 2017 and are not on track for reinstatement. Yet.

In fact, they're looking as messy as today's closing laps pile-up.

Extenders indecision: These assorted tax breaks are known collectively as the extenders. They get that name because they are temporary and must be extended periodically by Congress.

Some extenders were added permanently to the Internal Revenue Code as part of the Protecting Americans from Tax Hikes, or PATH, Act back in 2015.

But some of the 26 temporary tax laws that expired in 2017 (which are this week's By the Numbers figure), as well as the two that ended at the end of 2018 and seven set to expire at the end of this year, could get new lives.

Or not.

Timing of tax renewals: Often, as now, they lapse and are resurrected retroactively, making tax planning a mess.

That happened in February 2018, when Congress extended provisions that had expired at the end of the 2016 tax year.

Those renewals included popular individual tax breaks for tuition and fees, mortgage insurance premiums and residential debt cancellation.

The remainder of temporarily extended tax breaks were for businesses that had been part of the tax code for close to a decade or longer.

Year after year, or sometimes every other year when Congress extends them for slightly longer periods, the tax benefits have been routinely approved by lawmakers.

The effort is bipartisan. Extenders have been, well, extended regardless of whether the legislative chambers and White House were under Republican or Democratic control.

The times, however, may finally be changing.

GOP pro extension, Dems warier: Sen. Chuck Grassley (R-Iowa), the chair of the Senate Finance Committee, is a fan of the current extenders. 

He had hoped that the tax extenders — renewed retroactively for the 2018 tax year, as well as for 2019 — would be attached to the government funding bill that was signed on Friday, Feb. 15, and which will keep federal offices open through the end of September.

No such luck.

Grassley has been frustrated in part by his tax-writing colleagues in the House, which have the constitutional duty to initiate tax bills. 

And in a flipping of traditional fiscal positions, some House Democrats are arguing that the budgetary cost of extenders be considered — and paid for — in any renewal bill. Technically, the dollars haven't mattered because the tax laws are temporary.

"We're not just going to be adding to the deficit like the Republican majority was fond of doing, and that includes an extenders package," Rep. Ron Kind (D-Wisc.), a member of the House tax-writing panel, said earlier this month.

Kind advocates considering the value of each extender, especially as to whether the tax breaks encourage job creation for well-paying positions. "We want to be supportive of a growing economy, but I don’t think there's any reason why we Socan’t get back to regular order [and] have some hearings, get some feedback."

Kind's fellow Ways and Means Committee member Rep. Brian Higgins (D-N.Y.) agrees. Higgins said that he and his tax panel colleagues will give careful, deliberate consideration to the extenders, but the committee, now led by Democrats, isn't going to "just simply rubber-stamp what's already been done."

Timing is everything: Grassley and other members of Congress aren't the only ones getting antsy. Taxpayers are starting to worry, too.

With less than two months before most filers must send the Internal Revenue Service some tax forms and possible tax payments, they want three key filing questions answered.

First, will any of the expired extenders be renewed?

If Capitol Hill's response is yes, the next query is which ones?

Finally, the biggest question must be resolved. When will it happen?

Your guess is as good as mine to all questions.

Extenders' many legislative roadblocks: Congress originally had hoped to resolve the extenders issue before 2018 ended. But those plans didn't pan out.

Republicans, who saw the 2018 midterm elections end their House majority, decided to focus on more permanent tax provisions that didn't make into the TCJA. The goal was to approve more tax reform items, dubbed Tax Reform 2.0, by the end of last year while the GOP still controlled the House, Senate and White House.

There was some hope extenders would be part of the 2.0 package. But it was pulled from consideration after many Republicans who lost their reelection bids decided not to return to or stay in Washington, D.C.

Then came the funding battle in December that led to the start of the longest federal government shutdown in U.S. history.

And then the Democrats took over with the start in January of the 116th Congress, focusing on the final fight (for now) over reopening the shuttered government offices.

Meanwhile, extenders got lost in the legislative shuffle.

Next extenders steps, or not: Grassley says he soon will introduce a tax extender measure to give taxpayers currently working on their 2018 returns some clarity.

But again, as he noted on social media, the House is charged with originating tax bills, even if the Ways and Means Committee simply incorporates Senate language into an official House bill.

Some Democratic House Ways and Means members reportedly remain interested in holding at least some hearings on the extenders. That would slow any renewal.

And a few share the no-more-extenders opinion held by several political and tax policy think tanks.

End extenders altogether: The Tax Foundation, a conservative-leaning tax policy nonprofit in the nation's capital, has long argued that temporary tax laws are poor tax policy. Extenders oft times do not effectively accomplish their stated, primary objective of encouraging certain activities, argues the group.

In an April 2018 blog post discussing Tax Foundation recommendations to Congress regarding extenders, analyst Erica York, wrote:

"Instead, because of their often-retroactive nature, these provisions result in an after-the-fact transfer to narrow groups without incentivizing the intended activity — businesses and individuals cannot go back in time and make different decisions. This temporary, uncertain nature also makes it increasingly difficult for businesses and individuals to engage in long-term decision-making as they do not know which tax provisions will be in effect in the future. The economic uncertainty created by these provisions slows economic growth.

The Committee for a Responsible Budget (CRB), another Washington, D.C.-based nonpartisan public policy think tank, agrees.

"Letting tax extenders expire was one of the few acts of fiscal responsibility taken by the last Congress," said CRB President Maya MacGuineas in a Feb. 13 statement. "Now, just over a year after these special-interest tax breaks expired, some in Congress want to bring them back and throw the cost on the credit card. And they want to do it after Americans have already started doing their taxes, throwing a wrench in the returns already filed.

MacGuineas also thinks Congress should follow its earlier inclinations to let these provisions permanently expire:

"Having twice decided not to make these expired provisions permanent — in the 2015 PATH Act and the 2017 deficit-financed tax reform bill — the third time should not be the charm. Congress should not revive the zombie tax extenders."

Will Congress listen to these groups and some of its own members? As the saying goes, we'll see.

And we need to see one way or the other soon.

You also might find these other tax reform posts of interest:

• Extenders one of top tax issues for 2019
• Educators tax deduction now permanent, not temporary, tax break
• Use 1040X if you can claim a renewed extender not available when you filed

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There's better news for taxpayers this week. Internal Revenue Service data for the second week of the 2019 tax filing season shows a slightly larger refund amount.

When the IRS released its first-week data, which covered 2018 tax returns filed by Feb. 1, the number of 1040s submitted and processed, as well as the number of refunds and average amount of those fewer checks, were dramatically lower than at the same time last year.

That led to much grumbling by filers and arguments among supporters and opponents of the Tax Cuts and Jobs Act (TCJA) about how the major tax reform law has affected people's taxes.

That debate will continue, but it now appears that the 2019 tax-filing season is getting back on its usual track.

More filers, refunds in 2019's second week: Yes, the filings and refunds and refund check amounts are still lower. But that's not a surprise.

Other filing seasons have gotten off to slow starts and they didn't even have to work around and amid a major government shutdown.

Filing facts and figures: So what exactly are the IRS' latest filing numbers?

As the table below shows, the amounts for the week that ended on Feb. 8 are still lagging.

2019 FILING SEASON STATISTICS
Cumulative statistics comparing 02/09/2018 and 02/08/2019
(Amounts and percentages rounded)

But the differences from 2018 are getting smaller.

And while the percentage changes in the average refund amounts are not moving much, the dollar amounts of the checks are creeping upward.

Refund strategies: Again, getting a big refund is not necessarily a good idea.

But that's what millions of U.S. taxpayers have for years relied on, some actually over-withholding so they get a refund. They use the Bank of Uncle Sam as the holding place for their annual forced savings accounts.

For others, notes Howard Gleckman, Senior Fellow at the Tax Policy Center (TPC), refunds also are "a point of pride — a weird way to show how we've cleverly manipulated the IRS into giving us money. This, of course, makes no sense. But it feels good."

Plus, most of us don't have any idea what tax bracket we're in or how much our annual tax bill is. But ask us if we got a refund and we have an answer — and amount, if the answer is yes — at the ready.

Taxes owed, not refund amounts: To get the real picture of how the TCJA affects your taxes, you need to look not at your refund amount, but the amount of tax you owe under the new law compared to your tax liability last filing season.

Even folks getting a smaller refund this year or even writing a taxes due check to the U.S. Treasury still could have a smaller tax liability under the new tax laws.

No tax bill for nearly half: Then there are the folks who don't pay any income tax.

That's the case for nearly half of Americans, according to the TPC, a nonprofit joint venture by Washington, D.C.-based think tanks The Urban Institute and Brookings Institution.

And the report of this phenomenon by MarketWatch -- More than 44% of Americans pay no federal income tax — earned this week's Saturday Shout Out.

Since we're looking at numbers, that's approximately 76.4 million U.S. workers who won't pay any federal income tax in 2018, writes Quentin Fottrell in the MarketWatch article.

That's up from 72.6 million people or 43.2 percent in 2016, before the TCJA was even contemplated.

But it's less than the 50 percent peak during the Great Recession.

It's also less than the 47 percent of non-income-tax payers that got former Republican presidential candidate Mitt Romney in trouble back in 2012.

And, notes Fottrell and TPC, these folks obviously still pay sales tax, property taxes and other taxes, including payroll taxes that go to the Social Security and Medicare programs.

You also might find these items of interest:

• Owe Uncle Sam at tax time? Here are some ways to pay
• Fed shutdown underscores why to adjust payroll withholding
• IRS offers tax penalty relief to some who didn't have enough withheld

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By now, everyone knows that a lot of taxpayers are getting the worst news ever at filing time. They owe the U.S. Treasury money.

We can debate the reasons for the unexpected tax bills ad infinitum.

Withholding tables were rejiggered in 2018 following the changes in the Tax Cuts and Jobs Act (TCJA). Itemized deductions and exemptions were reduced or eliminated by that tax legislation. Taxpayers didn't adjust their withholding to get their paycheck amounts more in line with the new law.

The bottom line is that more than the usual number of filers this year are going to have to come up with money to pay their taxes when they file.

Many of them have never been in this predicament before.

To help these folks out, the Internal Revenue Service has some suggestions.

Make a lump-sum payment: If you're tax bill isn't too big and you can cover what you owe in one payment, the IRS offers a variety of payment options, many of them of the electronic variety.

They include:

• IRS Direct Pay — Here you can make a tax payment directly from a checking or savings account. The service is free and doesn't require any preregistration.
• Electronic Federal Tax Payment System (EFTPS) — With this granddaddy of electronic tax payment, you can pay your tax bill by phone or online. This service also is free, but does you need to set up an account first.
• Debit or credit card payment — Stop me if you've heard this before, but this service is free. However, the card processing company may charge a fee. Fees vary by company.
• Check or money order — All y'all old school payers can send in actual paper payments, aka a check or money order. Make it payable to the United States Treasury (or U.S. Treasury), not the Internal Revenue Service (or IRS). You also can hand-deliver the payment in person if you live near a Taxpayer Assistance Center.
• Cash payments — Say it with cash is my personal mantra, except when it comes to taxes. But some folks like to operate in literal dollars. If you're one of them, you can make cash tax payments can be made at some IRS offices or at participating PayNearMe locations. Some restrictions apply. Never send cash, to the IRS or any other vendor, through the mail.

Regardless of what method you use to pay, make sure you get it to the IRS (or postmarked if mailing) by the April deadline(s). 

Pay in installments: If, however, your tax bill is too big for you to pay in one fell swoop, the IRS also offers some ways to pay over time.

They include:

• Online Payment Agreement — Individuals who owe $50,000 or less in combined income tax, penalties and interest and businesses that owe $25,000 or less in payroll tax and have filed all tax returns may qualify for an Online Payment Agreement. Most taxpayers qualify for this option and in most cases an agreement can be set up quickly.
• Installment Agreement — Installment agreements paid by direct deposit from a bank account or a payroll deduction will help taxpayers avoid default on their agreements. Even taxpayers who don't qualify for a payment agreement may still pay by installment. Certain fees apply.
  
  

• Delaying Collection — If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves.
• Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise, or OIC. To help determine eligibility, use the Offer in Compromise Pre-Qualifier

Remember, too, that you don't have to deal only with the IRS to set up a payment plan. You also should look into getting a loan from a private lender to pay the amount due. In many cases, the loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law in connection with its installment payment arrangements.

Adjust your withholding: Finally, so that you won't find yourself owing, or at least not so much, this time next year, adjusted your payroll withholding.

Now.

The IRS has a new Form W-4 you can use to ensure that the amount of income tax taken from your paychecks will match up properly with all the TCJA changes.

When you file your 2019 tax return in 2020, you'll be glad you did.

You also might find these items of interest:

• 6 reasons to file your taxes early
• 6 reasons to wait to file your taxes
• IRS offers tax penalty relief to some who didn't have enough withheld

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The National Taxpayer Advocate this year selected 21 major problems that taxpayers encounter in their dealings with the Internal Revenue Service. I found five of those issues particularly troublesome.

Every year, the National Taxpayer Advocate issue a report to Congress. The 2018 version released this week included a look at, not surprising, how the recent government shutdown affected not only Internal Revenue Service operations, but also the taxpayers who, particularly at this time of year, are relying on IRS services.

Part of that annual report also includes at least 20 tax matters that the Taxpayer Advocate identifies as the most serious problems that taxpayers face in their dealings with the IRS.

National Taxpayer Advocate Nina E. Olson this year found 21 issues — Yay! A bonus problem this year! — that adversely impact taxpayers.

Olson reviews a wide variety of tax matters that cause millions of taxpayers to go hmmm (or worse) when they must touch base with the IRS, either of their own volition or when the tax collector comes calling. These range from getting tax information to paying taxes or getting refunds or, more central to the Taxpayer Advocate Service's mission, whether taxpayers' basic rights have been hampered or violated.

The full list of 20 from Olson's 2018 report are listed at the end of the post.

First, though, I wanted to take a closer look at five the top taxpayer problems that caught my eye.

1. Tax law questions: The IRS' failure to answer the right tax law questions at the right time harms taxpayers, erodes taxpayer rights, and undermines confidence in the IRS.

The Internal Revenue Code (IRC) is a massive document. Size, however, is not the only issue. It's constantly complicated by legislative tweaks — sometimes timely, some not so timely (retroactive changes, anyone?).

The most recent revision was the sweeping the Tax Cuts and Job Act (TCJA), passed in December 2017. The TCJA is the most comprehensive tax reform since 1986 and this is the first filing season that taxpayers are submitting 1040s (which itself has been redesigned) under these myriad changes.

The IRS surely will face lots (and lots and lots) of questions about the TCJA this year. But Olson says that's not the only issue. She says the agency is missing a huge opportunity to be of service year-round.

Since 2014, she notes, the IRS has been operating under a policy that calls for its representatives to only answer tax law questions during the main filing season, or basically from January through mid-April of the year. It justified this abrupt change in policy as a cost-savings effort in a time of budget constraints.

However, says Olson, taxpayers have ever-changing tax situations throughout the year:

"People move, open a business, close a business, get married, get divorced, have children and experience many other life changes that affect their tax obligations.  Forcing taxpayers into a 3.5-month window to ask questions or making it necessary for them to seek advice from a third-party source can be frustrating and costly to the taxpayer and result in eroded trust and confidence in the IRS."

Olson's right. Tax issues crop up year-round. And the IRS needs to improve its training and access to knowledgeable staff who can help taxpayers get the answers to fulfill their tax responsibilities whenever they need it. 

2. Navigating the IRS: Taxpayers have difficulty navigating the IRS, reaching the right personnel to resolve their tax issues and holding IRS employees accountable.

Taxpayers often have difficulty locating IRS personnel who can provide accurate and responsive information regarding their cases, says Olson. The agency emphasizes its main toll-free phone line. That phone option, however, includes difficult-to-interpret options and often leads to extended hold times.

Even when taxpayers are provided with a specific phone number, most often it is for a group, rather than for an individual employee. These group numbers make it difficult for taxpayers to have a sense of continuity and rapport with the personnel working their cases. 

In addition, says Olson, much taxpayer frustration in obtaining the answers they see is due to the fact that they prefer different methodologies of assistance for different issues and tasks. The graph below, taken from the Taxpayer Advocate's report, illustrates those preferences:

But the IRS, according to Olson, ignores these preferences. Instead, the agency does its best to push everyone into a "one size fits all" virtual environment. This effort, typically justified by the desire to preserve resources, has resulted in the ongoing closure of Taxpayer Assistance Centers (TACs) and substantial limitations placed on when taxpayers can receive answers to tax law questions.

I've got to admit that I love IRS.gov. I use it all the time. And in most of my life, I tend to look for solutions that require minimal contact with others. I save such interactions for interviews that I conduct or give, which I do enjoy.

But I also realize I'm the outlier here, and Olson's point about wider contact options regarding tax issues is well made.

3. Improper Earned Income Tax Credit (EITC) payments: Measures the IRS takes to reduce improper EITC payments are not sufficiently proactive and may unnecessarily burden taxpayers.

When the IRS allows a taxpayer's erroneous claim of the Earned Income Tax Credit (EITC), it makes an "improper payment." The IRS estimates that 25 percent of the EITC credits it allowed in Fiscal Year (FY) 2018 were improper payments (23.4 percent when considering improper payments the IRS recovered). A principal cause of the EITC improper payment rate is the complexity of the rules for claiming EITC, yet the IRS does not provide a dedicated telephone help line available year-round for taxpayers to call with questions about EITC.

The IRS estimates that 25 percent of the claimed EITC credits it allowed in fiscal year (FY) 2018 were improper payments. The IRS’s attempts to reduce the EITC improper payment rate have met with limited success. While she recognizes the importance of tracking and minimizing improper payments, the National Taxpayer Advocate is concerned that the focus on "a number" masks both the successes and challenges in improving EITC compliance.

The EITC is a good way, in theory, to help low- and moderate-income individuals and families lower their taxes and in many cases get a refund if they don't owe. It also is way more complicated than it should be, posing legitimate claiming problems for honest taxpayers, many of whom don't get help in filing, as well as crooks, both individual tax cheats and unscrupulous tax preparers, who use it to file fraudulent EITC claims.

Any actions the IRS takes to improve EITC claims and issuance of correct credit amounts is welcome. But that's treating the symptom. The main illness is the complexity of the EITC.

"The estimated amount of improper payments also does not take into account that many taxpayers who appear to be eligible do not claim Earned Income Tax Credit (EITC). The Treasury Inspector General for Tax Administration estimated that … for every dollar of EITC improper payments, there were 40 cents of unclaimed EITC."

As the comment above from Olson's report notes, while the EITC is abused, it also isn't claimed by many who could benefit from the tax break. The IRS has tried for more than a decade to educate taxpayers, notably its annual EITC Awareness Day, about the EITC and encourage them to claim it.

But the real solution needs to come from Congress. Federal lawmakers had tried to make tax professionals the EITC police over the years, but the House and Senate need to step up. Congress should re-examine the EITC and explore ways to make it easier for the workers for whom it was created to claim.

4. Free File: The IRS' Free File offerings are underutilized, and the IRS has failed to set standards for improvement.

To fulfill its statutory duty to increase electronic filing (e-filing), the IRS partners with the Free File Alliance, a group of private-sector tax return preparation software providers. The Alliance provides two services, Free File software, which provides online software to guide certain taxpayers through return preparation, and Free File Fillable Forms, a tool available for all taxpayers to enter their income tax forms digitally and also e-file at no cost.

Despite Americans' use of more electronic options for all areas of their lives in recent years, participation in Free File has steadily declined. Olson says the IRS is devoting minimal resources to oversight and testing of this program to understand why taxpayers aren't using it and how the services offered could be improved.

Some still argue that the free tax prep and e-filing program would work better if the IRS took it over from the private sector. I disagree. That would require money that Congress has not been eager to give the IRS. It also would require more personnel, again which would cost money that lawmakers don't want to authorize or allocate.

Also, the private tax industry does a pretty good job here. And there continues to be competition to keep the software manufacturers on their toes.

But I do agree that the IRS needs to work with the Free File Alliance to expand marketing of the IRS-based free tax prep and filing program. The biggest hurdle here would be convincing the private software companies, many of which offer some sort of free option themselves, to direct folks who might one day be paying customers to the IRS website. I don't see that happening any time soon.

5. Private debt collection: The IRS' expanding private debt collection program continues to burden taxpayers who are likely experiencing economic hardship while inactive private collection agency inventory accumulates.

The IRS implemented its current Private Debt Collection (PDC) initiative, as ordered by Congress, in April 2017. Olson says that as of Sept. 13, 2018, about $5.7 billion in debts of more than 600,000 taxpayers were in the hands of private collection agencies (PCAs).

Essentially, says Olson, the PCA inventory is fast becoming a substitute of the IRS collection queue.

Congress mandated this latest use of private debt collectors (after three earlier failed attempts) as a way to save money. Olson acknowledges that the current PDC program revenues have surpassed program costs.

However, she says, this surplus has been achieved to a significant extent by collecting from financially vulnerable taxpayers. According to IRS databases that contain information from tax returns filed by taxpayers and reports of income filed by third parties:

• 40 percent of taxpayers who entered into installment agreements while their debts were assigned to PCAs had incomes at or below their allowable living expenses, meaning they agreed to pay tax arrears while they could not pay for their basic living expenses.
• 44 percent of taxpayers who made commissionable payments while their debts were assigned to PCAs had incomes at or below 250 percent of the federal poverty level.
• 37 percent of taxpayers who entered into installment agreements while their debts were assigned to PCAs defaulted, a frequency that rises to 44 percent when defaulted agreements and private collectors do not report to the IRS as required are taken into account.
• 34 percent of the amount paid that was attributable to PCA activity was made by taxpayers whose incomes were at or below their allowable living expenses.

Plus, while it's covering its costs and a bit more, Olson says the private tax debt collection program is not generating the revenues Congress expected. Only about a third of revenues attributable to PCA activity in fiscal year 2018 made their way to, and remained in, the government's general fund.

I'm totally with Olson here. And many still skeptical members of Congress. Tax collection is a core IRS function. It should be done by the IRS, not by private companies who coincidentally, or not, come from the states of lawmakers who are major advocates of the private collection program.

Olson's total 21: The five areas above are part of Olson's total of 21. The full list is below.

1. Tax law questions
2. Transparency of the office of Chief Counsel
3. Navigating the IRS
4. Free File
5. False positive rates
6. Improper Earned Income Tax Credit (EITC) payments
7. Return preparer oversight
8. Correspondence examination
9. Field examination
10. Office examination
11. Post-processing math error authority
12. Math error notices
13. Statutory notices of deficiency
14. Collection due process notices
15. Economic hardship
16. Field collection
17. IRS Automated Collection System (ACS)
18. Offer in Compromise (OIC)
19. Private debt collection
20. Pre-trial settlements in the U.S Tax Court
21. Appeals

In her extended discussions of each of these problems, cites the specific Taxpayer Bill of Rights (TBOR) that are impacted.

Do you agree with Olson's and my lists? Are there particular tax areas that pose the biggest challenge to you this and every year?

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Open-close sign via Giphy.com

The drama continues in Washington, D.C., as far as keeping the federal government open.

It looked like, despite some grumbling from all sides, that a bipartisan, bicameral deal reached this week would keep all of the federal government open past Feb. 15. We all need to keep our fingers (and toes) crossed that it happens, especially those of us — which mean most Americans — who deal with the Internal Revenue Service.

The IRS obviously among those pushing for a resolution that will get the agency through the 2019 tax filing season. The agency is still catching up after the longest shutdown in U.S. history messed with its preparations for and implementation of the 2019 filing season.

Lingering shutdown effects: The National Taxpayer Advocate also is probably pulling for the funding deal to go through, since she noted in her 2018 annual report to Congress that the shutdown could not have come at a worse time for the IRS, which is facing its first filing season implementing a massive new tax law.

The five weeks of being forced to operate short-staffed means the IRS entered the 2019 filing season inundated with correspondence, phone calls and inventories of unresolved prior year audits and identity theft cases, noted Taxpayer Advocate Nina E. Olson.

And Olson says that shouldn't happen ever again.

She's recommending in her report, released Feb. 12, that lawmakers need to make sure the IRS stays fully operational even when other agencies and offices are closed during funding disputes.

"The full effect [of the shutdown] will become clearer months, and even years, down the road," wrote Taxpayer Advocate Nina E. Olson in her preface to the report.

But, she noted, the 35-day closure exacerbated trends within the IRS and problems that taxpayers already faced.

Shutdown impact on IRS operations: Many folks, both taxpayers and tax professionals, this year have encountered some problems related to the shutdown.

Olson's report explains why and how they were created and/or worsened filing issues for the IRS and taxpayers.

On the eve of the Dec. 22, 2018, shutdown, the IRS already was looking at entering the approaching tax-filing season with a backlog of items and with its resources stretched thin, according to the report.

Specifically, says Olson, the IRS was wrestling with record inventory levels of unresolved cases in its fraud detection programs.

Plus, there was the challenge of implementing the first filing season under the new tax law, the Tax Cuts and Jobs Act (TCJA).

As part of the TCJA changes, the IRS was directed to replace the three existing individual income tax returns — the long 1040, 1040A and 1040EZ — with a single new Form 1040. While the new form is smaller (two half pages in length), its redesign necessitated the creation of an additional six schedules.

The new tax law required the IRS to deal with what Olson calls a surge of tax instructions and publications, as well as notices, FAQs and regulations. During this process, as with other massive tax-related acts, key information technology (IT) personnel were moved from ongoing modernization or enhancement efforts to work on delivery of the new tax law and forms. And that meant that electronic filing requirements were not issued to private tax software vendors and electronic return originators until September 2018, much later than in previous years.

Then the IRS actually had to close many of its doors. Those excepted tax operations that remained open during the shutdown were forced to do run through the end of 2018 and into the first part of 2019 with only a fraction of employees.

Thousands more IRS staff eventually were recalled to help kick off the Jan. 28, 2019, filing season. However, they first had to clear at least some of the backlog that had piled up since late December.

The graphic (Figure 2) below details the state of various types of key work and measures on three key dates: Dec. 22, 2018, the first day of the shutdown; Jan. 26, 2019, the end of the fifth week of the shutdown when some employees were called back to work under the 2019 Filing Season Lapse Plan; and Feb. 2, 2019, the end of the first week of the filing season after the shutdown ended.

IRS problems mean taxpayer problems: The practical effects of this slowed workflow posed not only problems for IRS personnel, but obviously affected the service available to taxpayers.

On Jan. 24, just days before the 2019 filing season was set to open, the IRS had:

• More than 5 million pieces of mail that had not been batched for processing,
• 80,000 responses to fiscal year 2018 Earned Income Tax Credit audits that had not been addressed, and
• 87,000 amended returns waiting to be processed.

In addition, during the shutdown the IRS' National Distribution Center (NDC), the facility that handles tax forms used by companies and taxpayers, watched its inventory backlog grow to about 170,000 orders.

Employees worked overtime to process about 11,000 orders a day, but the IRS announced that orders for Forms W-2 and W-3 were backlogged and would not be finished shipping out until mid-February even though, by law, employers are required to submit these information returns by Jan. 31.

At key points in the return processing pipeline, inventories were up over 100 percent over the same time in 2018. During the last week of the shutdown, the level of service via various IRS phone lines was, in Olson's words, abysmal. Even a week after the shutdown ended, most service levels had improved only slightly.

Taxpayer protections essentially abrogated: Then there the instances where tax collection went haywire under the shutdown.

"The IRS' authority to collect revenue is not unconditional. It is conditioned on statutory protections, and a lapse in appropriations does not eliminate those protections," writes Olson.

"It is unconscionable for the government to allow its employees to enforce collection of taxes without the concomitant taxpayer rights protections enacted by Congress. None of these protections is considered an excepted activity, leading to bizarre results," added Olson.

Among the collection situations worsened during the shutdown were:

• A taxpayer with a levy issued against his or her bank account can normally call the Automated Collection System (ACS) and have it released by entering into an installment payment agreement with the IRS. During shutdown operations, however, ACS employees can put the taxpayer into an installment agreement, but they cannot release the levy.
• In other cases, when a taxpayer called to say he or she could not afford to pay, the employee might be able to put the taxpayer into Currently Not Collectible status, but the levy still could not be released.
• And for a period of time after the U.S. Tax Court closed on Dec. 25, 2018, the U.S. mail and private delivery services returned petitions to the original sender. This meant that the IRS has no way of knowing that the taxpayer timely filed a Tax Court petition protesting a proposed deficiency or the collection due process hearing determination.

"This is, of course, absurd. And harmful to the taxpayer. And to trust in the tax system and long-term voluntary compliance," says Olson in the report. "And none of this takes into account taxpayer anxiety."

Unusual year, but usual problems: Granted, the 2018 tax year and 2019 filing season are unusual.

It's been more than 30 years since taxpayers have had to deal with major tax law changes and their ripple effects in a filing season. That was going to be challenge enough. The shutdown made, as Olson's report shows, things worse.

But every year, there's always some fly in the tax ointment.

Tax law changes are renewed late in a year or retroactively, forcing the IRS to scramble to make form changes.

A few stray changes are made that mess up taxpayer's plans, like the Protecting Americans from Tax Hikes (PATH) Act's mandate back in 2015 that refunds related to Earned Income Tax Credit and additional child tax credit claims can't be issued until mid-February.

So to deal with even what passes as normal at tax time, Olson says all IRS activities should be excepted under the Anti-Deficiency Act. This federal law says that no U.S. government activity it allowed if there is no money appropriated to pay for it.

Exceptions are made, however, for government actions necessary "for emergencies involving the safety of human life or the protection of property."

That's a broad statement. And the way the IRS has interpreted Office of Management and Budget guidance issued in 1981 has not always been consistent, notes Olson. She points out:

"In 2011, some of the activities that the IRS included in the category of necessary for the safety of human life or protection of property were: processing of tax returns, taxpayer service centers and call sites, and protection of statute expiration, bankruptcy, liens and seizure cases. The IRS excepted 57 TAS [Taxpayer Advocate Service] employees under this category in 2011. It also excepted 1,263 ACS employees to handle levy release calls from taxpayers. In 2013, however, the IRS did not consider taxpayer service centers and call sites necessary for the safety of human life or protection of property exceptions, nor did it except any ACS employees to handle levy release calls from taxpayers. And no TAS employees, including the National Taxpayer Advocate, were excepted under the 2013 shutdown."

For future government shutdowns, Olson wants the interpretation to be even more inclusive when it comes to the IRS.

"I will recommend that Congress at the very least exempt the IRS from the operation of the Anti-Deficiency Act," she writes.

Specifically, Olson wants lawmakers to ensure that the IRS would have sufficient personnel available in future shutdowns to protect taxpayer rights.

"The strict interpretation of the Anti-Deficiency Act limits the ability for taxpayers to receive the tax help they need, specifically when an economic hardship happens at a time while government operations pause due to a shutdown," she argues in her report.

Added Anti-Deficiency Act actions: Will Congress agree to a wider exception of activities by the IRS during government shutdowns? It's not an outrageous consideration given the agency's importance to revenue collection and the scope of U.S. citizens who interact, if only once a year, with Uncle Sam's tax collector.

And the IRS is not the only agency that some have said should continue to run on the promise that funds eventually will be available.

Earlier today the House Transportation subcommittee on aviation examined a proposal that would keep the nation's aviation system running during future government shutdowns.

The Aviation Funding Ability Act would shift the money from the $6 billion Aviation Trust Fund to keep the Federal Aviation Administration and open — and Transportation Security Administration (TSA) workers on the job — when most of the rest of the government shuts down.

Concerns about air safety largely are credited with bringing the last shutdown to a close.

If, heavens forbid, we are forced into a possible second shutdown in a couple of days, the air safety system won't be alone in facing extreme pressure again.

The complications the IRS is now dealing with (and detailed in Olson's report) after the convergence of a prolonged shutdown and filing season could have dire results. A second closure of tax offices in such short order could essentially grind the tax collection, payment and refund system to a halt at this key time of year.

And that is not a thing anyone anywhere wants to see happen.

You also might find these items of interest:

• Shutdown could revive tax refund advance products
• Tax and financial lessons from the government shutdown
• IRS workers calling in sick by the thousands during shutdown

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One of my favorite recent TV shows was The Americans, FX's series on embedded Russian spies during the 1980s Cold War.

For six seasons, we fans watched the couple known to their suburban Washington, D.C. neighbors as Phillip and Elizabeth Jennings raise their two U.S.-born children, run their small travel agency and spy, sometimes in deadly fashion, for their native U.S.S.R.

One of the underlying themes was how well and easily the Jennings assimilated into the America they were trying to bring down. It's a common trope, but one done well and with nuance by the television program.

A radio story I heard today made me think again of the show and how many things we do share with the nation that is, to most Americans' minds, still one of our biggest enemies.

One of those shared experiences is, of course, taxes. In this case, it's the difficulty that the national tax collector — the Internal Revenue Service in the United States and the Finance Ministry in Russia — to get the money its due from its citizens.

In this case, we're talking about self-employed workers here and there.

Russia's tax-evading entrepreneurs: Almost 41 million U.S. workers in 2017 were self-employed, according to the 7th Annual MBO Partners State of Independence report.

That's an almost 3 percent increase from 2016, according to the study by MBO Partners, a Herndon, Va.-based firm that provides back office support to independent workers. MBO says the self-employed now represent 31 percent of the private workforce, according to the study.

On the other side of the globe, it's a similar situation. An estimated 15 million Russian workers, or 20 percent of the population, are self-employed.

And those freelancing Russians, says Lucian Kim in his report from Moscow for NPR's Morning Edition from Moscow, don't pay any taxes.

Global tax collection issues: Unpaid taxes by small businesses, particularly sole proprietorships, also is a big problem for the IRS. It's long been a given by the IRS that Schedule C filers are major contributors to the tax gap, the amount of money that is due but goes uncollected. It stands now at around $458 billion.

The problem is that the IRS must rely to a large degree on the unverified reports by self-employed workers on how much money they made and how many deductions they can claim.

Aside from the stray 1099 form, there are few third-party documents to confirm what a small business owner puts on his or her tax return regarding how well or not a business is doing for tax purposes.

The United States and Russia are not alone. Tax evasion is a global problem.

Poor tax collection contributed to Greece's debt woes. That in turn jolted European (and U.S.) economies and escalated the global financial slowdown.

Innovative ways to collect taxes: There are as many ways to collect missing tax money as there are countries facing tax gaps.

Greece considered enlisting tourists and students to act as tax spies when they bought from gray market vendors. Note the word considered. It never made it into practice.

India undertook a demonetization effort to reduce large stashes of illicit cash has led to markedly more tax compliance. After some initial success, the effort didn't work as well as tax officials on the subcontinent had hoped.

Now, Russia's Finance Ministry has implanted a pilot project to broaden its tax base using a new smart phone app for the country's self-employed workers.

Technology tax assist: As Kim explains in his NPR report (you can listen via the embedded story below), the app verifies participating Russian entrepreneurs, connects them to customers seeking their services and essentially moves the businesses from the gray market into the mainstream economy and onto the country's tax rolls.

To encourage use of the app, entrepreneurs who participate in the program will pay a tax rate of 4 percent tax instead of Russia's regular 13 percent tax rate.

Some of the targeted self-employed are skeptical, fearing the lower tax rate is a bait-and-switch technique since there's no guarantee of how long it will last.

And, say many of the Russians who are skirting their country's tax laws, the real barriers to business legitimacy and tax paying is the government's endless bureaucracy and constantly changing rules.

Sound familiar U.S. taxpayers?

I suspect the IRS and state officials, too, will be watching what happens with the Kremlin's latest effort to collect unpaid taxes from reticent taxpayers.

Tax collectors at all levels always are looking for more ways to modernize. Technological advancements that make it easier for them to get the tax money they're owed are at the top of the governments' upgrade lists.

And despite the United States' and Russia's many political and other (like idiomatic translation) differences, that tax collection goal is one that both countries share.

You also might find these items of interest:

• 4 tax tips for independent contractors
• Cross-border tax inspectors give tax cheats no place to hide
• The easiest way to cheat on your taxes? Run your own company

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