As far as Nina Olson knows, there’s no other government employee in the world quite like her.
Olson has been the National Taxpayer Advocate, an in-house IRS watchdog, for over a decade now. And while there are other agency ombudsmen, both in the U.S. and abroad, Olson says she has more tools at her disposal than anyone else in a similar position.
For one, Olson is the only IRS staffer who can make legislative recommendations to Congress without the approval of others. She sends two reports a year to Capitol Hill that higher-ups like the IRS commissioner and the Treasury secretary don’t get to review beforehand.
And through a power known as the Taxpayer Assistance Order, Olson can also direct the IRS to take a certain action or examine the case of someone being harmed by the administration of tax laws.
The agency doesn’t necessarily have to follow through on those directives, but Olson says it remains a potent device.
“You don’t want to abuse that power to give somebody a case to constrain that power,” Olson said in a more than hourlong interview with The Hill. “But on the other hand, if you don’t use that authority, why do you have it anyway?”
Olson said the taxpayer advocate — which gained that title during the 1990s after the ombudsman position was strengthened — has been given more freedom to criticize and prod than other agency watchdogs.
“Sometimes when you’ve had a strong internal advocate, and management changes, and one’s supported that position and the other finds it a nuisance — suddenly it’s buried down in the bureaucratic level,” Olson said.
With all that in mind, Olson says there is a natural tension between her office, tucked inside IRS headquarters, and the rest of the agency — even though Olson has often made the case for policies like tax reform that have broad support.
Terry Lemons, an IRS spokesman, suggested that it was natural for the IRS and Olson to have bouts of friction, adding that the agency had to take a broader view of tax collection than the taxpayer advocate.
“Our job is to ensure we run a balanced tax administration program during a time of limited resources,” Lemons said in a statement. “It’s not surprising that there can be differences of opinion with the advocate’s office, but we believe Ms. Olson has added a valuable voice to the discussion.”
Olson also faces something of a novel reporting structure, being chosen by the Treasury secretary — in her case, Larry Summers — but reporting directly to the IRS commissioner. And once in place, the advocate does not have a fixed term, and can be dismissed only by the Treasury secretary.
“You have to get used to the idea that you’re going to walk into a room, no one is going to want to see you there, they are not going to want you to open your mouth,” Olson said of life at the IRS. “And when you do open your mouth, they’re all going to will you to shut it as soon as possible. Because what you are going to be saying is, basically, pointing out that they didn’t think of something.”
But Olson, a lawyer who has represented wealthy clients in tax cases and started her own clinic for low-income taxpayers, walks a tightrope as well — advocating for all of the more than 300 million Americans who have diverse takes on the IRS and different expectations for how their taxes will be collected.
Still, Olson said the IRS was often slow to realize when its policies unnecessarily burdened taxpayers both rich and poor — be it in cases involving disclosure of offshore assets or the issuing of liens.
“When they get their mind on something, they just get hell-bent on something — and you could be talking to a tree and it might be more conversational,” Olson said.
Olson has also advocated strongly for issues also favored by the IRS brass in recent years, such as seeking to protect the agency from budget cuts and installing a program to register and monitor paid tax preparers.
In all, Olson’s advocacy efforts are buttressed by 74 local taxpayer advocate offices, with at least one in each state, and a nationwide staff of 2,100.
Staffers at those local offices meet on a regular basis with lawmakers, and Olson notes those get-togethers can have real-world policy implications.
Rep. Pete Stark (D-Calif.), for instance, a senior member of the tax-writing House Ways and Means Committee, began a push to change an IRS rule that critics said punished innocent spouses after he met with a taxpayer advocate representative.
Over the summer, Doug Shulman, the IRS commissioner, announced that the agency was scrapping the policy in question, which gave taxpayers who were unaware that their husband or wife was engaged in tax-cheating two years to file for protection — a time span critics found inadequate.
In a statement, Stark called Olson “capable and dogged” and said she was the driving force behind the IRS’s actions.
“Fixing the innocent-spouse rule has been one of Ms. Olson’s highest priorities,” Stark said. “She was relentless in bringing awareness to the issue, and she deserves all the credit.”
Olson has also stressed that, with Washington officials giving the IRS an increasing number of tax provisions to administer, the agency’s budget should not be cut — an outcome that Shulman has said would lead to the agency’s customer service taking a hit.
But with lawmakers looking to slash spending in many areas, measures in both the House and the Senate would cut hundreds of millions of dollars from the agency’s 2011 funding level of $12.1 billion.
Republicans have asserted that past freezes in IRS budgets have not led to less revenue from enforcement measures. But Olson, like top IRS officials, has declared that cutting the agency’s funding stream would impede collection efforts.
“It’s like a business cutting its accounts-receivable function,” Olson said.
The taxpayer advocate has also signaled that she believes lawmakers are concentrating too hard on fraudulent uses of refundable tax credits used by many low-income taxpayers, an issue raised by many Republicans.
Olson counters that revenue lost from unincorporated farms and businesses dwarfs the amount lost to fraud in the Earned Income Tax Credit. “There’s this myth that a dollar paid out improperly in a refundable credit is somehow more costly than a dollar in tax that we don’t collect in some other area,” she said.
Rep. Dave Camp (R-Mich.), the House Ways and Means chairman, and the taxpayer advocate both have made overhauling a tax code that was last reformed a quarter-century ago a priority.
“As the Ways and Means Committee pursues comprehensive tax reform, the taxpayer advocate has been helpful in shedding light on the immense amount of complexity, cost and confusion associated with today’s broken tax system,” said Michelle Dimarob, a Ways and Means spokeswoman. “As we work to create a climate that promotes job creation, her insight will continue to be both necessary and instructive.”
Olson acknowledges that, as an advocate for all taxpayers, she has to tread somewhat carefully when it comes to a tax revamp, given that at least some Americans profit from the code’s current make–up.
“But even the taxpayers that are benefiting from a particular provision, they are being harmed by the complexity and the pretzels you have to tie yourself into,” Olson said.
Besides, the advocate says, weighing those sorts of decisions comes with the territory.
“You have to be a certain personality to do tax controversy versus tax planning,” Olson said.