National Taxpayer Advocate Nina Olsen has issued her annual report to Congress, in which she is required to describe for policy makers the taxpayers’ major challenges for that particular fiscal year. Olsen adds her voice to the growing chorus of dismayed observers who express concern about the newly increased reporting requirements contained in the Patient Protection and Affordable Care Act. She also notes that the IRS needs to have its mission updated to include not only tax collection duties but also the administration of social programs that it is increasingly called upon to do, and that the agency should be funded accordingly. And she argues against some of the ways in which the IRS institutes collections actions against taxpayers, methods that unduly harm taxpayers, make it more difficult for them to resolve their tax issues, and do not appear to be particularly effective.

From the microbusiness perspective, those new reporting requirements are pretty daunting. I’ve heard them described before but never yet with the sort of detail Ms. Olsen uses to enumerate the many undesirable consequences in store. Every business filer will be required to file information returns, mostly IRS form 1099-MISC, for every vendor that provides them with more than $600 in goods or services. They will even have to file those forms for corporations. The National Taxpayer Advocates anticipates a mind-boggling regulatory burden for small businesses and, interestingly, an even more mind-boggling administrative burden for an underfunded IRS that will have to process all that paperwork. In addition, there remains serious doubt in many quarters about whether these new rules will increase voluntary tax compliance. More likely, the reverse will prove true as the rules get more complicated, more demanding and harder to decipher.