By Patrick Temple-West
WASHINGTON (Reuters) - The U.S. Internal Revenue Service should take steps to restore public trust in its work, including adopting a taxpayer bill of rights that clearly states individuals' rights to fair treatment from the tax agency, an IRS watchdog said on Thursday.
With its reputation for political neutrality hurt by a 2013 uproar over its treatment of conservative political groups, the IRS needs to reassure Americans of their tax rights, said the Taxpayer Advocate Service, an oversight arm of the agency.
In an annual report to Congress released on Thursday, National Taxpayer Advocate Nina Olson said she is working with IRS officials to publish a bill of rights this year. Olson is the head of the Taxpayer Advocate Service.
Her office's report said the document should include 10 guarantees for taxpayers, including the right to appeal a tax bill and to pay the correct amount of tax.
"Public trust in (IRS) fairness and impartiality was called into question because of reports the IRS subjected certain applicants for tax-exempt status to greater review based on political-sounding names," the report said.
The IRS came under fire last year after an agency official publicly apologized for what she called improper scrutiny of applications for tax-exempt status from political groups. The IRS targeted groups with "Tea Party" in their names for extra review.
If taxpayers lose faith in the IRS's credibility, "they will mistrust the tax system and be less likely to comply with law voluntarily," the report said.
The report also called on Congress to stabilize IRS funding. The IRS has taken on major new responsibilities, such as helping to implement President Barack Obama's healthcare law, but its budget has been cut for several years in a row.
(Editing by Kevin Drawbaugh and Amanda Kwan)