IRS Strategic Plan Focuses on Compliance and Service

The IRS released its strategic plan on Tuesday for 2009–2013. Not surprisingly, the plan says that the Service will focus on improved taxpayer service as well as increased compliance. The plan also discusses challenges that the IRS anticipates facing over the next few years and how it hopes to meet those challenges.

Among the challenges the IRS identifies are:

• Dealing with the increasing complexity of tax administration;
• Replacing the aging IRS workforce;
• Handling electronic and online security risks (the report says the Service has already repelled more than 35 million unauthorized access attempts this year);
• Keeping up with accelerating globalization (the IRS reports that U.S. corporations tripled their foreign profits between 1994 and 2004, and there are currently 63,000 multinational corporations); and
• Adapting to changing business models (pass-through entities continue to grow and currently make up 64% of all large and midsize businesses in the tax system).

The plan sets out a number of goals and objectives for addressing these challenges, but it does not provide specifics on how the goals and objectives will be met. For example, one challenge over the next few years will be replacing current IRS employees as they retire. The report says more than half of the IRS workforce is over age 50. Moreover, 39% of IRS executives and 20% of IRS managers are currently eligible to retire, and by next year 52% of IRS senior executives will be eligible to retire.

To address the challenge of an aging IRS workforce, the plan gives the objective: “Make the IRS the best place to work in government.” Four broad strategies are outlined to achieve this objective:

1. Attract and retain outstanding, diverse talent throughout the Service;
2. Increase employee engagement;
3. Identify, develop, invest in and reward top-quality managers;
4. Reinforce a culture of diversity, teamwork, equal opportunity and collaborative leadership.

Although the plan does not contain specifics on how the IRS will implement these strategies, it does delineate 12 performance measures that will help the IRS determine if it has met its strategic plan goals:

1. Voluntary compliance rate. This will essentially measure the “tax gap”—measuring the amount of tax that is paid voluntarily and timely as a percentage of the corresponding estimate of true tax liability.

2. American Customer Satisfaction Index (ACSI). The IRS will monitor the National Quality Research Center’s American Customer Satisfaction Index score related to the electronic and paper filing processes for the individual income tax.

3. e-File rate. This will measure the percentage of all major tax returns filed electronically by individuals, businesses and tax-exempt entities.

4. Taxpayer satisfaction with IRS services. The IRS will administer surveys to assess whether taxpayer issues are resolved in a reasonable amount of time.

5. Enforcement contacts. The Service will track all enforcement contacts to measure the coverage rate.

6. Nonrevenue enforcement activity. The IRS will also track enforcement activities that promote compliance but do not primarily focus on increasing tax revenue.

7. Nonfilers. The Service will analyze and estimate how many individuals who have an obligation to file a tax return do not file.

8. Taxpayer perception of fairness of IRS enforcement. The IRS will survey taxpayers who were subject to an enforcement action to assess whether they were treated fairly.

9. Employee engagement. The Service will use an annual employee survey to measure employee satisfaction and engagement.

10. Recruitment effectiveness. The IRS will measure the average time it takes to fill a job from an applicant’s point of view.

11. New hire retention rate. The Service will measure its success at retaining new hires.

12. Timely data. The IRS will measure the timeliness of data delivery to IRS service and enforcement personnel.