Many taxpayers and virtually all tax professionals are familiar with the unacceptably low levels of service that the IRS currently provides. For example, in the 2015 filing season, the IRS answered just 37% of taxpayer phone calls. And while the IRS answered 45% of tax professionals’ calls, the average wait time was 45 minutes.
The IRS is struggling with how to become more efficient and serve taxpayers with lower levels of staffing and an outdated, manual service model. The IRS’s big challenge is how to modernize in order to do more with less. At the same time, the IRS is grappling with sweeping changes in how taxpayers and tax professionals want to be served.
As the IRS Electronic Tax Administration Advisory Committee (ETAAC) concluded in its 2015 Annual Report to Congress, data consistently show that taxpayers and tax professionals prefer digital customer service, much like online customer service provided by banks and other financial institutions. Yet the IRS still operates primarily by paper and phone—a costly and antiquated model that erodes service to taxpayers and tax professionals.
The IRS must adopt a modern approach to providing quality service and also enforce compliance with fewer resources. It must also combat tax identity theft and widespread refund fraud. Let’s take a closer look at how ETAAC’s recommendations can help—and the critical role that CPAs play in them.
Strategic investment in digital development is the long-term solution to falling levels of service.
ETAAC wants the IRS to accelerate a digital-first strategy that would direct most taxpayers and their professionals to go online first to get service—before calling, writing, or walking into an IRS office. Because consumers increasingly prefer online service, a digital-first option would allow the IRS to serve the majority of taxpayers in the way they want to be served—and cut costs in the long term. For example, last year, the IRS reported that each live-assistance call costs $42.33, and handling each piece of inbound mail costs $53.64. In contrast, each digital transaction costs the IRS just 22 cents—half the cost of a postage stamp.
Digital tools aren’t the answer for all taxpayers and tax professionals. National Taxpayer Advocate Nina Olson, for instance, has argued that pushing everyone online will hurt service levels for some taxpayers, such as those who aren’t tech savvy or can’t afford the necessary technology. But providing more digital service options should help reduce the strain on phone lines—making it easier for those taxpayers to reach the IRS.
While the IRS has committed to developing more digital tools, ETAAC wants the agency to accelerate efforts to develop a secure, comprehensive, and customized online account available on IRS.gov. A comprehensive online account similar to those provided by private financial institutions would allow taxpayers and their CPAs to obtain tax and account information, manage tax accounts, and interact with the IRS on related issues.
Tax professionals are critical to the digital-first future.
Because tax professionals prepare and file the majority of taxpayer returns every year, ETAAC has consistently recommended that the IRS develop a comprehensive online account for tax professionals at the same time as the taxpayer online account. Secure account access would allow tax professionals to:
- Meet their clients’ expectations and bolster taxpayer voluntary compliance;
- Streamline and reduce expensive phone and paper interactions with the IRS;
- Leverage their trusted client relationships to encourage a digital-first approach to interacting with the IRS.
However, before the IRS can truly move forward on a digital-first service strategy, it must address two major obstacles to modernizing.
The IRS needs to shift its focus from compliance to service.
One obstacle starts with the way the IRS sees itself. As Olson discussed in the National Taxpayer Advocate’s FY 2016 Objectives Report to Congress, the IRS needs to move from viewing itself as a compliance-first organization, focused on the small fraction of taxpayers who don’t follow the rules, to a taxpayer-service organization that is focused on the needs of the majority of taxpayers who want to be compliant. Olson correctly questions the wisdom of the IRS spending more on compliance enforcement than it spends on taxpayer service.
Ninety-eight percent of taxes paid in the United States are paid voluntarily. Because voluntary compliance feeds the Treasury, the IRS needs to shift budget resources to primarily serve those taxpayers. If the IRS doesn’t, those compliant taxpayers will become increasingly less so, as their efforts to reach the IRS for basic service are frustrated.
The IRS must push forward to better secure taxpayer information.
Tax identity theft and refund fraud continue to erode the integrity of the tax system. They create trepidation and undermine the confidence of taxpayers, Congress, and even the IRS in advancing a digital-first taxpayer service strategy.
And this concern has merit. The IRS is combating unprecedented levels of tax identity theft. In the 2015 filing season, the IRS stopped more than 3.8 million suspicious tax returns. This year also saw the compromise of more than 300,000 taxpayers’ information on the IRS Get Transcript system.
That unfortunate event is even stronger evidence that the IRS needs to modernize and accelerate its digital strategies—including bolstering authentication—which is already an important part of the IRS’s digital road map in development. Ultimately, online accounts, with better authentication techniques, could be critical to combating tax identity theft by allowing taxpayers to prove their identity for filing.
Tax professionals should get involved.
The IRS must find sustainable solutions to the big challenges it faces. As tax practitioners, we should provide our suggestions to improve taxpayer service.
Read this year’s ETAAC report and provide your feedback to the IRS and ETAAC at firstname.lastname@example.org. And continue to look to your professional associations, such as the AICPA, for advocacy news and opportunities. Doing so will help the IRS accelerate the modernization of taxpayer service through digital tools and will ultimately give you tools to serve your clients more effectively.
Jim Buttonow, CPA/CITP, directs tax practice and procedure product development for H&R Block, and serves as chairperson of the IRS Electronic Tax Administration Advisory Committee (ETAAC).