Former IRS commissioners see challenges for agency

A group of former Internal Revenue Service leaders discussed the state of the IRS during a panel Tuesday at the AICPA National Tax Conference in Washington, D.C., after a wave of departures and layoffs.

According to IRS records, approximately 25,386 employees have separated, taken a voluntary buyout offer under one of the deferred resignation programs, or used some other incentive to leave. That amounts to over 25% of the workforce that was there at the beginning of the year, although the IRS has rehired some much needed workers. 

"After 20 years in the private sector, the IRS workforce is as good a group of people as I've ever had the pleasure and the honor of working with, and I'm confident even with 25,000 fewer employees, and even with all the pressure, they are dedicated," said former IRS commissioner John Koskinen, who led the agency from 2013 to 2017. "They're going to work as hard as they can." 

However, he acknowledged the loss of experienced employees will be difficult. "We lost 25,000 employees while I was there, but that was over four years, and we could adjust on the run," said Koskinen. "This is 25,000 employees in a few months. This is a tax season with complications from the new tax laws, and now you've got the largest shutdown in history in the middle of the preparation for that filing season. My sense is, I don't know how the leaders there who are left deal with this, but it seems to me, the morale issues and the pressure on the IRS employees is something that nobody's ever experienced before, and it's going to be a challenge."

He predicted there will be problems with taxpayer service next filing season. "I think the level of taxpayer service is going to be very difficult to deal with," said Koskinen. "I keep waiting for the administration just to blame the employees. It won't be the fault of the employees, I can guarantee you. The one thing I'm confident of is they're going to do the best they can for you, the best they can for taxpayers, and the best they can for the government."

Tech-enabling the IRS

Former IRS commissioner Danny Werfel, who served from 2023 until this past January, bemoaned the recent announcement of the closure of the Direct File free tax-filing program, which launched last year during his tenure, but he believes it brought important benefits to the IRS. 

"The initiative that I'll highlight, that I think is the most symbolic and will potentially have the most lasting impact, is actually Direct File, even though Direct File was recently terminated," said Werfel. "It's ironic that I would say that, but its legacy is really important. We set out to build new tools for taxpayers so that they would have a modern, digital, virtual experience with the IRS. Our vision in that plan was that all taxpayers could do all interactions with the IRS, digitally or virtually, if they choose."

He believes Direct File brought more attention to the IRS's longrunning Free File program and the question of the affordability of tax return processing. "It really symbolizes modernization," said Werfel. "It gives a roadmap for how to modernize quickly and with agility in the IRS. And even if that solution is now dormant, it created a lot of attention on Free File, and how do we improve it?"

Doug O'Donnell, who briefly served as acting commissioner at the IRS after Werfel's departure earlier this year and was previously acting commissioner from November 2022 to March 2023 during the transition between former IRS Commissioner Chuck Rettig and Werfel, recently joined KPMG. He sees benefits from the technology improvements, but believes the IRS still needs to have people there to make the fixes.  

"Even if there's a digital or an electronic front end, it all has to be done by a human being, and that takes time and effort and humans sitting at keyboards making these changes," said O'Donnell. "Until that is improved on the adjustment side, that work is always going to be a lag and really slow down the ability to get accounts changed. I'd say all employees want to do much better. They know they can, but need support. And one thing about this coming filing season, I do think it's going to be important for the ecosystem to be working with each other, being open . The Service, I think, is having a difficult time communicating out. I don't know how we're going to be able to pull them into the conversations, but somehow there's going to need to be a coming together of what is going on. How are things working? How can we help? And just being aware of where there's going to be bottlenecks, where things are going to be complicated moving forward."

Melanie Lauridsen, vice president of tax policy and advocacy at the AICPA, who moderated the panel discussion, asked about the Trump administration's push for digital transformation at the IRS, which is now led by Treasury Secretary Scott Bessent as acting commissioner and Social Security Administration commissioner Frank Bisignano in the new role of IRS CEO.

"I've seen public statements from the current IRS and the current Treasury leadership, I think they're on board with this idea of a tech-enabled IRS, a more digital IRS, a more AI-enabled IRS," said Werfel. "What I really urge the current administration to do is to produce a plan that lays out the critical path for how you're going to digitize the IRS experience for this new and emerging and current generation of taxpayers."

He noted that during his tenure, the IRS expanded the Document Upload Tool and the functionality in the individual taxpayer account and business taxpayer account, as well as added more chatbot technology to the call center.

"What I'm really hoping to see from the administration is OK, here's the next set of spans across the bridge that we're building to modernize the IRS through the lens of, how are we going to make the taxpayer journey more successful?" said Werfel. "We were obsessed with this idea of the taxpayer journey, and I really want to see the new administration embrace this idea of, what is that taxpayer experience, how do we reduce their stress, and how do we meet the current generation of taxpayers where they are? And you do that by creating a much more tech-enabled IRS."

Next IRS commissioner

When asked for advice for the next IRS commissioner, Koskinen alluded to the frequent turnover of commissioners and acting commissioners at the IRS this year. 

"Well, you can see how much fun it is to be the IRS commissioner these days," he said. "It's not totally surprising to me that there's not a long list of people applying for the job. I think my advice to the next commissioner would be my advice, really, to anybody taking on a large organization, as you heard from all of our discussion here, a lot of the progress has been made has been as a result of internal discussion of a group of people working together, and also external discussions, listening to taxpayers, listening to experts like yourselves, building systems that are responsive to what people have."

"The best job I ever had was being the IRS commissioner," Koskinen added. "The most challenging job I ever had was being the IRS commissioner, and I think anybody who's interested in running things ought to be interested in running the IRS."

Taxpayer Advocate Service returns after shutdown

Lauridsen separately interviewed National Taxpayer Advocate Erin Collins at the conference, where she gave her annual update on the work of the Taxpayer Advocate Service that she leads at the IRS. Collins discussed the impact of the recent government shutdown on the IRS. The majority of people at TAS were on furlough during the shutdown, Collins noted, but a number of them were still working.

"They are seemingly very happy to be back and to have a job and to be working for the taxpayer," she said. "I've had a lot of happy people coming back, but it has been a challenge."

TAS employees have been working with their colleagues in the IRS collection functions to give taxpayers more time to pay their tax debts.

"Any case that we have an outstanding request on a levy or lien, we went back to the IRS, and so if they had let's say a 60-day hold on it, they added another 60 days or additional time so that during the lapse, something wouldn't trigger that would harm taxpayers, so we were able to do that on behalf of all of our taxpayers," said Collins. 

She also worked with Ken Corbin, who is the chief of taxpayer services at the IRS, to help deal with cases that accumulated during the shutdown. 

"A lot of the accounts management issues that taxpayers come to us with went also to Mr. Corbin's shop, so he had a lot of his people working because they were protecting government property on various things," said Collins. "What we talked about was, even though I couldn't bring some of my people back, maybe he could prioritize working on our open cases. So when our people came back, the goal was we would have more closed cases to bring the volume down, because our volume is still going on. Historically, we get about 5,000 new cases a week, and so if you're shut for five or six weeks — you guys do the math — that increases our caseload. So if we could close some of those cases which we've been working on without our employees' help, that's going to help us a little bit on the back end. So any of you who are coming in or have cases, please be patient. Our guys are doing the best they can, but they do have, unfortunately, a backlog now coming in because of the challenges."

The IRS is continuing to work on a longstanding backlog of amended returns as well. Collins eventually hopes to provide taxpayers with a way to get a quick status update on their cases, similar to the What's My Refund tool on IRS.gov. 

"A lot of times the IRS is open to what we're recommending," said Collins. "They agree to what we're recommending, but because of the challenges, either because of financial resources or technology issues or something else, it takes a while."