IRS Urged to Use Internet More for Payment Arrangements

The Internal Revenue Service needs to do more to expand use of the Internet by taxpayers to arrange Online Payment Agreements with the agency, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, noted that while increasing numbers of taxpayers are using the Internet to arrange payment agreements with the IRS, the Online Payment Agreement program has met only 10 percent of its goal of increasing the number of online payment agreements. As a result, the IRS is not meeting its planned goals for increasing revenue or reducing taxpayer burden and costs.

The IRS implemented the OPA web application in 2006 to provide individual taxpayers or their authorized tax representatives a simple and convenient way to establish payment agreements while eliminating the need for paper forms, toll-free calls and personal interaction with the IRS.

For its audit, TIGTA wanted to determine the effectiveness of the OPA program in achieving its goals of reducing taxpayer burden and increasing revenue through a shift from paper to online payment agreements.

“The Online Payment Agreement program is providing benefits both to taxpayers and the Internal Revenue Service,” said TIGTA Inspector General J. Russell George in a statement. “However, more needs to be done to promote taxpayer use of the program to achieve the full extent of the intended benefits. Given the current economic environment and focus on efficient federal government operations, the program’s increased revenue and reduced costs become even more important.”

Taxpayer use of the OPA program increased from 18,291 taxpayers in fiscal year 2007 to 95,979 in fiscal year 2012, marking a 425 percent increase. The default rate (from missed payments) of streamlined installment agreements processed through the OPA program is 44 percent lower than the overall default rate, which means that more taxpayers continued to make their regular payments, leading to increased revenue via the OPA program.

But despite increasing usage, the OPA program is not meeting the IRS’s expectations, TIGTA found. The IRS projected that the OPA program would process 3.2 million streamlined installment agreements for fiscal years 2007 through 2012. However, only 308,246 taxpayers (or 10 percent of the goal) used the OPA program to establish their installment agreements during this period.

TIGTA recommended that the IRS begin measuring OPA performance results against program goals, improve its promotional efforts, and evaluate the OPA and installment agreement program to identify any barriers and the reasons why taxpayers used other methods to set up payment arrangements.

IRS officials agreed with TIGTA’s recommendations and said they have begun taking steps to implement them.

In response to the report, Faris Fink, commissioner of the IRS’s Small Business/Self-Employed Division, also pointed out that much of TIGTA’s assessment relied on an out-of-date set of projections that were developed in 2005. He will be working with the SB/SE Division’s research function to re-assess the program goals based on the current capabilities.

“We agree that continuing our efforts to expand use of the OPA program will benefit taxpayers and the IRS,” Fink added. “Prior to TIGTA’s audit, we recognized the importance of promoting the OPA program and, in 2012, increased our marketing efforts.”

He noted that over the past year, the IRS has used a variety of ways to promote Online Payment Agreements, including social media like Twitter and Tumblr, a YouTube video, and articles in IRS newsletters. Those efforts resulted in coverage in mainstream media outlets such as the Washington Post, MarketWatch, the Kansas City Star, and even the Today Show.