Taxpayer Advocate concerned about implementing new tax law
National Taxpayer Advocate Nina Olson released her mid-year report to Congress Wednesday, spotlighting her top areas of concern, particularly how the new tax overhaul will be implemented.
She noted the most significant challenge the IRS faces in the year ahead is putting in place the Tax Cuts and Jobs Act of 2017, which requires programming an estimated 140 systems, writing or revising some 450 forms and publications and issuing guidance on dozens of provisions in the new tax law. Olson is confident the IRS is up to the task. “Make no mistake about it,” she wrote. “I have no doubt the IRS will deliver what it has been asked to do.”
But she repeated her longstanding concern that IRS funding cuts have undermined its ability to provide high-quality taxpayer service and to modernize its aging computer infrastructure. She noted that IRS funding has been reduced by 20 percent since fiscal year 2010 on an inflation-adjusted basis.
“Because of these reductions, the IRS doesn’t have enough employees to provide basic taxpayer service,” said the report. “The compliance and enforcement side of the house has been cut by even more. So in addition to answering the fewest number of taxpayer calls in recent memory, the IRS also has the lowest individual audit rate in memory (0.6 percent) and its collection actions are way down.”
Olson also highlighted the IRS’s customer service problems. Her report said the IRS uses narrow performance measures that suggest the agency is performing well but don’t reflect the taxpayer experience. For example, the IRS reports it achieved a “level of service” on its toll-free phone help lines of 80 percent during the 2018 filing season, which is generally interpreted to mean IRS telephone assistors responded to 80 percent of taxpayer calls. In fact, Olson’s report pointed out IRS telephone assistors answered only 29 percent of the calls the IRS received. Similarly, the IRS reports it achieved a customer satisfaction level of 90 percent on its toll-free lines during FY 2017. The report pointed out the IRS only polled the subset of taxpayers whose calls were actually answered by telephone assistors and completed.
Olson’s report also pointed to shortcomings identified in the American Customer Satisfaction Index and the Forrester U.S. Federal Customer Experience Index for the Treasury Department and IRS.
“The significant cuts to the IRS’s budget combined with the need to implement several significant new laws in recent years has stretched the IRS very thin,” Olson wrote. “But the ACSI and Forrester reports show that taxpayers are not being well served. The aptly named Taxpayer First Act, which the House passed on a unanimous 414-0 vote in April, would direct the IRS to develop a comprehensive customer service strategy within one year. That’s an important step in the right direction. I have also recommended that Congress provide the IRS with more funding along with more oversight – and I will encourage the next Commissioner to make customer service improvements a top priority.”
Olson’s report also included several recommendations the National Taxpayer Advocate has made to improve customer service, including the following:
• Adopt robust performance measures that more accurately reflect the taxpayer experience, such as “First Contact Resolution,” a widely used measure in the private sector.
• Provide taxpayers with modernized “omnichannel” services so taxpayers can get assistance online, by phone or in-person.
• Speed up development of an integrated case management system. The IRS currently maintains at least 60 separate case management systems that contain different items of taxpayer data and cannot be centrally accessed.
• Use “big data” to help taxpayers and bolster enforcement. The IRS often uses technology to help identify fraud and noncompliance, but it should also employ such technology more frequently to lessen harm to taxpayers.
The report spells out 12 priority issues the Taxpayer Advocate Service intends to focus on during the upcoming fiscal year. The top five include implementation of the Tax Cuts and Jobs Act, the effectiveness of IRS service channels in meeting taxpayer needs, development of an integrated case management system, the impact of high false-positive rates on legitimate taxpayers and protection of taxpayers who face financial hardship from the IRS and private debt collection activities.
Olson made 100 administrative recommendations in her 2017 year-end report, and the new report notes IRS has implemented or agreed to implement 35 of the recommendations, or 35 percent. The agreed implementation rate is slightly lower than last year’s. Out of 93 administrative recommendations proposed in her 2016 year-end report, the IRS implemented or agreed to implement 35 recommendations, or 38 percent.
“Both people who work in the field of tax administration and taxpayers generally can benefit greatly from reading the agency responses to our report,” said Olson. “Tax administration is a complex field with many trade-offs required. Reading both my office’s critique and the IRS’s responses in combination will provide readers with a broader perspective on key issues, the IRS’s rationale for its policies and procedures, and alternative options TAS recommends.”
In conjunction with the Tax Cuts and Jobs Act, the Taxpayer Advocate Service has opened a new website, Tax Reform Changes, which lists key tax return items under current law (2017), shows which ones have been affected by the new law, and shows how the changes will be reflected on tax year 2018 returns filed in 2019. Taxpayers can navigate the site by checking out key tax return topics or seeing them illustrated on a 2017 Form 1040. The line-by-line explanations enable taxpayers to view how the new law could change their tax filings and to consider how to plan for these changes. The website will incorporate updated information as it becomes available. Taxpayers and professionals can sign up to receive email notifications when updates occur. If taxpayers find the new tax law will impact his or her tax liability, they should make withholding adjustments by filing a new Form W-4, Employee’s Withholding Allowance Certificate, with employers.