IRS Future State Plan
For the last two years, the IRS has been developing a “Future State” plan that envisions how the agency will operate in five years and beyond. A central component of the plan is the development of online taxpayer accounts. In the National Taxpayer Advocate’s 2015 Annual Report to Congress, Olson praised aspects of the plan but expressed concern that (i) the IRS’s intent in developing online accounts is largely to save money in light of recent budget cuts by reducing telephone and face-to-face assistance and (ii) many taxpayers will not conduct business with the IRS through online accounts because they lack Internet access or skills, cannot complete the authentication process required to set up an account, do not trust the security of the IRS system, or would prefer to speak with an IRS employee. As a result, she expressed concern that critical taxpayer needs may go unmet under the Future State plan.
Review of 2016 Filing Season
The report says the IRS delivered a generally successful filing season in 2016. Of particular note, the IRS substantially improved taxpayer service on its toll-free telephone lines as compared with 2015. In every year since FY 2008, the IRS has received more than 100 million telephone calls. During the 2015 filing season, IRS telephone service reached a low; the IRS answered only 37 percent of taxpayer calls routed to customer service representatives overall, and the wait time for taxpayers who got through averaged 23 minutes. During the 2016 filing season, the IRS answered 73 percent of its calls, and the wait time dropped to 11 minutes. Thus, the IRS nearly doubled the percentage of calls it answered and reduced wait times by more than half.
The IRS maintains approximately 375 TACs around the country that collectively serve more than five million taxpayers annually. Historically, the TACs were known as “walk-in sites,” but the IRS plans to eliminate virtually all walk-in service and require that taxpayers schedule advance appointments in all TAC locations by the end of the year.
Both on its phone lines and in its TACs, the IRS continued recent restrictions on answering tax-law questions. During the filing season, the IRS answered only “basic” questions, deeming more complex questions “out of scope.” After the filing season, the IRS is not answering any tax-law questions at all, even though many taxpayers obtain legally authorized extensions of time to file. Last year, nearly 15 million returns were submitted after the filing season.
Taxpayer Burden Caused by Identity Theft Filters
The IRS screens all tax returns claiming refunds in an attempt to identify returns submitted by identity thieves. When the IRS identifies a return as suspicious, it generally sends the submitter a letter saying the submitter must verify his or her identity before it will release the claimed refund. The false positive rate of this program, known as the Taxpayer Protection Program (TPP), was 36.6 percent in 2015. TPP filters stopped nearly 2.1 million returns overall, so with the 36.6 false positive rate, the IRS stopped more than 760,000 returns filed by legitimate taxpayers. The National Taxpayer Advocate has expressed concern about the impact of this high false-positive rate on legitimate taxpayers. Many taxpayers, particularly the low income, depend on timely receipt of their refunds, so the impact of refund delays can range from mere inconvenience to extreme financial hardship. Accordingly, the National Taxpayer Advocate has recommended that the IRS refine its TPP filters to reduce the false-positive rate.
IRS Priority Issues for 2017
Private Debt Collection Implementation:
In late 2015, Congress passed legislation that generally requires the IRS to assign delinquent tax accounts it is not actively seeking to collect to private debt collection agencies. TAS will be actively involved in the implementation of the program to ensure the program rules follow the law without infringing on taxpayer rights; to seek a definition of the statutory term “potentially collectible inventory” that excludes the accounts of taxpayers who are experiencing economic hardship; and to urge the IRS to require the PCAs to disclose the portions of their operational plans, calling scripts, and training materials that affect taxpayers so the National Taxpayer Advocate, Congress and the public can evaluate whether their collection tactics are reasonable.
IRS Levies on Retirement Accounts:
Congress has enacted numerous laws that promote retirement savings. These laws further the public policy of ensuring individuals have sufficient assets on which to live after they retire. The IRS is permitted to levy on retirement assets but does not do so as a matter of policy unless it determines a taxpayer has acted flagrantly in seeking to evade the collection of the tax. At present, the IRS does not have a clear definition of the word “flagrant,” but rather lists examples of flagrant conduct. TAS is working with the IRS to develop a definition of “flagrant” conduct that allows levies to be made in extreme cases but continues to shield retirement assets in cases where a taxpayer is simply unable to pay.
Online Taxpayer Accounts:
The National Taxpayer Advocate has long advocated that the IRS develop online taxpayer accounts as a valuable addition to the IRS’s taxpayer service offerings. As discussed in the context of the Future State development, however, the Advocate believes taxpayers should still have the option to work with IRS personnel by phone or in person. In addition, the IRS envisions granting account access to tax return preparers, most of whom are not currently licensed. During the coming year, TAS plans to work with the IRS to ensure it maintains adequate security protocols to protect taxpayer information, restricts taxpayer account access to credentialed preparers, and continues to provide telephone and face-to-face service to taxpayers who need or prefer to speak with an IRS employee.