IRS RESPONSE TO RECOMMENDATION: The NTA’s recommendation complements the agency’s ongoing effort to fill information gaps, refine measurements over time and maintain focus on encouraging taxpayer trust and confidence in the IRS, but to assume the agency’s culture is exclusively “enforcement-oriented” completely disregards the agency’s significant commitment of time and resources to taxpayer service. In fact, service and compliance activities are inextricably linked, and the IRS is oriented toward helping all taxpayers come into full compliance with their federal tax obligations. As a result, the agency’s focus on professionalism, integrity and courteous interactions permeates every aspect of IRS operations.

The IRS is required by law to report its performance levels and to evaluate all employees, including executives, at least annually on their individual performance. Individual commitments must align with the agency’s strategic goals to ensure a servicewide focus on common goals. Throughout the year, comprehensive measures are tracked and reported on all aspects of tax administration, including taxpayer service, compliance, and support operations. How the IRS performs in meeting taxpayer needs, as well as increasing voluntary compliance over time, is all freely available in IRS publications made available throughout the year.

The agency’s performance management system was established initially by law (Public Law 105-206) and regulation (26 CFR Part 801) nearly 20 years ago. At that time, the IRS Restructuring and Reform Act of 1998 (RRA ’98) marked a major turning point for the agency as Congress mandated the IRS institute more service-oriented measures. As part of that effort, the IRS transformed its approach and measurements entirely.

The reforms that began with RRA ’98 set the stage for year-by-year improvements. Today the IRS maintains a robust set of measures to manage and continually evaluate the performance of programs at many levels of the organization. The IRS, like all federal agencies, must identify performance goals, report progress against targets, conduct data-driven reviews.  The IRS must also regularly assess 1) customer satisfaction 2) employee satisfaction and 3) business results for all its various programs. To satisfy various legal and oversight requirements and to inform the public of how its federal tax agency is performing, several key measures are published throughout the year. For example:

• The IRS Data Book provides information on the scope and composition of the agency’s taxpayer assistance programs, including the telephone helpline, the IRS website, online tools, local taxpayer assistance centers, volunteer income tax assistance, and the workloads of the IRS Taxpayer Advocate Service and IRS Office of Appeals. The usability of this publication has improved dramatically in recent years with the addition of charts and graphs that more clearly communicate key measures to the average reader.
• The Taxpayer Assistance Blueprint is a multi-year report published since Congress mandated in 2005 that the IRS, the IRS Oversight Board, and the NTA collaboratively develop a five-year plan for taxpayer service. Subsequent updates to this report summarize taxpayer service levels, challenges to improving service, and survey research on taxpayer needs, preferences, and behavior.  This report is submitted to the U.S. Congress and published on our website, IRS.gov.
• The IRS Management Discussion and Analysis report is an annual publication that provides a wide range of information, including measures on refund processing, electronic filing, internet usage and levels of taxpayer service. This report is made available on the Government Accountability Office (GAO) website as part of its annual financial audit of the IRS.

Notably, tracking and reporting the right measures are far more important that the sheer volume of measures, so we choose carefully and adjust periodically. For all measures, specific documentation is required. The measure must have an understandable title, a full definition of its composition, and a justification for its inclusion or elimination. Over time, measures are adjusted to reflect the reality of the operating environment and to maintain alignment with the agency’s strategic goals and objectives.

For example, the IRS continues to transform and adjust key measures around taxpayer service. Popular self-service applications like “Where’s My Refund?” have enabled taxpayers to exchange information online with the IRS, thereby increasing the likelihood that IRS employees are more freely available to help others. As the self-assistance rate increases for simple tasks like checking the status of your tax refund, finding a tax form or making a payment, the telephone and in-person services IRS provides are more likely available for others who cannot or do not prefer to go online.

In recognition of changing taxpayer needs and preferences, the IRS began reporting the “taxpayer self-assistance rate” in fiscal year (FY) 2013 to illustrate the percentage of taxpayer assistance requests resolved using self-assisted automated services. By adding this new measure, the IRS can track its performance in adapting to the changing dynamic of online services and reinforce the strategic goal of enabling taxpayers to meet their tax obligations using the type of services, tools and support they prefer.

As required by law, the strategic goals of the agency form the basis of how performance is assessed for all employees, including executives. For example, executives are subject to multiple performance review boards ensuring appropriate and consistent application of Office of Personnel Management (OPM) policies and regulations that govern performance. The review boards are responsible for objectively ensuring individual performance evaluations and ratings align with operational performance and that any awards or annual increase in pay is strictly based on performance. Furthermore, executive performance plans require each person to set “specific, relevant, and measurable employee performance expectations (goals) that align with organizational goals.” To ensure IRS is focused on providing excellent customer service to taxpayers, all IRS executives’ performance plans must have a commitment to the “fair and equitable treatment of taxpayers,” requiring that consistent with the incumbent’s official responsibilities, adherence to the commitment of administering the tax laws fairly and equitably, protecting taxpayers’ rights, and treating them ethically with honesty, integrity, and respect.

More generally, key measures and other information are published regularly to illustrate how the IRS is meeting taxpayer needs and preferences, as well as how the IRS performs in fulfilling its many other duties as the nation’s federal tax administrator. The IRS relies on performance measures at all levels of the organization, and those measures are adjusted over time as the environment changes to better reflect the agency’s mission and goals.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate appreciates the IRS’s description of key performance measures it currently uses and publishes. We do not dispute the number or breadth of these existing measures. Moreover, we appreciate the IRS’s statement that it undertakes ongoing efforts “to fill information gaps, refine measures over time and maintain focus on encouraging taxpayer trust and confidence in the IRS.” With respect to taxpayer services, however, we believe the information gaps are significant. They include inadequate measures to gauge the quantity and quality of outreach and education and inadequate measures to identify how many taxpayers ask tax-law questions that the IRS declines to answer as “out-of-scope.” If the IRS is serious about filling “information gaps,” it should be working with our office to improve on existing measures or devise new ones.
We also believe it is important to publish the IRS’s multitude of measures in a consolidated format. The IRS response explains that some measures are published in the IRS Data Book, other measures are published in the Taxpayer Assistance Blueprint updates, and yet others are published in the IRS Management Discussion and Analysis report. We note that still others are posted on irs.gov as fiscal year “Enforcement and Service Results,” and many more are reported — some just internally — in each business unit’s Business Performance Review quarterly reports. Many measures are reported in several of these reports, while others are not. The purpose of a consolidated report card is to enable Members of Congress, IRS oversight organizations, external stakeholders, and of course taxpayers to find all relevant measures in one place.

In addition, the National Taxpayer Advocate takes strong exception to the statement in the IRS response that we “assume the agency’s culture is exclusively ‘enforcement-oriented.’” Nowhere does the report say the IRS’s focus on enforcement is “exclusive,” and the statement is facially incorrect. Among other things, the report acknowledges that the IRS budget is funded largely from separate “Taxpayer Services” and “Enforcement” accounts, it discusses the number of taxpayers assisted by IRS customer service representatives on the phones and in the IRS’s Taxpayer Assistance Centers (TACs), and it notes that the IRS has hundreds of employees from the Stakeholder Partnerships, Education and Communication (SPEC) function and the Stakeholder Liaison (SL) function who are assigned to conduct outreach to individual taxpayers and business taxpayers, respectively.

Rather, our point is that the IRS, in relative terms, places more emphasis on enforcement activities than on taxpayer service activities, including outreach and education. We cite numerous factors in support of our view, including that 43 percent of the IRS budget is allocated for Enforcement (a figure that rises to more than 60 percent with Operations Support dollars apportioned) as opposed to about four percent of the budget allocated for Pre-filing Taxpayer Assistance and Education. We note that the IRS currently has fewer than 500 employees in its SPEC and SL outreach functions11 out of a workforce of roughly 80,000 (i.e., about one-half of one percent). We describe how the IRS revised its mission statement in 2009, without any public discussion, to change the focus from “applying” the law to “enforcing” the law. And we point out the IRS has developed and posted on irs.gov four “vignettes” to illustrate the taxpayer experience under its “Future State” vision, where all involve IRS compliance activities and all reach the conclusion that the IRS is right and the taxpayer is wrong. We argue the IRS should shift its approach to tax administration from an “Enforcement First” approach to a “Service First” approach. That is a question of relative emphasis. By mischaracterizing our report as saying the IRS focuses “exclusively” on enforcement, the IRS response seems intent on creating a straw man and knocking it down rather than addressing the nuances of the issue and the recommendations we present.

Specifically, TAS will continue to encourage the IRS to reach an agreement with SSA, allowing it to provide  the IRS with data regarding SSI recipients, and to act quickly to adopt an approach for identifying taxpayers who have AGI at or below 200 percent Federal Poverty Level.  TAS will continue to advocate for this approach to consider third-party information the IRS has in its possession, such as W-2s and 1099s, to determine if a taxpayer’s AGI is at or below 200 percent Federal Poverty Level when no recent returns have been filed. These advocacy efforts will ensure that all taxpayers who are likely experiencing a financial hardship are excluded from PCA assignment and protected from PCA attempts to collect on outstanding liabilities, which taxpayers may feel obliged to comply with, despite their financial circumstances.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A