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MSP #17: IRS’s Automated Collection System (ACS)

ACS Lacks a Taxpayer-Centered Approach, Resulting in a Challenging Taxpayer Experience and Generating Less Than Optimal Collection Outcomes for the IRS

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #17-1

Assign one ACS employee to a taxpayer’s case, provide this employee’s contact information on each notice that is sent to the taxpayer, and assign the case to an ACS employee who is located in the same geographic region as the taxpayer.

IRS RESPONSE TO RECOMMENDATION: If implemented, this recommendation would result in overall lower service to taxpayers.  ACS uses a “first available” method of routing incoming calls. This method allows approximately 1,800 to 2,000 full time equivalents in ACS to answer 8 to 14 million taxpayer calls per year. If we were to assign a single employee to each case, we could not answer as many calls, reducing our ability to provide service to these  taxpayers.

CORRECTIVE ACTION: N/A

TAS RESPONSE: We understand the need to consider how implementation of this recommendation would affect ACS’s ability to answer calls or to answer calls in a timely fashion. However, these options, (i.e., speaking to an  assistor in the same geographic region as the taxpayer, and having the same assistor address his or her issues to finality) could be presented to the taxpayer with the understanding that they could result in a longer hold time. Also, the taxpayer could be given the option of leaving a message with the specific assistor who would return their call within 24 hours. These options would mitigate the effect on ACS assistors’ availability to answer calls while providing more customer service options to the taxpayer.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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2.

TAS RECOMMENDATION #17-2

Send out monthly notice reminders to taxpayers regarding their tax liabilities and accrued penalties and interest.

IRS RESPONSE TO RECOMMENDATION: ​Monthly notices are sent to taxpayers that have an installment agreement.  Taxpayers currently are provided with two to four notices when they have a balance due, including the Collection Due Process (CDP) notice, consistent with the statutory requirements. Additionally, reminder notices are sent yearly. The recommendation to provide monthly or quarterly notices to taxpayers is cost prohibitive and is not an effective use of our limited resources. While the study TAS referenced does show that sending a letter multiple times increases case resolutions, it does so with diminishing returns. Instead, we are working on an in-depth notice redesign program for certain balance due notices that will include behavioral insights to improve the effectiveness of notices we send.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is pleased that ACS is redesigning a number of its notices to  consider behavioral insights. However, as illustrated by the Notice of Federal Tax Lien (NFTL) study, these notices would likely yield better results if they were sent out on a more regular and frequent basis, rather than the sporadic notice schedule that is currently used, where months can go by without the taxpayer hearing from the IRS.2  Additionally, this would keep taxpayers better informed as to how penalties and interest continue to increase their tax liabilities, thereby more properly observing a taxpayer’s right to be informed.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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3.

TAS RECOMMENDATION #17-3

Revise ACS notices using a Taxpayer Bill of Rights framework that conspicuously informs taxpayers of the rights impacted by a given notice.

IRS RESPONSE TO RECOMMENDATION: The Collection Operating Unit has been working on an in-depth notice redesign program for certain general balance due notices as well as for notices used specifically by ACS. Since the project’s inception in August 2015, this redesign effort has included TAS personnel. Other IRS organizations, such as the Office of Chief Counsel, Information Technology (IT), On-Line Services, and Research, Applied Analytics, and Statistics (RAAS), have been deeply involved. We have also worked in coordination with private contractors. The CP14 and LT16 letters have been redeveloped and the LT11 and CP501/503 are currently in development. Collection is working with TAS on a notice that uses the Taxpayer Bill of Rights framework and intends to test that notice along with the others being developed. We must account for IT Unified Work Request processes in estimating our implementation date.

Update: Collection notices LT11, LT16, CP14, CP501 and CP503 were redesigned and put in place integrating the agreed upon Taxpayer Bill of Rights framework. Each notice contains a conspicuous section outlining taxpayer rights, sources of assistance, applicable references and ways to access additional information. Specific information regarding the role of the Taxpayer Advocate Service and their contact information is also provided. TAS was involved during the process of developing the taxpayer rights wording and agreed to the final product.

CORRECTIVE ACTION: Collection is working with TAS on a notice that uses the Taxpayer Bill of Rights framework and intends to test that notice along with the others being developed.

TAS RESPONSE: A careful redesign of ACS notices is an important first step toward providing taxpayers with more information about their tax issue and their rights surrounding that issue while presenting it in a manner that is easy to understand and grabs the taxpayer’s attention. The National Taxpayer Advocate understands there are a number of competing priorities in redesigning these notices, but the first priority should be to design the notice in a taxpayer rights framework that clearly informs the taxpayer of the rights impacted by the particular notice. If the taxpayer is totally unaware of what rights are being impacted after reading the notice, then the value of the notice is miniscule at best.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 11/2/2022

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4.

TAS RECOMMENDATION #17-4

Apply an indicator to cases in which the taxpayer is likely experiencing economic hardship and route these cases to a separate Economic Hardship Shelter excluded from assignment to private collection agencies.

IRS RESPONSE TO RECOMMENDATION: ​The likelihood that a taxpayer is experiencing economic hardship cannot be determined without taxpayer contact. A comparison of taxpayer income to allowable living expense (ALE) standards would not yield a useful indicator of financial condition. The ALE standards represent an average of what all taxpayers spend; a given taxpayer may spend more or less or not incur the expense at all. A taxpayer’s financial condition can only be evaluated by looking at their individual facts and circumstances. Further, there is no authorization in the statute to exclude cases from private debt collection based on such an indicator.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The IRS’s statement that “The likelihood that a taxpayer is experiencing economic hardship cannot be determined without taxpayer contact” is very dubious.  Recently, TAS Research staff analyzed the financial circumstances of taxpayers assigned to the Automated Collection System (ACS) over the last five years. Three multiples of federal poverty levels were applied to that same population base to determine if a percentage of federal poverty level (computed on adjusted gross income) would be a reasonable proxy for allowable living expenses (ALE), which are guidelines that “establish the minimum a taxpayer and family needs to live.”

This research showed that over a five-year period, applying 250 percent of the federal poverty level (FPL) consistently excluded about 85 percent of taxpayers that the ALE analysis predicted could not pay IRS debts without incurring economic hardship. The bottom line is that the IRS has sufficient data in-house to determine if a taxpayer’s adjusted gross income is at or below 250 percent of the federal poverty level, which has shown to be a very reliable proxy for economic hardship. In fact, it is this threshold that the IRS currently uses to exclude taxpayers from the Federal Payment Levy Program (FPLP).

The IRS’s rejection of the implementation of this indicator to be used by ACS employees is a failure to adhere to the Taxpayer Bill of Rights, which was codified by Congress in Internal Revenue Code (IRC) § 7803(a), and is a particular infringement on a taxpayer’s right to a fair and just tax system and the taxpayer’s right to privacy.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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5.

TAS RECOMMENDATION #17-5

Revise ACS’s Internal Revenue Manual and scripts to instruct employees when a taxpayer has an economic hardship indicator placed on their account, to consider all possible avenues for resolution, including Partial Payment Installment Agreements, offers in compromise, or placement into Currently Not Collectible hardship status.

IRS RESPONSE TO RECOMMENDATION: Internal Revenue Manual (IRM) 5.19.1 already allows employees to address economic hardship when it is brought to their attention. Employees have a suite of account resolution options open to them when working with taxpayers. There would be no new or special process to follow based on the presence or absence of this proposed indicator.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAs discussed in the previous response, the IRS has the data available to proactively place an economic hardship indicator on a taxpayer’s account. This indicator would allow the ACS employee to open up a discussion about the taxpayer’s financial circumstances and what type of collection alternative may be most appropriate for their situation. The current approach in ACS is to first discuss full payment or payment arrangements with little or no discussion of the taxpayer’s particular financial circumstances.

As discussed in the Most Serious Problem, solely focusing on full payment or establishing a payment arrangement to satisfy the outstanding tax liability with little regard to financial circumstances results in taxpayers entering into payment arrangements they cannot afford and will likely later default on. The IRS’s failure to use the data it has to create an economic hardship indicator which would in turn allow the ACS assistor to have a more meaningful conversation with  the taxpayer about their particular circumstances and what collection options may best suit them, will ultimately result in burdening taxpayers, wasting IRS resources, and creating rework for IRS and Taxpayer Advocate Service employees.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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6.

TAS RECOMMENDATION #17-6

Conduct a research study to determine if IRS’s modeling scores and collection potential calculator are truly identifying the cases that are most likely to be resolved.

IRS RESPONSE TO RECOMMENDATION: ACS Systems and Inventory, in conjunction with the Strategic Analysis and Modeling (SAM) group, looks at possible changes or adjustments to models to determine if any updates are needed to ensure that the system runs properly and identifies the best cases to be worked and resolved. The SAM group conducts annual reviews of cases modeled by the Inventory Delivery System to evaluate how well the models are performing at predicting a variety of case outcomes and taxpayer behavior. In addition, we are working towards incorporating model scores in the analysis of recent notice redesign randomized control trials.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS conducts annual reviews on its case selection models to determine if those models are accurately predicting the outcomes of the cases, thereby identifying what models may need to be modified going forward. However, the Inventory Delivery System is a system used to prioritize cases for all stages of collection, including which cases are assigned to ACS or the field. TAS’s recommendation is that an analysis is conducted specifically on ACS inventory, how it is prioritized, and whether that prioritization has proven to be effective. Thus, the IRS’s current annual review fails to exclusively focus on ACS inventory and whether or not it is applying its resources to the most productive cases.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

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

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7.

TAS RECOMMENDATION #17-7

Reorder ACS protocols to give high priority to cases where a taxpayer has defaulted on a prior installment agreement.

IRS RESPONSE TO RECOMMENDATION: ACS Systems and Inventory annually looks at its prioritization process to make decisions on whether it is feasible to adjust the order of taxpayer accounts. Detailed analysis is conducted to make a determination as to whether changes should be made. This analysis includes looking at accounts, such as defaulted installment agreements, to determine if they need to be moved up in priority to be worked by Collection representatives.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Taxpayers who have defaulted on an installment agreement are taxpayers with whom the IRS has previously made contact and who have taken a significant step to resolving their tax debt (i.e., entering into an installment agreement and beginning regular payments on the liability). This is a good indicator that these are taxpayers who want to resolve their tax situation but who may have encountered unexpected circumstances that have impacted their ability to continue with monthly payments, such as sudden medical emergencies, changes in employment status, or unforeseen expenses. It seems logical that the sooner ACS contacts these taxpayers after the default, the more likely it is that they can find out what caused the default and how they can help the taxpayers enter into some other arrangements that will better meet their current financial  circumstances. Allowing these types of cases to linger in ACS inventory is a missed opportunity for the IRS to re-engage taxpayers who have previously expressed the desire to address their tax issues, and harms taxpayers by allowing penalties and interest to accrue, making the liability larger and diminishing the likelihood of achieving a satisfactory resolution.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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