Popular search terms:

MSP #5: FILING SEASON DELAYS

Millions of Taxpayers Experienced Difficulties and Challenges in the 2021 Filing Season.

 

TAS Recommendations and IRS Responses

1
1.

TAS RECOMMENDATION #5-1

Utilize 2-D barcoding and/or optical character recognition technology to improve the accuracy and efficiency of processing of paper tax returns.

IRS RESPONSE TO RECOMMENDATION: ​The IRS agrees to implement the TAS recommendation in part as written as 2-D barcoding and optical character recognition (or similar) technology may not apply inclusively to all tax forms.

To improve the efficiency and accuracy of processing paper tax returns, there are several ongoing efforts that the IRS is leading for potential expansion of the use of optical character recognition (OCR) or 2-D barcoding, namely the 2-D barcode Pilot, OCR Pilot, and a five-year forms modernization initiative.

IRS has developed an iterative approach to investigate implementing 2-D barcodes on IRS forms, which has resulted in several initial successes; one of those successes is the perspective of how the application of 2-D barcodes could affect taxpayers and industry partners. When 2-D barcoded forms are processed, data from the barcodes are quickly extracted with 100% accuracy and do not require validation, significantly reducing processing time. The approach to implementing effective barcodes was developed and enhanced by lessons learned as high-data volume quick response (QR) codes were implemented on Form 8918 and tested in a controlled environment. The barcoded version of Form 8918 went into production in December 2021, and results are forthcoming as IRS begins to receive the form from filers through mail and eFax. 2-D barcodes were also added to Form 8886, which is slated to move into production by the end of March 2022. In a test environment, the project team reached its goals of 100% barcode readability for mailed samples and 100% data accuracy for all scanned barcodes. As an outcome of the pilot, a scalability readiness report was released in January 2022 that will help initiate adding 2-D barcodes to other IRS-owned forms. However, implementation at a larger scale is dependent upon access to adequate resources, the careful application of lessons learned and best practices, robust partnership with preparers and the software industry, and support from key internal partners.

Starting within the third quarter of fiscal year 2022, the IRS is pursuing a broader forms’ modernization initiative in which forms will be redesigned over the next five years, providing taxpayers adaptive online forms. Scaling of 2-D barcodes on IRS forms will generally follow the five-year modernization effort timeline, beginning with forms selected for the Minimum Viable Product (MVP) phase occurring within calendar year 2022.

IRS is currently evaluating OCR solutions for their ability to extract machine-readable data, especially out of low-resolution and poor-quality digital images. As a test set, three vendors have been asked to demonstrate their ability to extract machine-readable data from Form 990, as that information is publicly available. The vendor’s OCR solution will then be evaluated on its ability to learn and improve performance since previous challenges. Based on vendor evaluation results and the anticipated return on investment (ROI), IRS will decide to what extent funding will continue to be provided to the OCR firms. An effective OCR solution also provides a back-up function to 2-D barcoded forms that are received by IRS in poor quality and cannot be successfully scanned for automatic data extraction.

As we look to scale OCR, 2-D barcoding, or other technology solutions to address IRS business challenges, selection/implementation decisions will be made using systematic evaluation and prioritization criteria, further based on available resources and prospective ROI for the respective pilot project. It is important to note that the IRS does not have sufficient information to make a blanket statement that all forms and processes would benefit from the application of a 2-D barcode.

A significant caution about the expected benefit from barcodes or QR codes is in order. While requiring software providers to include such codes in printed forms seems an easy answer, IRS experience teaches that when Congress changes the tax law shortly before the filing season or, as happened recently, during the filing season, IRS and software vendors’ ability to respond and produce accurate forms may preclude timely inclusion of bar or QR codes, resulting in more submissions without useable codes.

CORRECTIVE ACTION: IRS is currently evaluating OCR solutions for their ability to extract machine-readable data, especially out of low-resolution and poor-quality digital images. As a test set, three vendors have been asked to demonstrate their ability to extract machine-readable data from Form 990, as that information is publicly available. The vendor’s OCR solution will then be evaluated on its ability to learn and improve performance since previous challenges. Based on vendor evaluation results and the anticipated return on investment (ROI), IRS will decide to what extent funding will continue to be provided to the OCR firms. An effective OCR solution also provides a back-up function to 2-D barcoded forms that are received by IRS in poor quality and cannot be successfully scanned for automatic data extraction.

TAS RESPONSE: The National Taxpayer Advocate is pleased to learn the IRS will be conducting pilot programs for 2-D barcoding and OCR and is recommending the IRS implement scanning technologies for the next filing season. On March 29, 2022, The National Taxpayer Advocate issued a Taxpayer Advocate Directive (TAD) directing the IRS to implement scanning technology by the start of the 2023 filing season so that paper tax returns can be machine-read and employees will not have to keystroke each digit on the return into IRS systems. After obtaining an extension for responding, the IRS’s answer to the TAD is now due on Monday, June 27. We are optimistic that the IRS will find both of these processes will provide the IRS and taxpayers with significant benefits and look forward to working with the IRS to implement filing season scanning capabilities as soon as possible. We will consider this recommendation as partially adopted and follow up once the pilot programs are completed and the TAD response is received.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing, pending multi-year funding and IT Development.

2
2.

TAS RECOMMENDATION #5-2

Set a goal of having all correspondence replying to notices resolved or the merits responded to within 45 days of receipt. When the IRS falls short of hitting this target in any of its workstreams, it should ensure that no related compliance or collection actions are taken until the IRS has fairly considered and responded to the merits of the taxpayer’s position stated in his or her correspondence.

IRS RESPONSE TO RECOMMENDATION: ​The IRS partially agrees with the TAS recommendation to set a goal of having all correspondence replying to notices resolved or the merits responded to within 45 days of receipt and ensuring that no related compliance or collection actions are taken until the IRS has fairly considered and responded to the merits of the taxpayer’s position stated in his or her correspondence.

Although the IRS is committed to resolving notice and correspondence issues as efficiently as possible within available resources and workload fluctuations, we cannot always commit to achieving a 45-day completion goal. The number of receipts is affected by factors such as legislative changes and peak filing periods throughout the year.

The IRS agrees that taxpayers should be protected from collection actions while there is a claim (e.g., amended return) or correspondence still under consideration, and there are procedures in place designed to fully resolve correspondence before moving forward with the collection process. For instance, Small Business/Self-Employed (SB/SE) Examination’s procedures as outlined in Internal Revenue Manual 4.19.13.10.2, Evaluating Taxpayer Responses, requires that taxpayers’ written responses are evaluated within 30 days. If the IRS is unable to complete the evaluation in 30 days, an interim letter is issued to the taxpayer informing them the IRS is still processing their reply. The receipt of the taxpayer’s correspondence stops any further actions by Exam until the correspondence is evaluated.

This recommendation has already been implemented.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is disappointed that the IRS cannot commit to setting a goal of responding to taxpayer correspondence within 45 days. While it may be true that there may be extenuating circumstances that will prohibit the IRS from meeting this goal in every instance, we believe it is still appropriate for the IRS to articulate such a goal.

We are pleased, however, that in February 2022, the IRS suspended automated notices and plans to suspend collection action during any delays in responding to taxpayer correspondence.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

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

3
3.

TAS RECOMMENDATION #5-3

Implement and increase callback technology capacity across all taxpayer-facing telephone lines.

IRS RESPONSE TO RECOMMENDATION: ​​In 2022, IRS increased the number of lines Customer Callback (CCB) is offered on from 16 to 31, adding 15 more telephone lines or applications. This includes the IRS’s most popular 1040 toll-free line as well as additional Spanish applications. Last year, we served over 7 million taxpayers with CCB and saved them 3 million hours of hold time. We will upgrade the platform for CCB, with the first iteration planned for December 2022, starting with the set of 31 toll-free applications currently offering a callback. The upgrade deployment process will include a review of what has changed in the call center regarding different telephone applications since we base-lined this service in 2019. The review will include all business units that have phone operations. Future releases of the callback system throughout 2023 and 2024 will continue to add toll-free applications from these business units to reach the goal of offering a CCB option to 95% of viable assistor services demand by 2024. With the 2022 deployment of the 15 additional applications, we reached 70% of the 95% goal.

CORRECTIVE ACTION: We will upgrade the platform for CCB, with the first iteration planned for December 2022, starting with the set of 31 toll-free applications currently offering a callback. The upgrade deployment process will include a review of what has changed in the call center regarding different telephone applications since we base-lined this service in 2019. The review will include all business units that have phone operations. Future releases of the callback system throughout 2023 and 2024 will continue to add toll-free applications from these business units to reach the goal of offering a CCB option to 95% of viable assistor services demand by 2024.

TAS RESPONSE: The National Taxpayer Advocate commends the IRS for increasing the use of callback technology as a way to improve taxpayer satisfaction. When taxpayers are being asked to spend a half hour on hold, this option to receive a callback from the IRS will be appreciated.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2024

4
4.

TAS RECOMMENDATION #5-4

Develop a dedicated automated phone line where taxpayers can enter their information and upon proper identity authentication, may retrieve specific details about their tax accounts, including but not limited to the amount of AdvCTC and EIPs received.

IRS RESPONSE TO RECOMMENDATION: ​The IRS plans to partially implement this recommendation if additional resources are made available. The IRS partially agrees with the TAS recommendation to develop a dedicated automated phone line where taxpayers can enter their information and, upon proper identity authentication, may retrieve specific details about their tax accounts, including but not limited to the amount of AdvCTC and EIPs received.

Unauthenticated voicebots provide general information to frequently asked questions (FAQ) and reduce the demand for live assistance. The IRS proactively deployed the less complex unauthenticated voicebots on May 4, 2021, for Economic Impact Payment (EIP) general and procedural responses. On September 21, 2021, the IRS added Spanish translations to the EIP voicebot. The IRS deployed an unauthenticated voicebot and chatbot on January 6, 2022, to provide one-time payment and notice FAQ assistance for the Small Business/Self-Employed (SB/SE) Collection function. On February 18, 2022, the IRS added an unauthenticated voicebot to provide general and procedural responses on the Advanced Child Tax Credit line and is in the process of developing a Spanish translation. The IRS is also developing other voicebot and chatbot use cases for deployment in 2022.

The IRS is modernizing toll-free telephone applications by implementing cloud-based natural language processing technology for conversational voice self-service and authentication that integrates with IRS taxpayer data platforms and customer requests. The current toll-free environment deployed voicebots on the existing phones lines used for live assistance. The long-term strategy is to move these services to a single telephone number.

CORRECTIVE ACTION: The IRS is also developing other voicebot and chatbot use cases for deployment in 2022.

TAS RESPONSE: The National Taxpayer Advocate is encouraged to learn of the IRS’s commitment to modernizing its toll-free telephone applications. Natural language processing and voice self-service technology will improve the IRS’s ability to serve its taxpayers. We encourage IRS leadership to make this a priority when it makes budgeting decisions. Until the funding is secured and allocated to these efforts, we will consider this recommendation as open.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 10/31/2022

5
5.

TAS RECOMMENDATION #5-5

Accelerate permanent implementation allowing for the use of e-signatures and secure email of documents by end of fiscal year 2022.

IRS RESPONSE TO RECOMMENDATION: ​IRS agrees with TAS recommendation but cannot implement it currently due to funding/resource limitations.

The IRS allowed the flexibility to exchange encrypted documents with taxpayers and their representative during certain compliance interactions using email. This guidance was extended through October 31, 2023, knowing that during this time the IRS will be able to offer more advanced options for communicating electronically. Before the permanent implementation of e-signatures may be deployed, technologies and related protocols for digitalization of forms are required. Additionally, business identity proofing must be perfected and deployed to ensure the person signing electronically and sending secure email for a business is not only identity proofed but that they also have the authority to act for the business. This activity will not be finalized by the end of fiscal year 2022.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is encouraged that the IRS is making progress and taking discrete stops to accelerate implementation of e-signatures and encrypted documents via email. We understand that the IRS has extended its target timeframe for implementation to October 31, 2023. As such, we will revisit this recommendation at the end of fiscal year 2023.

Update: This is a similar recommendation to 2020 #4-2 which is still open and being worked on. The due date on the 2020 recommendation is 12/31/2024 so we are keeping this open and will monitor it in conjunction with 2020 4-2.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2024

6
6.

TAS RECOMMENDATION #5-6

Conduct a postmortem 2021 filing season review of ERS delays to identify potential reasons for the extended delays and proposed solutions.

IRS RESPONSE TO RECOMMENDATION: ​The IRS agrees to implement the TAS recommendation. The IRS continually assesses and adjusts return processing functions including Error Resolution System (ERS) fall out, inventories, and delays in real time. For example, during the 2021 filing season, the IRS discovered that significant ERS fallout was due to legislation allowing taxpayers to use their Tax Year 2019 earned income to calculate their tax year 2020 Earned Income Tax Credit and Additional Child Tax Credit. To address this processing delay, the IRS expanded programming to add prior year earned income fields. Other ERS fall out occurred because of discrepancies in the taxpayer’s reconciliation of Recovery Rebate Credits (RRC) and inclusion of their Economic Impact Payments (EIPs). As a result, the IRS developed an Integrated Data Retrieval System (IDRS) tool in filing season 2021 for fast and accurate processing of the RRC reconciliation errors. This tool has proven to be very successful in quickly closing ERS cases in five key categories.

As a proactive measure for filing season 2022, the IRS developed the Integrated Automation Technologies FixERS tool to automate the resolution of the five highest volume errors projected for processing year 2022.

The IRS conducts pre-filing season program planning and develops an extension plan to execute the filing season. This process is led by an executive steering committee and closely monitors implementation of planned actions to achieve a successful filing season.

In partnership with the Treasury Inspector General for Tax Administration and the Government Accountability Office, the IRS has participated in multiple in-depth reviews over the past two filing seasons. These reviews document both the views of the auditors and of the IRS about the results of the filing season and the improvements planned for the following filing season.

This recommendation has already been implemented.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is pleased that the IRS agrees with this recommendation and was encouraged with the favorable results from the 2022 filing season.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

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

7
7.

TAS RECOMMENDATION #5-7

Program systemic reconciliation capabilities for refundable credits such as the RRC, ACTC, CTC, and systemic lookback capabilities to prior year modified AGI where a taxpayer claims eligibility for tax credits that are based on prior year AGI, such as the EITC lookback rule, and any future tax benefits of similar nature and impact that have potential to delay tax return processing and eliminate the need for manual reviews for computational adjustments.

IRS RESPONSE TO RECOMMENDATION: ​The IRS agrees with the TAS recommendation to program systemic reconciliation capabilities for refundable credits, systemic lookback capabilities to prior year modified Adjusted Gross Income, and any future tax benefits of similar nature and impact that have potential to delay tax return processing and eliminate the need for manual reviews for computational adjustments.

The IRS continually assesses and adjusts return processing functions including Error Resolution System (ERS) fall out, inventories, and delays in real time. During the 2021 filing season, the IRS discovered that significant ERS fallout was due to legislation allowing taxpayers to use their Tax Year 2019 earned income to calculate their tax year 2020 Earned Income Tax Credit and Child Tax Credit (CTC). To address this processing delay, the IRS expanded programming to add prior year earned income fields. Other ERS fall out occurred because of discrepancies in the taxpayer’s reconciliation of Recovery Rebate Credits (RRCs) and inclusion of their Economic Impact Payments. As a result, the IRS developed an Integrated Data Retrieval System (IDRS) tool in filing season 2021 for fast and accurate processing of the RRC reconciliation errors.

In January 2022, the IRS the created an ERS tool that automated the correction of RRC and CTC reconciliation errors. To address delays in processing the returns with prior year earned income, the IRS expanded programming to add prior year earned income fields, preventing the returns from falling out to ERS for manual review.

Programming updates allowing the systemic recognition of prior year earned income were implemented in January of 2022. As a proactive measure for filing season 2022, the IRS developed the Integrated Automation Technologies FixERS tool to automate the resolution of the five highest volume errors projected for processing year 2022. The FixERS tool was released in a testing mode in January 2022 and placed into full production in early February 2022.

This recommendation has already been implemented.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate appreciates the IRS’s efforts to automate the reconciliation process for certain refundable credits and was encouraged with the favorable results from the 2022 filing season. In addition to providing improved taxpayer service, we believe the investment in such programming will save IRS resources on the back end.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

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

8
8.

TAS RECOMMENDATION #5-8

Create a filing season dashboard and provide detailed weekly information on the filing season, including the total amount of return inventory, number of returns beyond normal processing times, number of returns in suspense status, and the anticipated timeframes for working through them, while acknowledging that the situation is fluid and timeframes may change along with circumstances.

IRS RESPONSE TO RECOMMENDATION: ​The IRS is in the process of launching a “Filing Season Processing Times” page on IRS.gov to regularly provide updated information for the most filed individual and business tax return types, letters, notices, and other forms. It will also provide links to tools that allow taxpayers to check their refund status, determine the status of their amended return, and contact information for reaching the IRS directly. Viewers will be able to check processing times for individual and business returns as well as amended return submissions. Links to Online Account and Where’s My Refund will be provided on the page as resources for taxpayers to research their personalized return information. Taxpayers will also find links to IRS telephone numbers, filing season alerts, and COVID-19 processing-related information.

CORRECTIVE ACTION: ​The IRS is in the process of launching a “Filing Season Processing Times” page on IRS.gov to regularly provide updated information for the most filed individual and business tax return types, letters, notices, and other forms. It will also provide links to tools that allow taxpayers to check their refund status, determine the status of their amended return, and contact information for reaching the IRS directly. Viewers will be able to check processing times for individual and business returns as well as amended return submissions. Links to Online Account and Where’s My Refund will be provided on the page as resources for taxpayers to research their personalized return information. Taxpayers will also find links to IRS telephone numbers, filing season alerts, and COVID-19 processing-related information.

TAS RESPONSE: The National Taxpayer Advocate is encouraged that the IRS agrees with this recommendation to create a filing season dashboard. While it is commendable that the IRS is in the process of developing such a page, we will consider this recommendation as open until this filing season dashboard is active and accessible by taxpayers on IRS.gov.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 6/30/2022

en English
X