In our Fiscal Year 2022 Objectives Report to Congress, I’ve likened this filing season to a perfect storm. Lasting and lingering effects of the global pandemic led to historically low levels of service, enactment of new tax legislation required changes to IRS programming, manual reviews were necessitated on tens of millions of returns, and the IRS had to distribute a third round of stimulus payments – all bringing about an unusually challenging filing season, which I also discussed in my 2021 Filing Season Bumps in the Road: Part III blog.
Unlike any prior year, individuals and businesses across this great nation were forced to confront ongoing medical and financial challenges while juggling health and family issues. As a society, we adapted to the COVID-19 challenges by working remotely, attending schools virtually, and generally changing the way we did business and lived our lives. We witnessed the passing of over 600,000 loved ones, friends, and members of our communities; the closure of businesses; and the loss of millions of jobs. We also witnessed many examples of the good in our society: We saw new business ventures develop out of the ashes, and we observed firsthand the generosity and caring of our friends, neighbors, and complete strangers.
During the past year, more than 170 million individuals and millions of businesses received financial relief through three rounds of stimulus payments, Paycheck Protection Program loans, and Employee Retention Credits. The IRS and its employees were instrumental in providing this much-needed relief. I want to recognize and thank the IRS leadership and its employees, and particularly Taxpayer Advocate Service employees, for making sacrifices this past year, helping taxpayers during this difficult time, and staying true to our mission.
As an optimist, I like to find the silver linings in the storm clouds. Though the pandemic exposed many weaknesses and vulnerabilities, the lessons learned are helpful in identifying and reprioritizing improvements needed in tax administration and taxpayer service. The IRS has taken new approaches to solve old problems, and collaboration has increased between the IRS and Congress. And notably, the pandemic challenges have renewed awareness of the impact of cuts to the IRS budget over the past decade and the IRS’s need for additional funding to provide high-quality taxpayer service.
With this in mind, we are recommending several proactive steps the IRS can take to improve service and communication with taxpayers.
- Prioritize the development of accessible, robust online accounts. The IRS offers an online account option for individual taxpayers, but its usefulness is limited in two ways. First, most taxpayers who try to establish online accounts fail because they cannot pass the e-authentication requirements. Second, the functionality of the accounts is very limited. TAS recommends that taxpayers be given the option of interacting online with the IRS for all common transactions, just as customers routinely interact with their financial institutions through online accounts. TAS further recommends that tax practitioners be given access to online accounts on behalf of their client taxpayers and that the IRS prioritize providing this service to practitioners.
- Expand customer callback technology to all IRS toll-free telephone lines. Many businesses and federal agencies with large telephone call centers offer customers the option of receiving a call back when the wait time to speak with a customer service representative is long. The IRS offers this option on some of its telephone lines, but the option is not yet offered on most lines, including the high-volume lines. Particularly in light of the telephone challenges taxpayers have experienced over the past year, TAS recommends that the IRS make customer callback an option on all high-volume telephone lines.
- Reduce barriers to e-filing tax returns. One of the biggest challenges the IRS has faced over the past year has been processing paper returns. Some taxpayers prefer to file on paper, but many taxpayers file on paper because they are prevented from e-filing. There are three principal obstacles to e-filing: (i) taxpayers sometimes are required to submit statements or other substantiation with their returns, and these attachments generally cannot be e-filed; (ii) some tax forms are not accepted electronically; and (iii) taxpayers sometimes need to override default entries when preparing their returns with tax software, and some of these overrides render returns ineligible for e-filing. TAS recommends the IRS address these limitations so all taxpayers who wish to e-file their returns may do so.
- Utilize scanning technology for individual income tax returns prepared electronically but submitted on paper. When taxpayers file returns on paper, IRS employees must manually transcribe the data line-by-line into IRS systems. In 2020, the IRS received about 17 million individual income tax returns and millions of business and other tax returns on paper. Manually entering data from so many paper returns is an enormous task, and transcription errors are common, particularly on longer returns. Scanning technology is available that would allow the IRS to machine read paper returns and avoid the need for manual data entry. TAS understands the IRS is exploring the implementation of scanning technology for paper 2020 tax returns and recommends it do so for future years as well.
- Expand digital acceptance and transmission of documents and digital signatures. The March 2020 closure of IRS offices and mail facilities made it impossible for IRS employees to receive paper documents from taxpayers. As a workaround, the IRS issued temporary guidance that authorizes employees to accept and transmit documents related to the determination or collection of a tax liability by email using an established secured messaging system. Employees are also permitted to accept images of signatures (scanned or photographed) and digital signatures on documents related to the determination or collection of a tax liability. TAS recommends the IRS make these temporary solutions permanent and continue to explore and prioritize additional digital communication options.
- Offer videoconferencing options to taxpayers. Videoconference technology allows taxpayers and their authorized representatives to be both seen and heard and to share documents without being physically present. The IRS Independent Office of Appeals offers WebEx technology for virtual face-to-face conferences among taxpayers, representatives, and Appeals Officers. The IRS Office of Chief Counsel and the U.S. Tax Court are also conducting video communications and virtual trials using ZoomGov.com. Although videoconferencing should not replace in-person or telephone conference options, it adds a vital human interaction option to enable communication with taxpayers when appropriate, and it provides options for taxpayers with difficulty traveling or the inability to take extended time off from work.TAS has recommended the IRS evaluate the feasibility of expanding the use of these technologies to as many taxpayer-facing functions as possible without removing the in-person options for taxpayers. Videoconferencing should continue to be expanded and offered as an option to taxpayers because it can help fill current or future voids in face-to-face service at Taxpayer Assistance Centers (TACs) and in working with revenue agents or revenue officers. It can also be a useful tool to supplement correspondence audits, where conversing face-to-face may facilitate a better understanding of the taxpayer’s return. In addition, taxpayers who are geographically remote from a TAC and taxpayers with mobility or transportation challenges find videoconferencing technology more helpful and economical than traveling for an in-person conference.
These steps focus on necessary, achievable areas of improvement in tax administration and service that will help us weather the storm. I encourage you to review this year’s June Report to Congress, which includes an in-depth discussion on these items and an assessment of the challenges faced by taxpayers, practitioners, and the IRS from this filing season.