The advocate states in the current environment, it is critical for the IRS to direct its resources where they have the greatest positive effect on achieving tax compliance, particularly voluntary tax compliance. Over the long run, voluntary compliance is the least expensive form of compliance to maintain. It is also the least burdensome from the taxpayer’s perspective. Importantly, voluntary tax compliance is heavily linked to customer service and the customer experience.
The President’s Management Agenda for 2018 states: “Federal customers . . . deserve a customer experience that compares to – or exceeds – that of leading private sector organizations, yet most Federal services lag behind the private sector.” The Agenda identifies several Cross-Agency Priority (CAP) Goals, including CAP Goal 1: Modernize IT to Increase Productivity and Security, and CAP Goal 4: Improving Customer Experience with Federal Services. The Agenda notes that “the 2016 American Consumer [sic] Satisfaction Index and the 2017 Forrester Federal Customer Experience Index show that, on average, Government services lag nine percentage points behind the private sector.” How do the American Customer Satisfaction Index (ACSI) and the Forrester Federal Customer Experience Index assess the IRS’s customer service relative to other federal agencies and the private sector? The American Customer Satisfaction Index ranks the Treasury Department 12 out of 13 Federal Departments and says the Treasury Department’s score is effectively an IRS score because most citizens make use of Treasury services via the [IRS] tax-filing process.
To be sure, the significant cuts to the IRS’s budget combined with the need to implement several significant new laws in recent years has stretched the IRS very thin. But the ACSI and Forrester results show that taxpayers are not being well served. The aptly named Taxpayer First Act, which the House passed on a unanimous 414-0 vote in April, would direct the IRS to develop a comprehensive customer service strategy within one year. That is an important step in the right direction. I have also recommended that Congress provide the IRS with more funding along with more oversight – and I will encourage the next Commissioner to make customer service improvements a top priority.
The Taxpayer Advocate Service (TAS) has long questioned whether the IRS’s customer service performance measures accurately capture the taxpayer experience. For example, the IRS reports it achieved a “Level of Service” on its toll-free telephone lines of 80 percent during the 2018 filing season, which is widely understood to mean that IRS telephone assistors answered 80 percent of taxpayer calls. In fact, IRS telephone assistors answered only 29 percent of the calls the IRS received. Similarly, the IRS reports it achieved a customer satisfaction level of 90 percent on its toll-free lines during FY 2017. Yet the IRS only surveys the subset of taxpayers whose calls were answered by telephone assistors and completed.
In addition, as described in the report, Area of Focus: Taxpayers Need More Guidance and Service to Understand and Comply With the Tax Cuts and Jobs Act, the IRS is facing the herculean task of implementing tax reform, which the IRS says involves programming 140 systems, writing or revising 450 forms and publications, and issuing some form of guidance about dozens of TCJA provisions. The IRS also is substantially revising Form 1040 and must train its employees – particularly outreach employees and telephone assistors – in light of the significant changes in the law. It’s a very heavy lift.
The Advocate believes the IRS will deliver what it has been asked to do. But this amazing achievement comes at a cost. Since fiscal year (FY) 2010, the IRS’s funding has been cut substantially. The IRS’s appropriated budget has been reduced by nine percent in straight dollar terms and by 20 percent after accounting for the effects of inflation.
In the Area of Focus: The IRS’s Enterprise Case Management Project Shows Promise, But to Achieve 21st Century Tax Administration, the IRS Needs an Overarching Information Technology Strategy with Proper Multi-Year Funding, the Advocate discusses the implications for taxpayers if the IRS falls further behind the rest of the world with respect to its underlying systems and customer-facing technology.
In the report the Advocate highlights several of the areas that, if improved, could begin to build taxpayer trust, which is strongly linked to tax compliance:
- Taxpayer Service: Private industry and experts say the #1 driver of customer satisfaction is the First Contact Resolution (FCR) rate.
- Online Services: The IRS is far behind most OECD countries (and many non-OECD countries) in developing an online account. As we discuss in the Filing Season section of this report, as well as in our Volume 2 comments on the IRS’s response to our 2017 Most Serious Problem recommendations, only about 30 percent of taxpayers who seek to create an online taxpayer account are able to do so because of stringent authentication requirements. The IRS is right to prioritize data security, but the agency must not neglect the importance of providing improved telephone and in-person services for all taxpayers.
- Enterprise Case Management: The IRS has more than 60 case management systems, all storing data and records pertaining to different aspects of a taxpayer’s interactions with the IRS. There is no one system or repository of data that contains a 360-degree view of the taxpayer’s activity and engagement with the tax system, so often the left hand doesn’t know what the right hand is doing. For example, telephone and other assistors cannot see what is happening in certain systems and so cannot assist taxpayers with related issues; they must send off a form to the appropriate area to take action, thereby ensuring that the First Contact Rate for these issues is zero!
- Underlying IT Systems: According to the Government Accountability Office, the IRS has the two oldest databases in the federal government – the Individual and Business Master Files. The utility of modernized Enterprise Case Management and Online Accounts will be limited if the IRS does not bring its underlying systems into the 21st
- Automation, Artificial Intelligence, and Big Data: The IRS regularly uses technology and big data to identify fraud and noncompliance, but it fails to use technology to help taxpayers get to the right answer or prevent or minimize harm to taxpayers.
- Geographic Presence:Activities like outreach and education, congressional and media relations, examinations, and collections in a country as large and diverse as ours require local knowledge and interaction. Yet 12 states do not have Appeals or Settlement Officers within their borders, and 14 states do not have Stakeholder Liaison employees whose job is to conduct education and outreach to Small Business and Self-Employed taxpayers.
- IRS Personnel Challenges: Closely related to IT and geographic presence challenges is the state of the IRS workforce.
The Taxpayer Advocate Service has made modest, actionable recommendations in each of the areas mentioned above that, if implemented, would help earn taxpayer trust and confidence in the IRS. While some of the recommendations require some expenditure of funds, all of them would eliminate wasted resources applied to downstream work.