April 6, 2023 – Today, the IRS released a Strategic Operating Plan (SOP) outlining how it intends to use the nearly $80 billion in additional funding received as part of the Inflation Reduction Act of 2022 (IRA) to improve the taxpayer experience, modernize its information technology (IT) systems, and strengthen tax compliance programs in a fair and equitable manner.

This is a game changer to transform how the U.S. government administers the tax laws in a more helpful and efficient manner while focusing on providing the service taxpayers deserve.

However, of the nearly $80 billion in supplemental IRA funding, only $3.2 billion was allocated for Taxpayer Services and $4.8 billion was allocated for the IRS Business Systems Modernization (BSM) projects. Combined, that’s just ten percent of the total. By contrast, 90 percent was allocated for Enforcement ($45.6 billion) and Operations Support ($25.3 billion). The additional long-term funding provided by the IRA, while appreciated and welcomed, is disproportionately allocated for enforcement activities, and I believe Congress should reallocate IRS funding to achieve a better balance with taxpayer service needs and IT modernization.

As discussed in the Estimated Allocation of Funds section of the SOP, the additional resources the IRS has deployed to meet current taxpayer service needs will deplete the entire $3.2 billion IRA allocation for Taxpayer Services in less than four years if additional annual appropriations or supplemental funding is not provided. The SOP also expresses concern about the adequacy of BSM funding to modernize the agency’s antiquated IT systems.

In my opinion, the most efficient way to improve compliance is by encouraging and helping taxpayers to do the right thing on the front end. That is much cheaper and more effective than trying to audit our way out of the tax gap one taxpayer at a time on the back end. The success of IT is instrumental in accomplishing the SOP’s objectives of improving compliance. Allocating more funds to service and IT is key to taxpayers and tax administration.

Even before the COVID-19 pandemic began, taxpayer service was unacceptably poor. Since the onset of the pandemic taxpayer service has fallen through the floor and the IRS has not been able to provide the service taxpayers deserve. Taxpayers and practitioners have struggled to get basic service and help understanding the tax laws and IRS procedures. This is not sustainable. As more Americans interact with the IRS each year than with any other federal agency the government has a moral and practical obligation to make those interactions as productive, fair, and painless as possible.

The vision of the SOP contemplates a significantly different experience for individuals, businesses, practitioners, and industry by providing the ability to obtain the information and help they need, when they need it, and in a variety of ways.

Although I share the long-term vision of the SOP, I want to caution that the IRS should not lose sight of its core mission and its immediate challenge of reducing the large backlog of amended tax returns and taxpayer correspondence. The IRS’s customer service representatives (CSRs) alternate between answering taxpayer telephone calls and processing paper. As the IRS has been assigning more CSRs to answer the phones this year, the paper backlog has been growing. Although the SOP offers the promise of many positive changes in the coming years, I urge the IRS to put appropriate focus on getting its inventories under control now and not lose sight of its core mission.

Throughout the year, my office participates on inter-agency teams and makes many recommendations to fix taxpayer problems within the IRS. I also make recommendations in my annual reports to Congress. Often, the IRS responds to our recommendations by saying, in effect, “Good idea in theory, but we barely have enough funds to keep our 1960s COBOL-based technology systems operating. We just don’t have the resources to do what you’re suggesting.”

See my annual reports to Congress for a discussion of serious problems impacting taxpayers and practitioners over the past three years and recommendations to improve service. With the long-term funding the IRS has received and prudent management, change is possible. There is light at the end of the tunnel.

Several of TAS’s senior leaders played leadership roles in developing the plan and beginning the process of transforming the agency. Many sections of the plan released today reflect recommendations that TAS has been making for years, as well as recommendations included in the Taxpayer First Act report to Congress, the Taxpayer Experience Office’s roadmap, and outside stakeholder recommendations.

The plan is organized around 5 objectives:

1. Dramatically improve services to help taxpayers meet their obligations and receive the tax incentives for which they are eligible.
2. Quickly resolve taxpayer issues when they arise.
3. Focus expanded enforcement on taxpayers with complex tax filings and high-dollar noncompliance to address the tax gap.
4. Deliver cutting-edge technology, data, and analytics to operate more effectively.
5. Attract, retain, and empower a highly skilled, diverse workforce and develop a culture that is better equipped to deliver results for taxpayers.

Below is a select list of service recommendations and IT projects, as they appear in the SOP, that reflect prior TAS recommendations and have the potential to dramatically improve services for individuals, businesses, practitioners, and industry:

• Improve the availability and accessibility of customer service: Taxpayers will be able to receive on-demand customer service or schedule service ahead of time.
• Provide comprehensive secure online account services for individual taxpayers: The IRS will add features to Individual Online Accounts, including the ability to schedule payments, save payment information, create and change payment plans, access user-friendly tax records, view the status of returns, refunds and audits, opt into certain notifications, use secure messaging, and more. Businesses and tax professionals will be offered similar online account services.
• Evaluate which taxpayers are most burdened during filing and remove barriers to electronic filing: Evaluate which taxpayers face barriers during filing, such as those who may be eligible for credits and deductions; those who need information quickly from the IRS, such as residency certificates; or those who are required to paper-file in certain circumstances. Prioritize creating and improving digital pathways for these taxpayers.
• Expand digital services and digitalization: Taxpayers will be able to file all documents securely and exchange correspondence electronically.
• Implement a standard case management platform: Consolidate disparate case management systems onto one standard platform. This upgrade will make managing the foundational technology more efficient and help employees to help taxpayers resolve issues.
• Make transcripts and account data easier to read and understand: Use plain language for IRS transcripts for all taxpayers and make them available in additional languages.
• Help taxpayers understand and claim appropriate credits and deductions: Develop better tools to help taxpayers identify and claim tax benefits for which they are eligible.
• Build status-tracking tools for taxpayers: Taxpayers will be able to use new status-tracking tools to see real-time status updates, next steps, and estimated time to process documents and resolve issues.
• Provide earlier legal certainty: Expand capacity in the Office of Chief Counsel and with the Department of the Treasury Office of Tax Policy to address more taxpayer questions proactively using both formal and informal legal guidance and rulings.
• Streamline multichannel customer assistance: Taxpayers will be able to get the help they need quickly, securely and accessibly, resolve more issues in a single contact, and experience minimal delays during interactions with the IRS.
• Expand service offerings across multiple service channels to meet the needs of taxpayers and tax professionals: Use improved data and analytics to project demand, staffing, estimated wait and processing times, and service locations. Adjust policies, services offered, and locations to provide in-person, telephone, and digital services for all taxpayers and tax professionals, including those in rural and underserved areas. This includes expanding the services available through current customer service channels such as the Taxpayer Assistance Centers (TACs) and phones.
• Provide the public with accurate wait time estimates: Include estimated wait times in customer service channels and processing times for high-volume returns and other forms.
• Staff customer service functions to meet projected demand: Use enhanced data and analytics to project demand for customer services and better allocate well-equipped employees to meet demand.
• Improve appointment scheduling and on-demand capabilities: Offer appointment scheduling and on-demand services across service channels.
• Develop policies and tools that support first-contact problem resolution: Develop policies and tools that support the immediate involvement of the right people to resolve taxpayer issues quickly, even when first-contact employees do not have the information or authority to resolve the issues.
• Enhance IRS.gov systems and content to support new digital tools, products, and services for taxpayers: Upgrade systems and improve content development to make sure IRS.gov supports the new capabilities and is accessible to taxpayers and stakeholders, including underserved and Limited English Proficiency (LEP) populations.
• Develop taxpayer-centric notices: The IRS will send taxpayers notices they can understand, delivered in ways they prefer, with clear explanations of issues and steps to resolution.
• Use improved data and analytics to tailor timely collections contacts: The IRS will provide early, tailored contacts to all taxpayers with past-due balances and will only escalate to more intensive treatments when appropriate.

Although my primary goals as the National Taxpayer Advocate are to protect taxpayer rights and improve taxpayer service, we need to acknowledge that enforcement is also central to the IRS’s tax collection mission. It is necessary both to collect the taxes essential to fund the government and to ensure equity, so that all taxpayers are paying their fair share. The SOP contains initiatives to improve tax compliance, particularly among high-income individual taxpayers, large businesses, and pass-through entities. As enforcement plans continue to develop, the IRS needs to improve and reimagine its examination process for correspondence audits, particularly for low-income taxpayers, to reduce burdens and eliminate unnecessary challenges in a more proactive and responsive manner.

The summary above reflects a small number of the planned initiatives. The report runs almost 150 pages and contains a lot of information. By design, the report is high level, with specifics left to be fleshed out. Some initiatives are contingent on attracting, hiring, training, and retaining a diverse workforce of the future to accomplish the vision of the SOP.

Conclusion

 As always, the devil is in the details, and the proof is in the pudding. Developing a plan and successfully implementing it are two different things. But, for the first time in my 40 years as a tax professional, the tax administration stars seem to be aligning. Congress has provided the IRS with significant long-term funding to improve taxpayer service, modernize IT systems and enhance enforcement, the IRS has developed an ambitious, albeit general plan to transform tax administration, and a new Commissioner with significant management experience has just taken office with a mandate to implement the plan and transform the taxpayer experience.

With continued support and oversight by Congress, the Government Accountability Office, the Treasury Inspector General for Tax Administration, and my office, I am hopeful and optimistic that five years from now, tax administration will be transformed and taxpayers, for the first time in memory, will receive the service they deserve. And that any additional resources the IRS expends for enforcement will be applied in a fair and equitable manner benefiting all taxpayers.

The post NTA Blog: IRS Strategic Operating Plan Has Potential to Transform Tax Administration appeared first on Taxpayer Advocate Service.

Source: taxpayeradvocate.irs.gov