IRS Tech Issues

I have a memory from my first job as a lawyer that reminds me how slow the legal profession can be embracing new technology. Or maybe it just reminds me of how old I am.

It was 2003 and we were using these lined, carbon copy half-sheets we called “quick notes” to send informal hand-written messages to opposing attorneys, doctors, etc. I don’t remember sending them to clients because they didn’t really make the best impression, so we would dictate actual printed letters on official letterhead when writing to clients. We mailed the top white sheet to the recipient and saved the yellow carbon copy for the file. This form of communication seemed a little dated to me, even then, but it worked, and it was efficient. Even though it had been in the mainstream for about 10 years, I do not remember using email at that job.

Some people, or groups of people, just don’t latch onto technology very quickly. Because the taxpaying public includes every category of person imaginable, it is easy to see how a large percentage of taxpayers would have a hard time with the IRS’ suite of web-based services. The National Taxpayer Advocate, Nina Olson, is concerned about those who may get left behind as the IRS moves more and more of its services online. These are some of the concerns outlined in her annual report to Congress that was published a few days ago.

Somewhat of a contradiction has been developing over the years as the IRS formulates its “future plan” that heavily emphasizes technology and, specifically, online taxpayer accounts. Online tools are supposed to make things easier and more accessible for taxpayers (in fact, that is always their stated purpose), but it is obvious that the main purpose is to save the IRS money. Can you have both? Sure you can, but the key is that you don’t completely phase out the low-tech alternatives so that there are still options for the “quick note” users. For example, the IRS plans to phase out face-to-face taxpayer assistance. First they changed the name of walk-in sites to “Taxpayer Assistance Centers.” Then they plan to eliminate walk-ins and require appointments. Is it only a matter of time before these assistance centers are completely off limits to the public? It’s true, the IRS has a tricky balancing act when it comes to implementing new technology, and frugal administration of the tax system is certainly a worthy goal. But forcing everyone to embrace online accounts and tools will only cause more frustration, distrust, and inefficiency — things the IRS has been trying to avoid for decades.

TAS Not Happy with IRS Future Plan

TAS Not Happy with IRS "Future Plan"

The IRS is devising nefarious plans behind our backs. According to the National Taxpayer Advocate’s (TAS) annual report to Congress, for the past year and a half the IRS has been developing a “future state” plan whereby it will drastically cut back on the face-to-face and telephone assistance it provides to taxpayers. This isn’t really new; the IRS has for some time now been trying to redirect taxpayers and point them towards irs.gov to find answers to their questions because they don’t have sufficient funding and they don’t have sufficient personnel to provide one-on-one help to everyone who seeks it. The only difference now is that they appear to be doing something about it, albeit secretively.

Implicit in the plan — and explicit in internal discussion — is an intention on the part of the IRS to substantially reduce telephone and face-to-face interaction with taxpayers.

~ TAS 2016 Annual Report to Congress

Nina Olsen, head of TAS, stated that these plans should be made public so that taxpayers and tax professionals can have their voices heard and so they can be prepared for whatever changes come their way. Also, she says, the IRS needs to be specific about how much it will be cutting back on personal service. So far the IRS has done nothing to make their “future state” plan public or to solicit comments and input from stakeholders.

The IRS contends that TAS is misjudging their “future state” plan. According to the IRS, as they beef up alternative “self-service interactions,” it frees up phone lines for those who are not comfortable with online resources. The problem with this line of thinking is it assumes that those who call the IRS are not comfortable with researching their issue on the IRS website. I think the number of people who avoid the IRS website because they don’t have a computer or they don’t know how to research an issue online is relatively small. If people have specific questions and they think they can find the answer online, they’ll look online. But if they need a dialogue or if they have a series of question, or if they have a unique set of fact (which is very common), or if they need something more than a cookie cutter black & white answer, then they turn to the phone. I have been involved in the tax industry, and more specifically tax resolution, for about 10 years, and can confidently say that if there is any chance I can find the help I need on the IRS website, I will definitely go there before dedicating an entire afternoon to the IRS telephonic abyss.

Taxpayer Advocate Says IRS Needs to Shift Focus Away from Collections

National Taxpayer Advocate, Nina Olson, recently submitted her mid-year report to Congress.  It is nothing incredibly new, I suppose, except that IRS’ 2015 tax season numbers are completely off the charts (and not in a good way).  Here are some key points:

  • 8.8 million dropped calls due to switchboard overload
  • only 37% of customer service calls were actually answered
  • average hold time was 23 minutes
  • less than 10% of customer service calls answered during peak of tax season

Olson’s preface is a pleasure to read.  Its brilliant, and yet so simple.  She acknowledges the lack of funding that the IRS has had to deal with over the past few years, and she astutely points out that, while difficult, periods of famine (so to speak) can be healthy if they cause you (or an organization such as the IRS) to rethink its priorities and to rethink the way funds are allocated.  The operative phrase here is that it can be healthy.  In her own words:

But from a taxpayer perspective, I am concerned its long-term approach is headed in the wrong direction. First, the IRS continues to view itself as an enforcement agency first and a service agency second. Enforcement is important, of course, but it is a question of emphasis and self-definition. Second, the IRS’s vision of the future rests on a mistaken assumption that it can save dollars and maintain voluntary compliance by automating taxpayer service and issue resolution and getting out of the business of dealing with taxpayers directly in person or by phone.

What the IRS should do during this period of congressional distrust and resulting inadequate funding is examine every one of its underlying principles. In my view, it should transform itself as a tax agency from one that is designed around nabbing the small percentage of the population that actively evades tax to one that aims first and foremost to meet the needs of the overwhelming majority of taxpayers who are trying to comply with the tax laws.

The truth is, most people pay their taxes voluntarily, but the IRS has always been laser focused on collection and enforcement.  Olson is right.  As the IRS continues to put taxpayer service on the back burner, the whole idea of voluntary compliance becomes more tenuous.  And I don’t think Olson is saying that enforcement has no place in our tax system.  There will always be a need for enforcement.  But the focus needs to shift so that it is not the top priority.

One of my mentors taught me how to operate a well-balanced law practice.  He taught me to see it as both a service and a business, and to never lose sight of both.  If you focus too much on the business, then you do your clients a disservice.  And if you fail to give attention to the business aspects, then you won’t earn a decent living.

The IRS is really no different.  As Nina Olson said, they are too focused on the “business” of enforcement and the service side is suffering.  But the great thing about both a law practice and the IRS is, when you give enough attention to the service aspect so that the clients/taxpayers are satisfied, the revenue will come.

2014 National Taxpayer Advocate Report

It’s a little bit (ok, a lot bit) frustrating reading the National Taxpayer Advocate’s annual report to congress that was released today.  Of course my frustration is with the IRS, not the Taxpayer Advocate.  It’s pretty much the same report year after year.  The IRS is severely understaffed and underfunded, and its employees are less than qualified.  The level of service is reaching abysmal levels and still dropping.

This year the Taxpayer Advocate applauded the IRS for adopting a Taxpayer Bill or Rights administratively, but is still pushing for it to be enacted legislatively so that it really has some “teeth” and so that it becomes a permanent fixture that encourages voluntary compliance.

One point that evokes an abundance of frustration for me is the “absence of studies to determine whether existing penalties promote voluntary compliance.”  What this means in plain English is that the IRS has been punishing Americans with penalties as long as anyone now alive can remember, but the IRS has done relatively little to determine if these penalties actually work.  This is the functional equivalent of building a castle on sand or on an active volcano.  And if you think this is a minor problem, you’ve probably never had a tax debt that has tripled in size due to penalties and interest.  Furthermore, you’re probably unaware of this little factoid:

The number of provisions in the Internal Revenue Code that either authorize or require the IRS to impose penalties has ballooned from 14 in 1955 to over 170 today.

A penalty is considered effective if it promotes voluntary compliance.  In other words, a penalty (or all the tax penalties combined) should cause taxpayers who are on the fence about paying to decide that they will pay voluntarily rather than expose themselves to IRS enforced collections.  And the IRS needs to strike the right balance: not too severe and not too light.  That’s not an easy task, but the IRS does not appear to be taking it very seriously, according to the Taxpayer Advocate.  Ever heard of the IRS Office of Service-wide Penalties?  Of course you haven’t because it’s a 6-man operation tucked neatly out of sight that hasn’t answered to Congress in over 20 years.

On a positive note, I am very happy with my own direct experiences with the Taxpayer Advocate Service (TAS) recently.  I had previously been told that the TAS would not provide assistance to taxpayers without the presence of an IRS levy or threat of levy (or other adverse action).  And even then, I was under the impression that TAS may not take a case without the presence of some sort of delay.  However, I have noticed that the TAS intake department has become quite a bit more liberal.  In fact, I have a couple cases that the TAS gladly accepted where there was no financial hardship whatsoever, only delay.

I'm Becoming a TAS Fanboy

I know I’ve said some harsh (maybe even disparaging) comments about the Taxpayer Advocate Service (TAS) in the past.  My comments have usually been related to the “quasi independent” nature of this service and how they seem to be nothing more than an appendage of the IRS itself.  I’d be lying if I said it didn’t bother me that their offices are in the same building as the IRS (at least they are in Sacramento), and that the URL for the Taxpayer Advocate ends in “irs.gov.”

On the other hand, the top lady at TAS, Nina Olson, has truly advocated for taxpayers during her tenure.  And I am encouraged by a recent correspondence I received from TAS that stands in stark contrast to many letters I have received from the IRS.

First of all, the letter I received came about seven days after requesting TAS involvement, weeks faster than anything done at the IRS.  The Case Advocate tried calling me, but when she didn’t reach me, she sent this letter.  The only criticism I have (so far) is that I wish she would have left a message, but I understand that messages often result in phone tag and wasted time, and the IRS is very reluctant to leave detailed messages without prior permission.

The Case Advocate gave her direct telephone number and fax number.  She outlined the issues very thoroughly and precisely, and obviously in her own words rather than using a template or form letter.  She described what information and documents she needed and when she needed it, gave an estimated resolution date, and signed off with an original blue ink signature.  Funny how those little details make a difference.  I guess it just shows that she is giving individual attention to this case, which I think anyone can appreciate.

Oh yes, there is one other problem I had with this correspondence: the due date was too short.  But I guess I can live with that if it means we can move things forward without any further delays from the IRS.

TAP Now Accepting Volunteer Applications

Do you live in Alaska and have a spare 200 to 300 hours per year to donate to a good cause?  You may want to think about volunteering as a member of the Taxpayer Advocacy Panel (TAP).

TAP is “a federal advisory committee that listens to taxpayers, identifies major taxpayer concerns, and makes recommendations for improving IRS services.”  As a TAS committee member, one of your primary responsibilities will be to put together an annual report (containing said recommendations) for the Taxpayer Advocate Service (TAS), the Treasury Department Secretary, and the IRS Commissioner.

The IRS is actually seeking TAP committee members in several states (19 to be exact), not just Alaska.  They want alternates in a handful of states as well.  And they need one member to represent international taxpayers.  If you’re interested in the international position, don’t worry too much about travel; it looks like the IRS is not requiring any in-person meetings from the international member.

The great thing about this service opportunity is you don’t have to be a tax preparer, accountant, tax attorney, or any kind of tax professional to join the panel.  You have to be accepted to the panel, but you don’t need to have any special connection to the IRS or the tax community at all.  Federal advisory committees in general are required to seek out people from a variety of backgrounds and viewpoints.  The “underrepresented groups” sought by TAP include U.S. taxpayers living abroad and Native Americans.

April 11th is the deadline to apply to become a member of the panel.

IRS Funding: Seems Adequate to Me

Some say the biggest problem at the IRS is that they are not allocated enough money to be able to administer the tax laws fairly and competently.  Even Nina Olson, the National Taxpayer Advocate, has bought into this theory:

Today, the IRS is an institution in crisis. In my view, however, the real crisis is not the one generating headlines. The real crisis facing the IRS — and therefore taxpayers — is a radically transformed mission coupled with inadequate funding to accomplish that mission. As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.

~ Nina Olson, in her mid-year report to Congress

What’s ironic about this quote is it was released today along side juicy headlines about IRS employees using government credit cards to make some highly questionable purchases of alcohol, expensive meals, party supplies, and even porn.  Of course many of these purchases were made on cards that were reported stolen.  I’m sure that’s true because there is no way any IRS employee would abuse his card privileges.

I don’t know Nina, I usually agree with your opinions, but it seems to me that the crisis is fairly well summarized by the headlines.  Why downplay the high-profile mistakes that are so very telling of what’s going on at the IRS?  And how is it that the IRS’ mission has been “radically transformed”?  Regardless of any official mission statements, their mission has always been, and always will be, to collect as much revenue as possible without too much regard to fairness, tax relief, and taxpayer rights.

So if the “real crisis” is inadequate funding, then why should we turn a blind eye to outrageous spending abuse?  There is no way in this world we should increase funding to the IRS until they clean house.

IRS Hopes to Answer 63% of Calls in 2013

image via thewashingtonnote.com

The Taxpayer Advocate Service (TAS) released its annual report to Congress today which focuses on a few main themes: tax code simplification/reform, increased funding for the IRS, greater safeguards against identity theft, and improved taxpayer service.

For anyone working in the field of tax relief, and for taxpayers who contact the IRS seeking to address their back tax debt, some of the most interesting statistics are related to taxpayer service.  The IRS has a notoriously poor customer service record, especially with regard to the phones:

  • IRS received over 100 million calls in fiscal year 2012 and 30% went unanswered
  • Average wait time was almost 17 minutes in FY 2012
  • IRS goal is to answer 63% of incoming calls in FY 2013, down seven percent from 2012

And these numbers tend to get worse year after year.  Obviously the decline in customer service is closely related to the reduction in funding to the IRS.  However, I don’t know how they can seriously set a goal of answering only 63% of calls.  What an embarassment!

If you have to call TAS, at least dial the right number

 

photo via gretachristina.typepad.com

The Taxpayer Advocate Service (TAS) has two main phone numbers. 

  1. 877-ASK-TAS1 (established in 2004)
  2. 877-777-4778 (NTA toll-free line, established in 1998)

The NTA toll-free line is the more prominent number on the TAS website.  It is the number found under the “contact us” link.  And this is the same number listed on the IRS website.  However, the primary difference between these two numbers may surprise you.  ASK-TAS1 is staffed by TAS personnel, but the NTA toll-free line is actually staffed by IRS customer service personnel!  See the latest TIGTA report for more information.  These representatives are charged with vetting out the cases that they believe will “qualify” for TAS help.

TAS describes itself as an “independent organization within the IRS” — really an oxymoron, don’t you think?  Tax professionals have long questioned their independence.  When you call TAS, you are literally talking with the IRS (unless you dial the right number).  I do not recommend calling TAS for help with your tax problems.  For high-quality tax relief, it is important to select an experienced tax attorney that can give objective, unbiased attention to your tax matter.

Your 2012 and 2013 Federal Tax Returns Are At Risk!

Today, National Taxpayer Advocate Nina E. Olson reported to Congress the issues that the Taxpayer Advocate Service (TAS) will focus on during the upcoming fiscal year. Olson, expressed particular concern, among other issues, about the taxpayer impact of expired and expiring tax provisions.

“The continual enactment of significant tax law and extender provisions late in the year has led to IRS delays in handling millions of taxpayers’ returns and caused many taxpayers to underclaim benefits because they did not know what the law was … Because of the magnitude of these challenges and the uncertainty about such a large number of important provisions, the 2013 filing season is already at risk. The 2013 filing season is likely to pose problems for many (if not most) taxpayers and the IRS if Congress does not address the many provisions that have already expired or soon will.” Wrote Olson.

You may be asking, “How does this affect me?” Well, if Congress doesn’t act soon you may need to hire an experienced tax attorney to fight for tax relief. As my Federal Income Tax professor repeatedly ordered in law school: “Read on, read on, read on…”.

The following provisions are among the tax provisions that expired at the end of 2011:

  • The so-called “Alternative Minimum Tax patch.” As result, an estimated 27 million more taxpayers are subject to the Alternative Minimum Tax this year.
  • The deduction for state and local sales taxes.  About 11 million taxpayers claimed this deduction last year.
  • The deduction for mortgage insurance premiums.  About four million taxpayers recently claimed this deduction.
  • A provision allowing persons over age 70-1/2 to make tax-free withdrawals from their Individual Retirement Accounts (IRAs) to make charitable contributions.

According to the IRS website, Congress is likely to extend many of these and other expired provisions retroactive to January 1, 2012, but neither taxpayers nor the IRS know for sure what will happen and taxpayers, therefore, cannot make educated tax planning decisions now.

In addition to the provisions that expired at the end of tax year 2011, an even larger number of provisions are set to expire at the end of 2012. Such rules include the Bush-era cuts in marginal tax rates, reduced tax rates on dividends and long-term capital gains, various marriage penalty relief provisions, certain components of the child tax credit, the earned income tax credit, and the adoption credit, and the moratoria on the phase-outs of itemized deductions and personal exemptions.