National Taxpayer Advocate Releases Annual Report to Congress
Bridget Roberts, the Acting National Taxpayer Advocate, released her 2019 Annual Report to Congress. The report discusses the key challenges facing the IRS regarding the implementation of the Taxpayer First Act, inadequate taxpayer service and limited funding of the agency. Further, Roberts released the third edition of the National Taxpayer Advocate’s “Purple Book,” which presents 58 legislative recommendations designed to strengthen taxpayer rights and improve tax administration.
Taxpayer First Act
The report highlighted that the Taxpayer First Act ( P.L. 116-25) had made the most comprehensive revisions to IRS procedures since the IRS Restructuring and Reform Act of 1998, including some 23 provisions previously recommended by the National Taxpayer Advocate. Further, the Taxpayer First Act also required the IRS to develop four strategic plans:
- a comprehensive taxpayer service strategy (due to Congress by July 1, 2020);
- a comprehensive plan to redesign the IRS’s organizational structure (due to Congress by Sept. 30, 2020);
- a comprehensive employee training strategy that includes taxpayer rights training (due to Congress by July 1, 2020); and
- a multi-year plan to meet IRS information technology (IT) needs.
Key IRS Challenges
The biggest challenge facing the IRS is its struggle to complete its mission. The IRS aims to “provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.” The report emphasizes that the IRS is struggling to meet both of those goals, and attributes the IRS’s shortcomings mostly to budget constraints but also to a culture in which the agency focuses on its own priorities without adequately factoring in the needs of taxpayers.
The report states that the IRS is among the lowest-performing federal agencies in providing a positive customer experience. During fiscal year (FY) 2019, the report said that the IRS received approximately 100 million telephone calls, and customer service representatives answered only 29 percent. The report further states that the IRS has also struggled to enforce the law with “fairness to all”. The report urges the IRS to prioritize phone service for taxpayers against whom it takes collection action.
Since 2010, the IRS budget has been reduced by about 20 percent after adjusting for inflation, and the number of full-time equivalent employees has declined by about 22 percent. The report points out that answering 100 million telephone calls, conducting audits, and taking enforcement actions require adequate staffing, and the IRS cannot substantially improve its performance without additional resources. The report urges Congress to increase IRS funding and particularly for taxpayer service and IT modernization, and to change the budget rules to account for the revenue additional IRS appropriations are likely to generate.
Identifying Taxpayer Needs and Preferences
Despite the IRS’s significant funding limitations, the report urges the IRS to utilize the Taxpayer First Act requirements – to develop plans to revamp its taxpayer service strategy, organizational structure, employee training strategy, and technology priorities – as a roadmap for a once-in-a-generation reassessment of its objectives and operations.
While noting that the IRS has developed strategies in a vacuum without soliciting taxpayer feedback and taking into account taxpayer needs and preferences, the report suggests a full-scale cultural shift. The report also expressed concern that the IRS has declined to include the National Taxpayer Advocate or a Taxpayer Advocate Service (TAS) representative as part of a core team created to coordinate its Taxpayer First Act implementation activities.
The report also makes numerous recommendations to improve the customer experience, including that the IRS take the following actions:
- Conduct multi-disciplined, comprehensive research into taxpayer needs and preferences.
- Require that all IRS business units, including those charged primarily with enforcement, develop a detailed customer service strategy.
- Appoint a Chief Customer Experience Officer to coordinate service initiatives across IRS business units.
- Ensure that taxpayers who cannot work with the IRS digitally, or whose issues are not resolved online, can reach and work with an IRS employee.
- Address the needs of practitioners who interact with the IRS on behalf of large numbers of taxpayers.
- For each proposal included in its customer service strategy, include cost estimates, milestones, and taxpayer-focused performance measures so the effectiveness of the strategy in improving customer service can be measured over time.
The report also:
- identified 10 “most serious problems”;
- provided status updates on two problems identified in previous reports;
- made dozens of recommendations for administrative change;
- made 58 recommendations for legislative change;
- analyzed the 10 tax issues most frequently litigated in the federal courts; and
- presented four research studies.