Using 20th Century Technology in a 21st Century World: IRS Stops Initiating Contact By Phone on Failure to Deposit Cases

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There was a great scene from the TV show Black-ish last season when the stylish and trendy older daughter Zoey (played by Yara Shahidi) decides she has had enough of her brothers’ using her trend-setting ways as a way to get ideas on the next big thing to make money in the stock market. She decides to thwart her brothers’ plans and shun new technology; we see her sitting in a chair reading a print newspaper and making a phone call on a rotary phone. (as an aside, video of this generation of kids trying to use a rotary phone is a good way to spend a few minutes).

The antithesis of successful integration of technology for communication is the IRS. When one looks at tax administration, we see a world where the IRS for the most part operates in a 20th century model. To be sure, IRS has achieved success in getting Americans to e-file (in partnership with the private sector), but as the recent Electronic Tax Administration Advisory Committee report indicated the IRS is “mired in a manual taxpayer service delivery model that relies on interactions using people, paper and phones.” The IRS needs to change the meet the expectations of those who expect to seamlessly communicate while at the same time be sensitive to the needs of those who rely on and may in fact prefer the opportunity for a more personal way to communicate with the IRS.

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The next few years will be important as the IRS tries to shift away from paper and phones and begin providing resources for real time communications with taxpayers (see NTA Objectives Report Focuses on IRS Future State: Some Thoughts on Technology, Participation and Tax Administration). This possible shift is one of the most important developments in tax administration. No doubt it has animated the National Taxpayer Advocate in her efforts to get the IRS to balance its needs for efficiency and the public’s expectation that it can communicate with its citizens in a manner similar to other business interactions with the realities that among other things there is a deep digital divide in our country. This complicates IRS measures to rely heavily on technology for all the programs it administers, especially those like refundable credits where many Americans who claim various credits do not have ready internet access.

One complicating feature that all businesses (and IRS) have come to address is the possibility that bad guys are out to get personal information that would facilitate identity theft and just plain theft. We have discussed identity theft and IRS imposter scams many times as well. In a speech earlier this year the Commissioner said that IRS would not initiate phone calls to taxpayers; that was a big deal because as TIGTA and others have reported there has been a proliferation of IRS imposter phone schemes that have separated many innocents from their money.

Well, it turned out that in some instances IRS did initiate phone calls with Americans. One area was when employers are delinquent with depositing employee income and employment taxes. IRS has been pulling back from that practice, and earlier this month in an IRS Small Business and Self-Employed Division (SB/SE) legal memorandum the Director of Collections Policy indicated that “[i]n response to the continuing threat of phone scams, phishing and identity theft, we are changing our practice of making initial contact on FTD (Failure to Deposit) Alerts by telephone.”

The memorandum provides some additional information, including some templates for letters to use and how the process should work generally:

Field contact is the preferred method of contact on assigned FTD Alerts. However, Revenue Officers retain the discretion to determine the best method of effective initial contact on a case-by-case basis. Effective immediately, all anticipated telephone initial contacts on FTD Alert taxpayers can proceed AFTER a notice is sent to the taxpayer informing them that a Revenue Officer (RO) will contact them by phone within 15- calendar days of receipt of the FTD Alert.

Parting Thoughts

It is not easy trying to administer compliance with FTD penalties, which require a real time interactive experience to prevent the possibility of cascading liabilities. It is even more difficult for an agency stuck in 20th century technology and at the same time combatting 21st century scams. I suspect in about ten years the way the IRS communicates with taxpayers in 2016 will remind us of Lily Tomlin playing Ernestine the telephone operator trying to collect an unpaid phone bill.

Leslie Book About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

Comments

  1. Carl Smith says:

    I tend to read with horror about the IRS’ desire to rapidly move toward using computers to interact with taxpayers. When I headed the Cardozo clinic, many of my older, poor taxpayers either did not own a computer or were not computer literate (relying on their children to go on line for them, when forced). When I drop by my local library, I also see banks of computers in use by people who obviously can’t afford to own one at home. At least until the government (if ever) supplies computers to all poor people, I think it inevitable that it must be prepared still to interact with many taxpayer using snail mail and paper.

    • Bob Kamman says:

      The universe of poor and elderly taxpayers with no computer access or skills, and the universe of business taxpayers that pay enough in wages to be required to make tax deposits, rarely intersect.

      Quarterly payroll tax returns are due this month. IRS Form 941, for paying FICA and withheld income taxes, has a line near the signature block asking for “best daytime phone.” I predict that within the next ten years, after much time and effort wasted on the IRS “Future Shock” theoretical intercourse, there will be a line on the Form 941 requesting an email address.

  2. When I was with the IRS, we were issued portable (by the day’s standards) Zenith computers, with portable ink-jet printers that used fan-fold paper (“portable” meaning with a luggage hand-truck). I’m talking about the kind with the two 5-1/4″ floppy disks.

    Whereby hang two tales of IRS’s Luddite culture:

    1. My manager directed us to not print out the relevant forms on the printers. Not because he had any doubts as to the legal validity of such forms (knew the relevant tax law cold). Not because he was a coward (he was not; he was willing to take a stand for his people — a quality not inconsistent with his decorations from military service). It was because he knew that someone downstream would question the use of such monospaced font forms.

    2. The IRS had a program to compute the Estate Tax “Bahr deduction,” said program requiring the swapping of two disks. One of the Estate Tax Attorneys in Dallas had come up with a one-disk program that did not require any disk swapping, which the IRS info tech people refused to allow the use of (copies of it made their way to Estate Tax Attorneys throughout the country, with the consent and connivance of the developer).

    Seems that the IRS’s technological issues just keep persisting in one form or another.

    • Bob Kamman says:

      One of my duties as staff assistant in district Taxpayer Service was to schedule temps and PPTs for tax-season call-center phone work. This involved filling out worksheets with predicted daily and hourly call volume, sending them off to the Service Center, and getting back some useless printouts three weeks later. I had bought a Radio Shack TRS-80 Model 1, which cost about as much as the division secretary’s IBM typewriter, and written a DOS program that did the same thing in house, in real time.

      Of course it was absurd to expect IRS to buy personal computers for such uses, because approval was required from two or three levels of technology purchasing review. (They didn’t have to review purchases of typewriters.) By the time the purchase was approved, the item would be obsolete. I left IRS for private practice and law school, in that order, a few months later. They did make a video of how my system worked. Approval of expensive video equipment didn’t require the same level of scrutiny, as home computers.

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