The IRS Cracks Open the Door to Electronic Communications

In 2016 the IRS released its Future State vision, featuring seamless electronic interactions between the agency and taxpayers or their representatives. Progress towards this vision has been slow, as IRSAC noted in its 2018 and 2019 reports. (Les also wrote several posts on the Future State, its implications, and related developments.) Today the IRS remains far behind lenders, brokers and banks in the digital customer interactions it offers. While the IRS’s privacy concerns with electronic communications have not abated, faced with the coronavirus pandemic the agency adapted quickly, recognizing the need for digital communications if taxpayers’ matters are to progress as people shelter in place. In today’s post, guest blogger James Creech describes important new IRS parameters for email correspondence and electronic signatures. Christine

On March 27, 2020 as part of the IRS’s response to COVID-19 the IRS issued an internal memorandum temporarily modifying the existing prohibitions against the acceptance of electronic signatures and use of email to send and receive documents. For the Service these modifications were a necessary adjustment to the realities of remote work. It allows many of the cases in progress prior to the People First Initiative to continue to move forward even if it is just to avoid a statute of limitations expiring. It is also an acceptance that many taxpayers who must interact with IRS employees are sheltering in place and may lack access to any technology beyond a smartphone. It is interesting to note that the memorandum does not specify an end date for these temporary procedures unlike many of the other aspects of COVID-19 that expire on July 15, 2020.


Electronic Signatures

The most important part of the IRS accepting electronic signatures is not how they accept them but rather what types of documents have been approved for electronic signatures. Electronic signatures are temporarily permitted on documents required to extend a statute of limitations or to close an agreed upon matter such as Forms 870 and 872. Beyond those forms, the memorandum only lists a few specific forms by number but it appears that it should be interpreted broadly. As a catch all, it states that long as the form is not normally subject to standard filing procedures, ie a 1040x or 8832, an electronic signature is permitted and the document can be submitted electronically. An IRS employee can request further guidance from their internal policy office on the specific email acceptance policy. Given that the internal guidance is vague it might be incumbent on a practitioner to remind an IRS employee that this option is available should there be some hesitation about accepting particular form.

One other routine document specifically listed by the memorandum is a power of attorney. On the surface the inclusion of the 2848 seems of limited utility. The CAF units are located in service centers that are currently closed, new matters are not being assigned to the field, and adding a power of attorney midway through working through an issue with a Revenue Agent is relatively rare. However for tax clinics and taxpayers who need to either add or change a representative mid stream specifically stating a power of attorney can be filed with an electronic signature is a useful inclusion.

If a document is eligible for an original electronic signature, the signature itself can be submitted in a number of widely used file formats including pdf and jpeg file types.

The real value for practitioners in the modification is the ability to send in photographs of a signature, or to have a client electronically sign a document on smartphone without the need to print the document at all, and still have it accepted by the IRS. Without this ability many taxpayers could potentially have to either have to physically meet their representative in order to sign a document, or worse yet many pro se taxpayers could be unable to meaningfully participate in moving cases forward because they lack access to a printer or a scanner.

Emailed Documents

The IRS now allows employees to both send and receive emails, including emails with attachments. For practitioners receiving emails the procedures are similar to receiving a physical copy of information from the IRS. The attachment is sent as a standalone email in an encrypted SecureZip. The 12 character password is then relayed to the practitioner over the phone, or by some other means than email, and the attachment can then be opened.

Sending documents to the IRS is a little more complicated. In order to protect the IRS, incoming email is not being accepted without an established relationship between the taxpayer or their representative. The IRS employee must also first request that the documents be sent through the normal e-fax channels prior to offering the use of email.

If the taxpayer is unable to send an e-fax or wishes to use email the employee must still take steps to dissuade them from doing so. They must advise the taxpayer that email is not secure. They must request that all attachments should be encrypted to the best of the taxpayer’s ability and baring that any information must be in a valid format. Links to files in the cloud are not accepted. Finally they should advise the body and subject line of the email must not contain any sensitive or identifying information. All of these steps are perfectly reasonable for security purposes but may be intimidating to some taxpayers.

If the taxpayer is sending a document that contains an electronic signature the taxpayer must attest to the signature by including a statement similar to “The attached [name of document] includes [name of taxpayer]’s valid signature and the taxpayer intends to transmit the attached document to the IRS.” It is worth noting that if there are technical issues with the .gov email address, IRS employees are prohibited from using personal email addresses as a back up.

Privacy Concerns

Part of the reluctance on behalf of the Service to accept emailed documents in the past has been a well-founded worry about introducing viruses into a secure system. From the IRS’s point of view requiring a known taxpayer to opt in to email, and follow the required procedures and formats, should greatly reduce this risk.

Email for the practitioner has its own set of privacy concerns. From a technical perspective sending an email to the IRS is no different than an e-fax. E-faxes are routed to IRS employees’ email addresses so the only difference is the terms of service for the e-fax vs the email provider.

Slightly different is what happens to the data once it is on a laptop in the IRS employee’s home. Fortunately for taxpayers the IRS has a robust set of data privacy protections that can be found in Section 6103. Generally speaking the IRS has done a good job of training employees on the importance of Section 6103. Without going into much detail, Section 6103 prohibits the disclosure or inspection of sensitive taxpayer information by anyone who is not authorized to view the material. The punishment for violations of Section 6103 can range from potential criminal charges for willful disclosures to administrative sanctions, including termination, for less serious breaches. Violations of Section 6103 also give taxpayers a right to a civil cause of action against the United States under IRC Section 7431.

Section 7431 was given additional teeth in the Taxpayer First Act of 2019 that is especially relevant right now given that all IRS employees are working remotely. Even though the IRS has safeguards in place to protect taxpayer information, such as requiring that laptops containing sensitive data are encrypted, accidents do happen.

Prior to the Taxpayer First Act taxpayers were only notified of a Section 6103 disclosure violation if the violation resulted in criminal charges. This left many taxpayers in the dark if return information was disclosed in a non willful manner. The Taxpayer First Act significantly broadened this disclosure to impacted taxpayers, including when IRS “proposes an administrative determination as to disciplinary or adverse action against an employee arising from the employee’s unauthorized inspection or disclosure of the taxpayer’s return or return information” and it requires that the IRS affirmatively inform taxpayers of the civil cause of action against the government. It remains to be seen whether there will be an uptick in Section 6103 violations but if expanded use of email does not trigger a wave of taxpayer notifications, then privacy may not be such a barrier to making this modification permanent.

While the limited acceptance of electronic signatures and use of email was expanded to benefit IRS employees during this difficult time, it is impossible to see this as anything but beneficial for taxpayers. Even with the required hurdles it makes engagement with the IRS easier, quicker, and more approachable to anyone who does not have a scanner and an e-fax service.

Acting NTA Blog Highlights Role of TAS Recommendations on Taxpayer First Act Legislation and Challenges That The IRS Faces

Acting National Taxpayer Advocate Bridget Roberts’ recent blog post Highlights of the Taxpayer First Act and Its Impact on TAS and Taxpayer Rights discusses some of the main TFA provisions, including the impact of TFA on TAS and how many of TAS’ past recommendations have had a direct impact on the legislative changes.  While many of the provisions of TFA influence tax policy and administration rather than directly impacting tax procedure, the policy and administration changes will have direct and indirect influences on the tax procedures facing taxpayers and practitioners.

The post includes useful links to some of the major TFA changes. Some of the provisions are starting to generate litigation (see, for example, what evidence the Tax Court can consider in innocent spouse cases, a topic that PT has covered already a few times –see Christine’s discussion at TFA Update: Innocent Spouse Tangles Begin.)

In this post I will highlight the key parts of the post as well as offer some brief comments on some of the challenges the IRS faces as it marches toward meeting the TFA requirement of reporting on customer service and modernization.


Highlights of NTA Post

First, the post is a reminder of how important TAS’s reports have been over the years as a contributing factor to legislative change. The Acting NTA notes that about 25 provisions within TFA were “recommended or strongly supported by the NTA or TAS.” The NTA blog post has a handy table with the TFA provisions, as well as links to underlying TAS work that relates to the TFA provisions.

Second, the post emphasizes that a few of the TFA changes directly implicate TAS, including the following:

  1. New rules on the next permanent NTA’s salary to limit the possibility that an NTA will face a personal financial conflict of interest when interacting with the Commissioner,
  2. A codification of the Taxpayer Advocate Directive (TAD) authority to make somewhat analogous the NTA’s ability to elevate systemic issues with its ability to raise individual case matters in Taxpayer Assistance Orders,
  3. Reducing the NTA’s annual reporting requirement on the most serious problems from 20 to 10,
  4. Requiring coordination with TIGTA on research studies, and
  5. Requiring the IRS to provide statistical support on TAS research studies, and requiring the NTA in the research reports to report in whether the IRS provided the support and determined the validity of the information.

Finally, the post praises for IRS and the way it is prioritizing implementing some of TFA’s sweeping changes, including the setting up of a dedicated “office within the IRS to oversee and coordinate the agency’s TFA implementation efforts.” While noting that the office includes the Commissioner’s Chief of Staff and executives from W&I, SBSE and IT, the Acting NTA notes one concern:

My one concern is that TAS has not been included as a core member of the TFA implementation team. Congress created the position of the NTA to serve as the statutory voice of the taxpayer within the IRS. To implement the aptly named “Taxpayer First Act,” I believe TAS should have a seat at the table to the same extent as key IRS operating divisions, particularly for purposes of implementing the TFA requirements that the IRS develop a comprehensive customer service strategy, modernize the IRS’s organizational structure, create online taxpayer accounts, and develop a comprehensive employee training strategy that includes taxpayer rights.

Concluding Brief Thoughts on TFA and Challenges the IRS Faces

In the run up to TFA and its requirement that IRS report on modernizing its structure and customer service strategy, IRS has dedicated a significant amount of time and energy around these issues. To that end see, for example the 2019 IRS Integrated Modernization Business Plan, released a few months before TFA became law this past summer. Part of the business plan had its origin in the IRS Future State initiative, as the GAO discussed in a 2018 letter with the subject Tax Administration: Status of IRS Future State Division to Senators Hatch and Wyden. That letter provides a nice historical perspective on Future State and its rebranding. Future State was a topic that inspired the recently retired NTA Nina Olson to conduct nationwide forums, which was a Special Focus in the NTA’s 2016 Annual Report to Congress.

In an era of scarce resources and rapid technological changes, tax administrators worldwide are focusing on how to efficiently deliver services. Online tools offer the promise of taxpayers able to help themselves, and minimize costly person-to-person exchanges.

Yet, one of the key themes that emerges from reading the transcripts of the 12 TAS led public forums on taxpayer needs and preferences is that there is a wide range of taxpayer resources and skills. Failing to recognize those differences when building models of service and enforcement can have an outsize impact on vulnerable taxpayers.

A Pew Research Center piece from earlier this year highlights the differing levels of access to technology across income classes, as well as the different ways that lower income individuals access the internet (see below). Simply put, lower income individuals have less access to the internet. When they do access the internet, they are often dependent on smart phones rather than tablets, laptops or desktops. The reliance on smart phones for internet access for more vulnerable taxpayers, combined with how important refundable credits are to the economic welfare of low and moderate income Americans, means that a tax system that fails to recognize the preferences and needs of these taxpayers is likely to fail to deliver quality service to many taxpayers who most need it.

This is a key challenge for those who are charged with the responsibility of ensuring that we have a 21st century tax system that delivers to all taxpayers. There is no simple way to build a world class tax system, especially one that is charged with not just collecting revenues (a herculean task in itself) but also a system that is responsible for delivering benefits that can mean the difference between living in and out of poverty.

IRS Digital Communication Pilot: Digital Divide and Tax Administration

Last week Bloomberg reported that IRS officials are expanding the Taxpayer Digital Communications pilot, which was launched in late 2016. The pilot program allows taxpayers to respond to correspondence audits electronically through a secure portal rather than by regular mail or fax. According to Bloomberg[$paywall], IRS has tested the program with audit correspondence from the Philadelphia Service Center and will add the Brookhaven Service Center to the pilot program next year.

The IRS has noted that there was over an 80% satisfaction rate among taxpayers who used the digital communications tool. The take up rate was relatively low, however, with 3,000 taxpayers opting in out of 28,000 invited. On the other hand, the default rate is quite high for correspondence examinations; it is not clear how many taxpayers who chose not to opt in continued participating in the audit process.

The brief Bloomberg article notes that the pilot actually added about an hour of IRS employee time to resolve a case; to me that is an interesting metric but key questions left unaddressed include whether the program will facilitate IRS and the taxpayer getting to the correct outcome, and the amount of time saved in closing the case from start to end.


The same week that the Bloomberg story came out the New York Times reported that Microsoft has released a study showing the digital divide is much worse than the government has previously reported.  Access to broadband, according to Microsoft, is unavailable to over 168 million Americans, while the FCC claims that broadband is unavailable to only 24.7 million. The Microsoft study relied on actual speeds of people using its products.

To be sure, Microsoft has a vested interest in this discussion, as greater access to broadband makes its products and services more likely to be purchased. Yet, independent researchers have documented the difference in access to broadband and also detailed differing preferences and abilities for use of differing technologies (a good place to look at this research is the Pew Research Center on Internet & Technology). Access varies greatly by region; for example as of about a year ago reported that about 1/3 of city residents had no access at all to internet in any form. New census data shows a stark digital divide within the city of Philadelphia, where neighborhood broadband access rates range from a shocking 37% to a high of 89%.

When it comes to use of technology, the IRS is playing catch up compared to many other tax administrators and the private sector. My sense is that the agency’s reflexive starting point with the adoption of technology is the possibility of efficiency gains. This is especially important to an agency that has faced serious funding shortfalls. To that end see this week’s  terrific piece in Pro Publica by Paul Kiel and Jesse Eisinger that highlights some of the recent IRS budget history and steep decline in many enforcement metrics. A companion Pro Publica piece quotes clinicians and guest posters Michelle Drumbl and Mandi Matlock discussing the burdens that EITC recipients face in light of the continued drumbeat for EITC audits while audit rates for all but the very rich continue to plummet. No doubt that for the IRS the allure of doing more with less is hard to resist.

Technology access and the skills to use new technology, like other resources, are unevenly distributed in America.  While the new technology holds great promise for the IRS and taxpayers, some of the greatest challenges the IRS face in the next decade include evaluating how the adoption of new technology relates to fundamental taxpayer rights as well as traditional tax procedure principles that have their origin in a paper-based tax system.

The National Taxpayer Advocate has been focusing on this for years, including her series of public hearings gathering information to inform IRS as it plans its Future (soon to be present) State and on more technical issues like the need to think about how the mailbox rule of Section 7502 intersects with digital communication. We are just scratching the surface on these issues.

I hope that the IRS and Congress consider all taxpayers’ perspectives, including the many low and moderate income taxpayers who increasingly rely on the safety net now increasingly found within the tax code, when evaluating and developing any IRS technology roll out. That will require a holistic view of taxpayers, and one that focuses on more than IRS employee hours per case resolution as compared to whether the technology facilitates reaching the correct outcome. In considering taxpayer service the IRS should understand the key role that taxpayer rights play in ensuring sound tax administration.  Relying on the supposed efficiency gains of technology can lead to a two track system of tax administration, and one that will exacerbate inequalities and unfairness associated with being poor.

IRS Expands Online Account Tools

Last year IRS launched an online account tool to allow individual taxpayers to look up basic information such as balance due for any years where there was an outstanding liability. Earlier this week, IRS announced that the tool’s now include the option to view up to 18 months of tax payment history. The online portal also allows individuals to get transcripts of Form 1040-series tax returns through the IRS’s Get Transcript tool and make payments through electronic payment options.

Mindful of the data breaches of the recent past IRS appears to have inserted a robust authentication process. To register, IRS requires the following:

  • Social Security Number
  • Date of birth
  • Filing status and mailing address from latest tax return
  • Access to an email account
  • Personal account number from a credit card, mortgage, home equity loan, home equity line of credit or car loan
  • A mobile phone with your name on the account.

The news release accompanying the development provides a bit more detail on registering:

Taxpayers who have registered using Secure Access for Get Transcript Online or Get an IP PIN may use their same username and password. To register for the first time, taxpayers must have their personal and financial information including: Social Security number, specific financial information, such as a credit card number or loan numbers, email address and a text-enabled mobile phone in the user’s name.

Moreover, IRS seems to be moving toward an authentication that should limit inappropriate access:

As part of the security process to authenticate taxpayers, the IRS will send verification, activation or security codes via email and text. The IRS warns taxpayers that it will not initiate contact via text or email asking for log-in information or personal data. The IRS texts and emails will only contain one-time codes.

The shift to an online account portal for individual taxpayers is a welcome development, as digitally capable taxpayers will  access information that until now generated resource draining phone calls and correspondence. With the opportunities it provides, it also presents challenges. The National Taxpayer Advocate, for example, has discussed on numerous occasions how many segments of the taxpaying public (such as the poor and elderly) may have limited access to technology and differing preferences than other taxpayers (see e.g., her comments from the 2016 Annual Report at around page 23, where she discusses research showing that “28.5 percent, 40 percent, and 31.9 percent of the Low Income, Senior, and Disabled taxpayers, respectively, had no broadband access at home, significantly limiting their online activities.”)

It is helpful that IRS is seeking comments from individuals who use the online tools. The problem comes if the IRS fails to recognize the needs of a sizeable portion of the population for whom this is not a viable option. It is important that Congress funds the IRS and IRS addresses the needs and preferences of the millions of taxpayers who by choice or necessity will be communicating with IRS via correspondence, telephone or in person.



NTA Releases Annual Report

The National Taxpayer Advocate released her Annual Report yesterday. The report is broken into three main volumes.

Volume 1 follows the general approach of past reports with a discussion of most serious problems, legislative recommendations and most litigated issues. Given the NTA’s laser-like focus on IRS plans to build the so-called Future State, much of the discussion touches on issues relating to IRS plans to modernize tax administration. In a Special Focus to Volume 1, the NTA “has attempted to identify and make recommendations to address the challenges the IRS faces to become a 21st century, taxpayer-centric tax administrator.” Volume 1 also has a discussion of IRS performance relating to taxpayer rights, a section I am looking forward to reading and a welcome addition to IRS performance metrics.

Volume 2 contains TAS research and related studies. There are five studies in the volume, including discussions of taxpayer service among differing ethnic groups, the impact of educational letters on potentially noncompliant individuals, IRS use of financial analysis in installment agreements, a call for IRS to better use internal data to determine collectability of taxpayers, a discussion of collection issues facing business taxpayers.

A new part of the report is in Volume 3, which contains literature reviews on taxpayer service in other countries, incorporating rights in tax administration, behavioral science, geographic considerations for tax administration, customer considerations for online accounts, alternative dispute resolution options and ways to reduce false positives in fraud detection.

For those looking for the Cliff Notes version there is an executive summary that summarizes the main issues.

I have previously expressed my admiration for the NTA’s reports. The reports are a major contribution to tax administration. I have not had time to work through materials but the Special Focus on Future State in Volume 1 is a good place to start for those interested in the prospects of tax administration reform. In the past year the NTA has convened a series of public forums to gain insights in taxpayer preferences and challenges. Applying her considerable experience with IRS and using insights from those forums, the NTA has attempted to provide a blueprint for best practices that Congress and IRS should keep handy as IRS crawls into the 21st century.

Technology and the Tax System: A Less Personal Appeals Office Coming Our Way

In the last month, Appeals has announced plans to shift away from in-person conferences and institute a default rule that sets conferences for telephone and possible virtual conferences.  I will describe the changes and highlight some of the challenges facing the tax system as Appeals and other IRS functions shift even further away from in-person meetings.


Technology is rapidly changing how the IRS intersects with taxpayers. For example, in 2000, only 28% of individual income tax returns were e-filed. In 2005 for the first time more people e-filed than paper, and last filing season over 86% of individual income tax returns were e-filed. We are also seeing an uptick in self-prepared returns, especially among lower-income filers, reflecting perhaps a growing comfort level that many Americans seem to have for DIY and software.

We have discussed the IRS’s big plans for its Future State initiative which is at it describes its overall efforts to “take advantage of the latest technology to move the entire taxpayer experience to a new level.” At the recent ABA Tax Section meeting, the National Taxpayer Advocate announced that its end of year annual report will include its ideas of the future, informed by its public forums.

Appeals also has been thinking about how technology would alter the Appeals experience. It recently revised the Appeals section of the Internal Revenue Manual, and those changes reflect the decreasing use of in-person conferences to resolve Appeals cases. The new default method for Appeals’ conferences is by telephone.

IRM now provides that if a taxpayer requests an in person conference, the taxpayer instead should be offered a virtual service delivery (VSD) conference, if the technology is available (generally defined as within 100 miles of the taxpayer’s address) (for background on VSD, I wrote about it a couple of years ago in Technology and Tax Administration: The Appeals Virtual Service Delivery Program and the National Taxpayer Advocate in a section of the 2014 annual report offered suggestions on ways IRS could better use this technology).

What if a taxpayer within 100 miles does not want to use VSD technology? The new IRM provisions states that taxpayers will get an in-person conference only if the Appeals team manager (ATM) agrees either following a taxpayer or Appeals employee request. The provision then goes on to list factors that the ATM should consider in evaluating the request:

  • There are substantial books and records to review that cannot be easily referenced with page numbers or indices
  • The Appeals Team Employee  cannot judge the credibility of the taxpayer’s oral testimony without an in-person conference
  • The taxpayer has special needs (e.g. disability, hearing impairment) that can only be accommodated with an in-person conference
  • There are numerous conference participants (e.g., witnesses) that create a risk of an unauthorized disclosure or breach of confidentiality
  • An alternative conference procedure (e.g., Post Appeals Mediation (PAM) or Rapid Appeals Process (RAP)) involving separate caucuses will be used
  • Another IRM section specific to the workstream calls for an in-person conference

IRS is also working out the kinks in rules that will generally prevent taxpayers from getting an Appeals case reassigned from a campus to the field. That change would be consistent with the IRM changes already in place relating to initial requests.

Some Observations

I understand the allure of creating efficiency gains through technology and limiting personal contacts, especially as technology improves and Congress continues to squeeze IRS budgets.  I recently oversaw our Graduate Tax Program’s development of an online program. In that program we have created a curriculum that relies on interactive exercises and a real-time (synchronous) weekly session that allows for discussion and a robust give and take with students. I was skeptical of our ability to deliver a high quality experience. I no longer am. The technology is robust.  I am not a technology expert, but I know that it is not easy to teach in a distance platform. For each class we launch we spent hundreds of hours developing the class ahead of time, working with instructional designers who knew nothing about tax or law but who understood education and technology.

The IRS task is much more difficult than ours was in Villanova’s tax program. Our students are self-selecting. We train students in the technology before they start class. IRS generally and Appeals has a much more challenging task in front of it. This is especially true when many taxpayers who interact with IRS do so without the benefit of a representative.

There is substantial push back on these proposed Appeals changes, and especially the default rule setting conferences for telephone conferences and the somewhat narrow circumstances justifying transfer to an in-person meeting. For example in a letter released this past week the American College of Tax Counsel suggested that the Manual should be revised to allow for lower level Appeals employees to allow a transfer and reflect additional considerations for a transfer decision, including the complexity of the case, whether penalties are involved, the taxpayer’s compliance history, and the amount at issue relative to the taxpayer’s income. (For the ACTC letter see here.)

I am not enmeshed in Appeals’ cases these days so I do not know the precise impact of the changes. Nor do I know how flexible Appeals will be when taxpayers request to opt out of the default telephone conference. It does seem, however, that before implementing these rules Appeals would have been well-served to solicit greater input from stakeholders. That likely would generate better substantive rules as well as greater acceptance of the rules.

A good contrast for this is the NTA public forum approach with Future State. By discussing the findings and observations in the next annual report, the NTA ensures that there will be an IRS engagement with the concerns that the forums have raised. Assuming IRS engages with those findings in a serious way, that generates a transparency and discussion that in my view likely leads to better outcomes, and greater confidence and trust in the tax system.



NTA Objectives Report Focuses on IRS Future State: Some Thoughts on Technology, Participation and Tax Administration

There is little question that tax administration has not kept pace with the vast changes in technology that have transformed our society. Last year, the IRS announced plans for a future state of tax administration that would attempt to bring the agency into the 21st century and in its words “take advantage of the latest technology to enhance the entire taxpayer experience.” In response to the IRS’s announcement, the National Taxpayer Advocate, often with the assistance of members of Congress, convened public forums around the country in an attempt to get the pulse of taxpayers and practitioners. In addition, the forums provided an opportunity to bring in researchers who have studied individual preferences when it comes to online interactions, as well as some of the challenges of the digital divide, the inequality in access to technology across communities.

Last week the National Taxpayer Advocate released her mid-year report to Congress. The Report does three main things: 1) it reports on the forums the NTA convened and held across the country which provided an opportunity for public comment on the IRS’s nascent Future State plans for tax administration, 2) it provides an overview of 2016 filing season performance metrics, and 3) identifies 14 priority issues in addition to Future State that the NTA plans to focus on in the upcoming year.

In this brief post I will discuss the report’s consideration of the forums.


The preface to the report focuses on the public forums and the IRS’s Future State plans. It is organized around eleven concerns that the NTA identifies as present throughout the forums, with the themes backstopped by testimony of the witnesses and attendees. Those concerns are the following:

  • IRS engagement with taxpayers and practitioners and how to increase trust in the tax agency
  • Building a Future State before the IRS current state of taxpayer service is fixed.
  • The taxpayer experience as told by taxpayers.
  • The continuing trend away from person-to-person and face-to-face taxpayer service and compliance activities, including audit, collection, and appeals, as well as a declining geographic IRS presence and increased centralization.
  • The benefits and limitations of online accounts
  • Doing digital right.
  • The lack of clarity around what will be offered as self-service online options, and the legal and due process implications of “self-corrections.”
  • The implications of online accounts for taxpayers with limited online access or digital expertise, and the impact of security concerns on taxpayer online account usage.
  • The implications of granting access to taxpayers’ online accounts to unregulated return preparers.
  • The increasing workload for VITA sites and the compression of the filing season for professional tax preparers.
  • The IRS Mission-what IRS should be focusing on in the 21st century

Each of the concerns has a separate pdf with the witness statements, and the NTA landing page for the report is a useful link if you wish to hone in any of the themes in greater detail. In addition, the report lists the IRS webpage on Future State, as well as transcripts to all the public forums that have been held to date.

In the mid-year report, the NTA discusses how over the next few months it will be surveying taxpayers, holding additional forums, and convening  focus groups with practitioners. As part of the annual year-end report NTA will discuss its vision of IRS Future State “based on taxpayers’ needs and preferences, as they and their representatives have expressed them to us.”

Some Brief Observations

As an observer and participant in this process (I testified at the inaugural forum in DC and discussed that in PT here), I am impressed by the bipartisan nature of the process and the opportunity that the forums provide for general public engagement. There is little that seems to escape partisan rancor, and IRS has been no exception to that over the past few years, as evidenced by for example recent House efforts to impeach Commissioner Koskinen. Yet it seems to me that people of good faith would want the IRS to succeed in what Congress tasks it do. Part of the problem no doubt is that some in Congress wish for IRS to fail in its job, for a variety of reasons, including opposition to programs that IRS administers. Yet that Congressmen Roskam, Serrano, and Meadows, and Senators Casey, Grassley, and Cardin participated in the NTA’s Future State forums suggests to me that there can be a consensus of good will across the aisles that can lead to a genuine effort to get to good tax administration.

I recently read about the Presidential Commission on Election Administration. President Obama convened the commission by executive order in 2013. That Commission was co-chaired by the prior general counsels for the Obama and Romney campaigns, and went about identifying best practices in election administration and recommendations to improve the voting experience. It issued a report in 2014. The Bipartisan Policy Center has picked up the work of the commission and has been working to implement the commission recommendations. There are few issues as potentially polarizing as those surrounding election law, but that there is a bipartisan effort to both identify and implement best practices seems to me a useful model.

The testimony highlighted in the NTA Objectives Report suggests that the IRS has a difficult but important job in front of it as it plans and eventually implements a tax administration model that leverages the interactive technology-based experiences that have come to define the lives of most Americans. The IRS administers many different programs that are housed in the tax code. The diversity in experiences and resources of taxpayers and practitioners alike makes the task of building a new model of tax administration difficult. That the NTA is bringing the voice of many Americans who often do not have a seat at the table when the rules are being written is a valuable public service. Hopefully as IRS rolls out more details and as Congress considers the funding implications of what IRS is seeking IRS and Congress will adopt an evenhanded approach to the issue of tax administration. Building a service model requires a deep understanding of the needs and limitations of all taxpayers, and that understanding is hard to come by without a process that allows those who often do not engage an agency at a time when it is writing the rules.

National Taxpayer Advocate Forum on Future State Highlights Challenges IRS Faces in Building A Modern Tax System

An earlier version of this post originally appeared on the Forbes PT site on March 2, 2016

Last week the National Taxpayer Advocate convened the first of a series of public forums on taxpayer service. The impetus for the forums was the IRS’s Future State initiative. That initiative is based in large part on IRS wanting to ensure that people have “a more complete online experience for their IRS interactions.”

The IRS is still in the planning phases for its Future State. The IRS overview of the plan reveals the contours of what IRS would like the future to look like:

Taxpayers should expect the same level of service when dealing with the IRS in the future as they have now from their financial institution or a retailer. The idea is that taxpayers would have an account at the IRS where they, or those they authorize, can log in securely, get the information about their account and interact with the IRS as needed. This approach also has a goal of freeing up limited IRS in-person resources — such as our phone lines — to more easily serve people and tax professionals who need one-on-one assistance.

Planning for the future must no doubt take into account the challenges of today which will likely be with us for some time. For example, IRS is struggling with the aftereffects of last year’s cyber attack into taxpayer accounts, which we learned last week was more serious than originally reported, with the attacks hitting over 700,000 taxpayer accounts, more than double the IRS originally thought. (That was widely publicized; see e.g., an article in USA Today from last week, Cyber hack got access to over 700,000 IRS accounts).


The forum last week featured an introductory statement by the Commissioner and one from the National Taxpayer Advocate. As the NTA explained in her statement (and in her most recent annual report), the forums are a way to ensure that the public has a chance to comment on the IRS’s plans. The next public forum on taxpayer services is scheduled for March 9 in Chicago.

The NTA’s discussion of Future State in the report and her announcing the holding of public forums had the added benefit of spurring the IRS to release more information about Future State. For example, last week the IRS released vignettes of what a future state could like for differing taxpayers, including taxpayers from Tax Exempt Government Entities, Wage and Investment, Small Business and Self-Employed and Large Business and International.

There were three panels last week. The first panel included me and Pam Olson, the Former Assistant Secretary of Treasury (Tax Policy). In my testimony I discussed mainly the possible impact on a shift to an online service and enforcement based service model on lower-income taxpayers, with Pam’s testimony offering a perspective mainly looking at larger and corporate taxpayers. Despite our differing starting points there was much in common, including the importance of trust in a tax system, with Pam’s statement situating IRS plans to involve the public as a means to building trust:

As I see it, the IRS’s future state initiative represents an essential effort to find more efficient and effective ways of interacting with taxpayers, an effort that is to be applauded. There are two items that I think are critically important to designing the IRS future state: (1) opening the design process to the public, and (2) building trust. Each will lead to and reinforce the other: the greater the transparency around the design, the greater the trust; the greater the trust, the greater the willingness to engage and participate in the process. There is much to be gained from an open and collaborative process that includes taxpayers and tax professionals in the design. Our needs and capabilities have to be taken into account and the best way to understand them is through open and frank discussion.

Likewise, I emphasized the importance of building a tax system that takes into account taxpayer and stakeholder characteristics and how “a future vision of tax administration that sees the taxpayers as they actually are may lead to an approach that can increase trust in the tax administration and enhance voluntary compliance.” In my statement, in an article on taxpayer service that Keith and I have co-written for Tax Notes that should be out in a couple of weeks, and in an upcoming article in a special issue of Georgetown’s Tax Lawyer that will be home to a number of papers that were discussed at last year’s International Taxpayer Rights Conference, I have been building this theme out. In all of the pieces I focus on the administrative challenges associated with the IRS’s responsibilities as chief federal benefits’ administrator, in addition to its role of collecting about 90% of federal receipts. Congress has long used the tax system as a tool to achieve all sorts of social policy, but with the advent of refundable credits in the last few decades the IRS now has the added responsibilities of addressing a different aspect of tax administration that carries with it new challenges.

The second panel included representatives from the various IRS advisory committees and panels, and included statements from the Internal Revenue Service Advisory Committee (IRSAC), the Information Reporting Advisory Committee (IRPAC), the Electronic Tax Administration Advisory Committee (ETAAC), and the Taxpayer Advocacy Panel (TAP). The statements from the Committee are available on the TAS’s dedicated public forum page, available here. (Stay tuned: we hope to have some guest posts from these witnesses).

The final panel looked to social science research that offered insights into some of the challenges the IRS faces in interacting with tax return preparers and taxpayers themselves. With respect to preparers, Michael Best, a Senior Policy Advocate of the Consumer Federation of America, discussed some recent research suggesting that there is a strong preference among taxpayers for additional oversight over unlicensed preparers. Arturo Gonzalez, Chief, Consumer & Community Development Research, Board of Governors, Federal Reserve spoke about research into consumer preferences in using technology in financial transactions. The Federal Reserve research suggests that nonusers of mobile banking services identify security as a major concern but also suggests that there seems to be a preference for in-person services even when institutions make mobile banking readily available.

Aaron Smith from Pew Research Center’s Internet Project spoke about the limited internet access that restricts many lower-income Americans from communicating in an online environment. The Pew research suggests the presence of a deep digital divide, with many lower-income Americans shut out of broadband due to costs. That reality for Americans was illustrated in a NY Times article last month, Bridging a Digital Divide that Leaves Schoolchildren Behind. That article described how some lower-income children in Texas had to take extra steps to ensure that they had access to internet to complete homework, including doing homework on the sidewalk in front of a local elementary school to piggyback off that school’s wifi and taking three hour school bus rides home to use the bus wifi because the child’s parents could no longer afford it at home.

It is not easy to administer a tax system. When you add into the mix a society as diverse as ours, and a tax system that really is not just one system but many differing systems, the IRS has its hands full. The forums are an important way for differing constituents to present their voices and hopefully allow the IRS to design future service plans with taxpayer needs in mind.