The Taxpayer First Act’s Legacy: What Comes Next

For the last few years, I’ve asked my students whether they’ve heard of the “Tax Cuts and Jobs Act” before. Many raise their hand. Because I’m insufferable, my first order of business is to tell them that there is really no such thing as the “Tax Cuts and Jobs Act” (or TCJA). What they refer to as the TCJA could only pass under budget reconciliation, thus eliminating the superfluous provision of a “short title.” This pedantic foray serves the dual roles of proving my academic bona fides and of alienating my students.

More seriously, when I ask students about their knowledge of the TCJA it is really to make a point for the next question: how many of those students have heard of the “Taxpayer First Act.” I’d note that to date I have yet to meet a student that had heard of the bipartisan, magnanimously (and actually) titled “Taxpayer First Act.

There are a few things I usually emphasize from this little exercise:

(1) that we are going to be learning about federal tax procedure, which is not much covered in the “federal income tax” courses,

(2) that “substantive” tax bills like TCJA tend to be highly partisan whereas procedural or administrative bills like the TFA are not (note that RRA 98 also had bipartisan support), and

(3) that students may be forgiven for not knowing much about the TFA because, frankly, it didn’t really end up making that many big changes that I can think of.

Only perhaps in the future I may have to rethink that final point. In Section 1101 of the TFA Congress required the IRS to provide a “Comprehensive customer service strategy.” That report is here. And for you, loyal reader, I have waded through the pages of MBA-corporate speak to highlight some actual changes that may be coming down the road…

read more…

In this post I will be focusing on the IRS’s “Taxpayer Experience Strategy” as detailed in their report to Congress. The IRS’s approach was to “reimagin[e] the taxpayer experience across six areas of focus.” Those six areas are:

  1. expanded digital services,
  2. seamless experience,
  3. proactive outreach and education,
  4. community of partners,
  5. focused strategies for reaching underserved communities, and
  6. enterprise data management and advanced analytics.

Describing this further, the report provides “[t]his strategy is not a series of discrete approaches, but rather integrated strategies that build on each other to create the best holistic experience for the greatest number of taxpayers.”

To me, this reads like a lot of buzzwords beloved by business schools but largely meaningless to tax practitioners. So I’m going to abridge much of the report and try to provide a list of specifics and highlights that practitioners should be aware of. Here is a list of what I found to be the most interesting goals and projects:

Expanded Tax Professional Accounts

There are a range of different online account functionalities that the IRS appears to be working on as part of the Taxpayer Experience Strategy. Some are fairly simple and greeted with a “how has it taken this long?” sigh. For example, allowing e-signatures on Form 2848, and expanding digital signatures more broadly. Others are vague and call to mind some sort of IRS Frequent Flyer Rewards program. (One goal is “Practitioner Premium Access.”)

Overall, however, the goal appears to be digitizing the power of attorney process from cradle-to-grave. Indeed, one bullet point includes the phrase “Fully Digital CAF.” This, in turn, should allow practitioners to more quickly access client account information.

Issues with processing Form 2848 are a cause of near constant concern in the tax world. Fixing POA problems is, in my opinion, one of the easier ways to increase downstream efficiencies for practitioners, the IRS, and taxpayers alike. Dare to dream of a future world in which no one would think to read or comment on a post about Form 2848 processing issues…

“Omni-Channel” Communication

Basically, the IRS wants to do a better job at the front-end of steering (“channeling”) people based on their personal preferences. For example, if you hate waiting on the phone the IRS seeks to introduce expanded automated callback. If you don’t mind waiting, but just want to have a better sense of how long you’re going to wait, the IRS is proposing better “wait time transparency.”

To some degree, these are things the IRS already does (“we estimate your wait time to be between 15 and 30 minutes”). Perhaps they will just start doing it better (“we estimate your wait time to be 12 minutes and 27 seconds”).

One proposal that did appear new is that the IRS employee is supposed to “remain engaged” with the taxpayer during a call transfer to ensure that the transfer actually goes through. So when you spend 30 minutes waiting and then have an IRS employee inform you “I can’t help, let me transfer you to collections,” the transfer is more likely to actually happen.

Hopefully, however, fewer of those transfers will be necessary to begin with. First, as part of the “concierge navigation support,” the IRS is looking to better ensure that calls go to the right subject-matter expert picking up. Second, and to me vastly more important, the IRS is looking to significantly upgrade the functionality of its “Enterprise Case Management” (ECM) system so that IRS employees have a “360-degree view” of taxpayer accounts. Presumably, in non-MBA speak, this will mean that IRS employees can say with better certainty if/when a letter was sent to a taxpayer when you call.

The Rise of AI… For Answering Tax Questions

There are three new artificial intelligence (AI) features the IRS is looking to showcase: (1) AI powered web-chat, (2) AI powered appointments, and (3) AI tax question assistance for IRS employees. What will this look like?

With regards to the first AI feature, we’ll likely begin seeing the “Can I Help You?” pop-up boxes (“chat-bots”) on IRS webpages that are already ubiquitous as customer-service stand-ins elsewhere. Second, if the chat bots don’t fix the problem, they can help schedule an appointment with an actual human that might be able to. Lastly, when you get an actual human at the IRS, that human being will have an “AI-powered” assistant.

More Translated Forms!

Last but not least, we shift to the lower-tech world of text. The IRS is planning on translating Form 1040 into Chinese, Korean, Russian and Vietnamese (note the IRS has already translated to Spanish, as noted here). But beyond Form 1040, the IRS is also planning on translating Pub 17 and (eventually) notices that are sent to taxpayers.

Steps in the right direction. But will it make a significant difference in the “taxpayer experience?” Are there more fundamental changes that need to happen? What would an improved taxpayer experience really look like? My further thoughts in a future post…

“Empowering” Taxpayers: Reflections on the IRS Strategic Plan Annual Review

I’ll forgive you if the IRS’s report on “Putting Taxpayers First” has fallen through the cracks of your reading list. The National Taxpayer Advocate’s report (recently covered here and here), the onset of the filing season, and the raft of legislative tax changes over the last year have left me feeling somewhat behind in my tax knowledge. And I get the feeling I’m not alone in that sentiment.

Yes, times are busy for us in the tax world. But that doesn’t mean we shouldn’t take a moment from our busy schedules to reflect on our larger goals. For the IRS, one way this is done is through their Strategic Plan Annual Review and mapping their progress to the myriad goals therein. In this post I’ll take a look at the first of those ten goals: To “empower and enable all taxpayers to meet their tax obligations.”

read more…

A first step in mapping your progress towards a goal may be to clearly define what that goal really is. For example, what does it mean (or look like) to “empower and enable all taxpayers to meet their tax obligations?” I found the report a bit lacking on defining the goal, and even in discussing if the IRS has met it. Instead, the report mostly just discussed what 2021 looked like for taxpayers, and let you, the reader, draw your own conclusions about whether that meant the IRS was “empowering and enabling” taxpayers.

This reader would say that, towards the goal of empowering taxpayers, the IRS had some wins but also some pretty big losses (I will call them “obstacles”) that likely outstrip the wins. I’ll discuss both in turn.

The Wins:

It is hard for a taxpayer to be “empowered” to meet their tax obligations if they don’t understand what those tax obligations are. One way this might happen is if the taxpayer doesn’t speak English. On that front (making tax resources accessible to ESL taxpayers) the IRS deserves kudos.

For one, it was the first year the IRS made Form 1040 available in Spanish. Admittedly, I thought this already was the case but apparently that was only for certain Puerto Rico returns.

But an even bigger (and I think more consequential) change made by the IRS was the creation of “Schedule LEP.” Filing this with the IRS allows the taxpayer to choose from among 20 different languages to receive written communications from the IRS in. For those working with immigrant communities in particular, I’d be sure to take note of this. I commend the IRS for making it available. The next step forward, however, would be for the IRS to do more than just allow taxpayers to make their language preference known to the IRS… It would be to actually communicate with the taxpayer in their preferred language. According to this TIGTA report that is not yet happening. Instead, all Schedule LEP does at the moment is put a notation on the taxpayer’s account for their preferred language. One hopes the actually translated letters will be coming soon.

Another win for the IRS was the popularity of IRS.gov. Fiscal year 2021 saw 11.5 billion page views, which was a 24% increase from 2020. There were also 16.8 million people using the IRS2Go app at least once in FY 2021.

Maybe this is only “kind-of” a win for empowering taxpayers, since it is entirely possible that people had to rely on the website largely because they couldn’t get through on the phone (more on that in a bit). But like it or not, the IRS is going to have to rely on a greater online presence and online capabilities as a medium for connecting with taxpayers. Further, the IRS is statutorily required to “improve the digital experience for government customers” under something called the “21st Century IDEA Act” (which I just learned of and will now reference to my students as if it is common knowledge). There are some definite caveats to this “win,” but for now let’s chalk it up as “greater online presence = progress towards empowering taxpayers.”

Lastly, and really more as a matter of statistics rather than evidence of “empowering taxpayers,” the IRS notes that more taxpayers received more good news (i.e. refunds) last filing season. The refunds were both larger and more frequent than the prior year: an 8.6% increase in the number of refunds issued over 2019 returns, and a 2% increase in the dollar refund amount.

The Obstacles:

Let’s start with the obvious. A lot of people wanted to contact the IRS and a lot of people weren’t able to. I’ll list as “obstacles” the sheer demand of taxpayers as well as actions of Congress in late-season changes to the tax code. It is clear that these were impediments to the IRS “empowering” taxpayers with information on their filing obligations.

The report notes that “individual taxpayer telephone demand” (the report isn’t clear on exactly what this entails) was 24 million, a 456% increase over the prior year. That’s a pretty big number. But the number I really found jaw-dropping was this: 2,000%. As in, there was a 2,000% increase in disconnects over the prior year. See page 19 of the report. I note the specific page because this statistic was presented in a way that made it difficult to parse exactly what sort of “disconnects” were being referred to. In any event it is not a statistic that suggests the IRS is “empowering and enabling taxpayers to meet their obligations.”

Another issue is that more people than ever are filing returns. Makes sense since more people than ever have a filing requirement or are eligible for refunds when they weren’t before. But still there are some numbers I can’t quite make sense of. In particular, I’m hoping someone can explain why the IRS would see a 17.7% increase in the number of business returns filed from CY 2021 over CY 2020. One thought I have is that this could be a product of the “start-up boom” and that 2020 apparently saw more than 4.4. million new businesses created. But I would have thought the vast majority of those would be Schedule C filers… In any event, the jump in business returns has created a ton of additional work for an understaffed IRS and is greatly exacerbated by the fact that a huge number of those returns are on paper (20.7 million of the approximately 53 million filed).

A final obstacle worth mentioning is inherent to tax: it just doesn’t translate to other languages well. As the report notes:

Automated translation of languages remains a significant challenge, even for the most sophisticated software. The level of complexity of tax terms and the need for surrounding context means that automated translation tools need to be carefully evaluated to ensure that translations reach a consistently acceptable level of accuracy for users of the translated content. This portion of the project will be ongoing for the next several years.

It’s hard work empowering taxpayers. It’s even harder when you’re trying to empower them in a different language. But my concern has less to do with translating complex English to other languages. Rather, I’m worried about the first step of translating technical tax provisions to plain English -or any language other than tax, really.

The pandemic has augmented my belief that the more people try to self-research complex issues online, the more problems arise. I cynically believe that this is unavoidable until or unless the tax code is drastically simplified -which I have no real (or politically palatable) recommendations on how to achieve. I’m sure there is value to the IRS online resources (like the “Interactive Tax Assistant”). But there are limitations and on efforts to put in simple language things that are inherently complicated -the concept of “Simplexity” comes to mind. 

My Progress Report: Big Picture Thoughts

I’m not here to pile on the IRS. In fact, until the IRS receives some modicum of the funding it needs I am not sure that I really can criticize its customer service. That the IRS is woefully underfunded is perhaps the worst-kept secret in the tax world. The Congressional Budget Office has reported on it. The National Taxpayer Advocate has reported on it. Even HBO (via John Oliver) has reported on it… way back in 2015. And it has only gotten worse.

Without a doubt, there are areas that the IRS is performing sub-optimally even given their funding problems. But for now, I’m not going to focus on them. I think it is more important to keep a focus on the elephant in the room: the IRS had fewer permanent workers in 2021 than it did in 2010.

Think about that.

Among other things, in 2010 the IRS didn’t have to worry about (1) the Premium Tax Credit, (2) the Advanced Child Tax Credit, or (3) the Recovery Rebate Credits. Each of these credits vastly expands the population of individuals that now interact with the IRS. Each of these credits also becomes very confusing very quickly -particularly with their “reconciliation” processes. Further, in my unscientific opinion, each of these credits tend to implicate demographics that are most likely to need customer service (or “empowering”) by the IRS. This is going to require a serious reimagining of the IRS and its priorities if it is a road we continue down.

Increasingly, I conceive of our Internal Revenue Code as an unholy Frankenstein (or “Frankenstein’s Monster,” to the literary buffs/pretentious readers out there). There is some vestige of the original structure and purpose, but over the years we have tacked on appendage after appendage to the point that it really isn’t one “thing” anymore. And we should probably stop pretending that it is.

Scholars sometimes talk about the historical transition of American taxation from “Class Tax” to “Mass Tax” during World War II. We are living in something akin to a third phase now. It isn’t that more people have to pay federal income taxes (“Mass Tax II”). It’s that more people than ever have to file federal income tax returns. (I tried to find something that rhymes with either “Class/Mass” or “Tax” to cleverly anoint this third phase. I failed.)

The stated goal of the IRS was to “empower and enable all taxpayers to meet their tax obligations.” I think that goal, in itself, reflects part of the problem. In this third phase, I would bet so many of the phone calls the IRS gets have nothing to do with trying to “meet their tax obligations.” They have to do with receiving their tax benefits. The IRS (and perhaps Congress) needs to begin conceptually separating “delivering tax benefits” as distinct from “meeting tax obligations.” See Nina Olson’s post, walking through some of her advocacy efforts on that sort of reorganization.

Frankly, I have some reservations about the choice to go down that road with the tax code. But at this point one must acknowledge that we’ve already taken so many steps down it to begin with.

The Top Ten Procedurally Taxing Posts of 2021

As 2021 comes to a close, Procedurally Taxing has been around for over eight years.  When we kicked it off in 2013 with Welcome to Procedurally Taxing, we did not know precisely how the blog would evolve. With over 3,400 subscribers and closing in on two million views, the blog has exceeded our expectations.  Stay tuned, as we will be announcing some changes and new features in the new year.

What were the most viewed posts of the year?

read more...

Not surprisingly issues relating to economic impact payments and the receipt of refunds when there is a hardship topped the list. Those posts reflect the needs of not only practitioners but also taxpayers who at times are desperate for information concerning access to needed refunds. To that end, the top post of the year was Keith’s post, Requesting an Offset Bypass Refund and Tracing Offsets to Non-IRS Sources. That post is our all time reigning champ, having generated over 93,000 views since its 2015 posting.

Also on the list was my favorite post of the year, Biden Administration Floats Refundable Pet Tax Credit Idea to Boost Child Tax Credit. With the Build Back Better legislation currently stalled, we will have to wait until 2022 to see if Congress will enact that piece of legislation.

Here is the complete top ten list, including posts that were published in prior years:

  1. Requesting an Offset Bypass Refund and Tracing Offsets to Non-IRS Sources (Keith Fogg)
  2. Offset of Injured Spouse Stimulus Payment (Keith Fogg)
  3. How Will I Get My CARES Stimulus Payment if my Preparer Paid My Refund? (Connor Moran, guest post)
  4. Injured Spouse and Economic Impact Payments (Caleb Smith)
  5. Lost or Destroyed EIP Debit Card (Keith Fogg)
  6. Senators Question Commissioner About Company Offering Fee-Based Access to IRS Phone Lines (Leslie Book)
  7. Offsets in a Time of Coronavirus (Keith Fogg)
  8. Refunds, Offsets & Coronavirus Tax Relief (Barbara Heggie, guest post)
  9. My IRS Wishlist for 2021 – Part 1: The mail and return processing backlog (Nina Olson)
  10. Biden Administration Floats Refundable Pet Tax Credit Idea to Boost Child Tax Credit (Leslie Book)

What about for the posts that were published in 2021? Here are the top ten most viewed posts from this year.

  1. Senators Question Commissioner About Company Offering Fee-Based Access to IRS Phone Lines (Leslie Book)
  2. My IRS Wishlist for 2021 – Part 1: The mail and return processing backlog (Nina Olson)
  3. Biden Administration Floats Refundable Pet Tax Credit Idea to Boost Child Tax Credit (Leslie Book)
  4. The Current State of Taxpayer Service (or Lack Thereof) at the IRS (Nina Olson)
  5. Tax Court Announcement re Premature Assessments (Keith Fogg)
  6. Thinking Out Loud About the Advanced Child Tax Credit (Part 1) (Nina Olson)
  7. Can the IRS Ever Collect on Erroneous EIPs? (Caleb Smith)
  8. Congress to Consign IRC 6751(b) To The Graev? (Keith Fogg)
  9. Calculating the Collection Statute of Limitations (Keith Fogg)
  10. Major Change to Offer in Compromise Policy (Keith Fogg)

We wish our readers a happy and healthy new year.