Release of NTA Objectives Report Paints Bleak Picture

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This past week the Obama Administration announced an initiative, ConnectHome, to help bring internet access to more Americans. The plan is meant to address the fact that there is a wide gap in internet access, with many lower-income Americans lagging behind. From the press release announcing the plan to partner with the private sector and nonprofits to bring access to 275,000 households in 27 cities:

[A] new analysis released today by the President’s Council of Economic Advisers (CEA)  illustrates that some Americans are still unable to benefit from high-speed broadband, especially America’s lower-income children.  In fact, while nearly two-thirds of households in the lowest-income quintile own a computer, less than half have a home internet subscription.

How does this fit in with tax administration? Well, this past week the NTA released the FY 2016 Objectives Report. There is lots to digest, but in my review of the press release and introductory remarks the report paints a very depressing picture for tax administration and in particular those without the resources to outsource the burdens of tax compliance or access to the internet to meaningfully engage in self-help. A link to the press release describing the report is here; the NTA’s preface with her sobering introductory remarks is here. The entire report can be accessed here.

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The press release accompanying the Objectives Report paints a depressing picture of the abysmal service delivered to taxpayers during the recent filing season:

  • The IRS answered only 37 percent of taxpayer calls routed to customer service representatives overall, and the hold time for taxpayers who got through averaged 23 minutes. This level of service represents a sharp drop-off from the 2014 filing season, when the IRS answered 71 percent of its calls and hold times averaged about 14 minutes.
  • The IRS answered only 39 percent of calls from taxpayers seeking assistance from TAS on the National Taxpayer Advocate (NTA) Toll-Free hotline, and hold times averaged 19 minutes. TAS serves as the IRS’s “safety net” for taxpayers who are experiencing a financial or systemic hardship as a result of IRS action or inaction.
  • The IRS answered only 17 percent of calls from taxpayers who called after being notified that their tax returns had been blocked by the Taxpayer Protection Program (TPP) on suspicion of identity theft, and the hold times averaged about 28 minutes. In three consecutive weeks during the filing season, the IRS answered fewer than 10 percent of these calls.
  • The IRS answered only 45 percent of calls from practitioners who called the IRS on the Practitioner Priority Service line, and hold times averaged 45 minutes.
  • The number of “courtesy disconnects” received by taxpayers calling the IRS skyrocketed from about 544,000 in 2014 to about 8.8 million this filing season, an increase of more than 1,500 percent. The term “courtesy disconnect” is used when the IRS essentially hangs up on a taxpayer because its switchboard is overloaded and cannot handle additional calls.
  • The decline in telephone performance can be attributed largely to three factors: The number of taxpayer calls routed to telephone assistors increased by 41 percent, the number of calls answered by telephone assistors decreased by 26 percent, and the average call duration increased by 10 percent.
  • The IRS sharply restricted the availability of paper copies of forms and publications, imposing burden on taxpayers without Internet access or online literacy. The IRS’s own Taxpayer Assistance Centers (TACs) and its Tax Form Outlet Partners such as libraries and post offices did not receive forms until February 28, almost halfway through the filing season. Once a TAC ran out of forms or publications, it could not order more.

For a system that relies on people to voluntarily comply with their tax obligations, the above shows that our tax system is in trouble. As the NTA describes, enforced compliance accounts for only 2% of all tax collections. People comply with the tax laws (or choose not to comply) for all sorts of reasons. The NTA recommends that the IRS use some of the challenges she describes as an opportunity to revisit its priorities. According to the NTA, IRS should transform itself to better serve the needs of the vast majority of Americans who want to comply with the tax laws, rather than focus on those that do not:

By shifting its focus, the IRS would not give up one whit of its power or any of its tools for fighting tax evasion. Indeed, it is important to the willingly compliant U.S. taxpayers that the IRS take action against those who are breaking the law. But enforcing the law against evaders should not be the organizing principle of the agency, as it is in reality today. Rather, helping taxpayers achieve and maintain voluntary compliance should be the IRS’s raison d’être.

This seems like a very good starting point as IRS goes about its business of trying to deliver services in a time of increased responsibilities and tight budgets.

For those who want to read more in the report, the following may be helpful. The report is organized as follows:

Part I of the Report is itself broken up in to seven main sections.

The first section has a useful summary of the recent filing season, and then the second moves on to eleven separate areas of focus. After the focus areas, there are sections on TAS Research (including what looks like an interesting study looking at compliance trends five years out for taxpayers who sought TAS assistance and those that did not), TAS Technology, and appendices (with useful beach reading like a comprehensive list of tax administration acronyms and the addresses and names of all tax clinics).

In my opinion, the heart of the report is in its discussion of the separate “areas of focus.” Those areas are the following:

  • Identity Theft Procedures
  • Refund Procedures for Victims of Preparer Fraud
  • ACA Administration
  • FATCA Administration
  • IRS Procedures for Levies on Retirement Accounts
  • Low-Income Taxpayers at Risk With IRS Move to Self-Service Administration
  • Appeals Timelines and Taxpayer Rights
  • IRS Administration of Tax Exempt Applications
  • The Need for International Taxpayer Advocates
  • Implementation of Taxpayer Bill of Rights
  • Need to Have Better Review Process for IRS Guidance

Volume II of the report has IRS comments and NTA responses to the most serious problems that were raised in the 2014 Annual Report.

I have not had time to read the entire report. There are a number of points in the focus areas we have discussed on PT over the past few months (e.g., identity theft taxpayer rights), and I look forward to learning more. I am most interested in the discussion of the IRS’s procedures on levying retirement accounts, especially after reading one of the most depressing tax cases of the year, Gurule v Comm’r, that Steve discussed in Sum Op a couple of months ago (for those questioning the value of CDP, I encourage a read of the case which shows why it is vital to have some judicial check on IRS collection determinations).

About Leslie Book

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

Comments

  1. Carl Smith says

    Although reading the report is pretty depressing, I wanted to point out one very good thing that the IRS reported in its responses to the TAS report of 12/31/14. On page 70 of Vol. II, the IRS states:

    The programming change required to exclude taxpayers receiving Social Security Disability Insurance (SSDI) payments from the Federal Payment Levy Program (FPLP) is to Bureau of Fiscal Service (BFS) system. We have requested that BFS update their system as quickly as possible. BFS has advised that they are completing programming to exclude SSDI payments from the FPLP and that the programming will be completed in October 2015.

  2. Thanks for the summary. I’ve skimmed the Report but won’t have time to digest it for quite a while. Two things I want to mention:
    1. Taxpayer noncompliance: Your post contains the following sentence:

    “People comply with the tax laws (or choose not to comply) for all sorts of reasons.”

    I don’t remember if the words “or choose not to comply” appeared in Nina’s report, but I think it would have been preferable to say “or fail to comply,” to eliminate the implication that non-compliance results from a conscious decision by those who fail to comply. As you recognize, much if not most noncompliance is unintentional.

    2. “Courtesy Disconnects.” This is hardly a good descriptive term. How can an organization that is as large as the IRS and that receives so many millions of calls not have a system that tells callers at the beginning of a call that their call can’t be handled at that time? I had two different experiences yesterday: First, I waited on PPS for the 15-30 minute stated estimated hold time. After 30 minutes, I got the chime that indicated I was being transferred to an assister – and then I was disconnected. I called right back, sat through another 15-30 minute hold time, and then AFTER 30 minutes I received a “courtesy disconnect!” An hour later, I called PPS again, using the same option as on the prior calls, but this time I was told RIGHT AWAY that my call couldn’t be handled and was asked to call again the next day. THAT was “courteous.”
    There’s no excuse I can think of to allow a caller to sit through the pre-announced estimated hold time and then to have the system terminate the call – that’s not a “courtesy disconnect.” It’s about as discourteous as you can get, short of being verbally abused. It’s just the kind of procedure that seems intentionally designed to anger the caller. It’s also the kind of thing that ends up being cited at a Congressional hearing as evidence of IRS’s intentional disregard for the way its procedures waste taxpayers’ time.

  3. Bob Kamman says

    Now that Chicken Little has reminded us that the sky is falling, let’s go for a ride in the Time Machine to see how this compares to six years ago. From the NTA Annual Report for 2009:

    “In response to the declining levels of phone service, the IRS has set goals of 71.2 percent
    for CSR LOS and 698 seconds for ASA in fiscal year 2010. In other words, the IRS has set its priorities so that nearly three out of every ten calls seeking to reach an IRS telephone assistor will not get through, and callers who do receive assistance will first have to wait on hold for an average of nearly 12 minutes.”

    http://www.irs.gov/pub/tas/msp_1.pdf

    Does this prove that Congress was right to make budget cuts? IRS did about as well this year, as it planned to do in the flush days of yesteryear. And compared to 2008, when it achieved a telephone call site level of service of only 50%, IRS earns accolades for its 40% increase in productivity for 2015 to more than 70%.

    Most of this is smoke and mirrors anyway. As the 2009 report footnotes, “ CSR LOS is not a measurement of the total number of callers to the toll-free lines who speak with a customer service representative.” The formula for estimating how many individuals are represented by a count of busy signals, is “by guess and by golly.” Does anyone really believe that only 17% of taxpayers who received the identity-theft notice actually got through to someone? The more logical explanation is that they endured many more busy signals because of the urgency of their problem.

    IRS decided nearly 40 years ago to build a Chinese Wall between Taxpayer Service and Compliance. Its tax auditors and revenue officers were deemed incapable of helping 98% of taxpayers two months of the year, while enforcing laws for the other 2% during the other ten months. Compliance employees were happy with this decision, because they considered taxpayer service a menial task compared to their primary duties.

    Maybe that was the right decision by IRS managers in the 1970s, and maybe it’s still the right attitude today by the army of enforcers who could otherwise be available to help out the battalion of assistors. But it’s odd that no one ever suggests that perhaps IRS culture, and the world, have changed enough to take a second look.

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