IRC § 7803(c)(2)(B)(ii)(III) requires the National Taxpayer Advocate to prepare an Annual Report to Congress that contains a summary of the ten most serious problems encountered by taxpayers each year. For 2023, the National Taxpayer Advocate has identified, analyzed, and offered recommendations to assist the IRS and Congress in resolving ten such problems.
For each of the ten Most Serious Problems we identify in this report, At a Glance summarizes what taxpayers want from the IRS, explains why the problem is serious, and provides some key statistics. The section “what taxpayers want from the IRS” comes directly from an IRS survey about taxpayer attitudes and preferences. The goal is to give the reader the ability to quickly glance over the material and grasp some of the impediments that must be overcome to improve service to taxpayers.
Ongoing Processing Delays Burden and Frustrate Taxpayers Awaiting Refunds and Other Account Actions
In 2023, millions of taxpayers once again experienced significant burden and frustration while awaiting refunds or other IRS actions necessary to comply with their tax obligations and resolve tax account issues. These delays not only have negative financial implications for taxpayers awaiting refunds but also for the government, as the IRS must pay interest on overpayments it does not timely refund.
Shortcomings in the IRS’s Employee Hiring, Retention, Recruitment, and Training Programs Adversely Affect the Quality of Taxpayer Service the IRS Provides and Undermine Effective Tax Administration
Public trust in the IRS is at the core of our nation’s system of voluntary tax compliance and self-assessment. IRS staffing levels in the past decade have fallen to lows not seen since the 1970s. Insufficient staffing has caused the quality of taxpayer service to decline on telephone lines and at Taxpayer Assistance Centers and significant IRS processing delays to arise. Even when the IRS can recruit enough staff, it struggles to attract, onboard, retain, and train the talent it needs because of “[i]neffective and outdated policies, technologies and processes.”
The IRS Still Does Not Provide Sufficient Clear and Timely Information to the Public, Causing Confusion and Frustration and Complicating Agency Oversight
Some taxpayers and tax professionals still struggle to access information from the IRS, including finding clear and timely guidance on which they can rely, determining the status of pending issues, understanding IRS correspondence and whether they must respond to it, and reaching an IRS employee with the knowledge to answer their questions and the authority to resolve their problems.
Taxpayers Continue to Experience Difficulties and Frustration Obtaining Telephone and Face-to-Face Assistance to Resolve Their Tax Issues and Questions
When taxpayers call the IRS, they expect and deserve quality service without suffering long wait times. The IRS’s Level of Service (LOS) metrics tell taxpayers nothing about how many calls the IRS transferred, whether taxpayers had to call multiple times, and whether the taxpayer ultimately received the information they needed. Although the IRS significantly improved phone service over the past year, the way the IRS calculates LOS paints a picture far more optimistic than the reality of the taxpayer’s experience when calling for assistance and does not address “quality service.” Tax professionals have been frustrated with the wait times and low LOS, incurring unnecessary costs due to IRS delays or customer service representatives’ inability to answer questions. Taxpayers who need face-to-face service can make an appointment to visit Taxpayer Assistance Centers (TACs) for free tax help to address their tax questions and receive support if they face language barriers. Although TACs exist throughout the United States, several states have just one TAC location, and many are not fully staffed or operate on a limited schedule causing challenges for taxpayers.
Taxpayers Are Harmed by the Absence of Minimum Competency Standards for Return Preparers
Even though tax return preparers prepare over half of the individual returns filed each year, many have no credentials and are subject to no minimum standards. Because taxpayers bear responsibility for the accuracy of their own returns, inept or dishonest preparers harm taxpayers by subjecting them to unanticipated tax deficiencies, interest, overpaid taxes, or lost refunds.
Lengthy Issue Resolution Delays and Inadequate Notices Burden Taxpayers Who Are Victims of Identity Theft or Whose Returns the IRS Has Flagged for Possible Identity Theft
Individuals who are victims of tax-related identity theft are waiting an average of nearly 19 months for the IRS to process their returns and send their refunds. Yes, you read that correctly: for many victims, that’s more than a year and a half! During the pandemic, the IRS’s policy decisions to prioritize other areas (such as shuffling employees to answer telephone lines) contributed to these unreasonable processing delays that continued throughout 2023 and are expected to continue into 2024. But there is a second group of taxpayers also harmed. Each year, the IRS flags millions of returns for potential identity theft. Taxpayers who have filed legitimate returns deal with inadequate notices and difficulties authenticating their identity. Until a taxpayer completes authentication, the IRS cannot process their tax return or send their refund.
Digital Services Remain Inadequate, Impeding Efficient Case Resolution and Forcing Millions of Taxpayers to Call or Send Correspondence to the IRS
Taxpayers and tax professionals lack a comprehensive online account with integrated digital communication tools to access tax information and services. When taxpayers cannot quickly communicate with the IRS to resolve issues digitally, it negatively affects the taxpayer experience, which in turn impacts taxpayers’ overall satisfaction and trust in the IRS.
The IRS’s Approach to International Information Return Penalties Is Draconian and Inefficient
U.S. persons who receive money from abroad or who have certain foreign financial interests and cross-border business activities are potentially subject to a wide range of U.S. reporting requirements. Many of these requirements come with significant penalty exposure when a filing is late, incomplete, or inaccurate. These international information return penalties harm sometimes unsuspecting lower-income taxpayers, small businesses, and immigrants. The majority of these penalties are automatically assessed, broadly applied, needlessly harsh, and often unexpected.
Taxpayers Abroad Continue to Be Underserved and Face Significant Challenges in Meeting Their U.S. Tax Obligations
Taxpayers abroad face vast difficulties in complying with their U.S. tax obligations. Many find themselves trying to navigate a complex tax system they do not understand, and the IRS offers limited assistance and guidance. Taxpayers lack accessible, real-time customer service assistance from the IRS, and help from private tax professionals, if available, is often expensive; both contribute to additional burden for these taxpayers. Taxpayers abroad may face severe penalties if they fail to file forms, some of which they may not even be aware. The complexity of the tax code, the inability to easily comply, and the fear of severe penalties are so great that some taxpayers choose to relinquish their U.S. citizenship.
Despite Some Improvements, Many Taxpayers and Tax Professionals Continue to Perceive the IRS Independent Office of Appeals as Insufficiently Independent
The lack of independence and operational efficiency in the IRS Independent Office of Appeals (Appeals) process undermines taxpayer trust and prolongs dispute resolution. When taxpayers are unable to resolve their issue in Appeals or question the impartiality of Appeals, they may opt for costly litigation instead, adding financial and emotional strain. These issues erode confidence in the tax system, are burdensome, and compromise the taxpayer’s statutory right to appeal an IRS decision in an independent forum.
