IRS RESPONSE TO RECOMMENDATION: Since the release of the Strategic Operating Plan (SOP) in April 2023, the IRS has communicated accomplishments regularly through press releases and internal leadership updates, and will continue to do so on no less than a quarterly basis. The IRS has also begun developing the SOP annual progress update that will be released annually.

In December, the IRS completed the initial version of an IRA Integrated Enterprise Roadmap that converts the strategic vision laid out in the IRA SOP into an implementable program plan that can be efficiently executed and effectively managed with tangible outcomes and key results with specific deadlines. The IRS will continue to update the Roadmap and include performance metrics where appropriate.

CORRECTIVE ACTION: The IRS has communicated accomplishments regularly through press releases and internal leadership updates, and will continue to do so on no less than a quarterly basis. The IRS has also begun developing the SOP annual progress update that will be released annually. The IRS will continue to update the Roadmap and include performance metrics where appropriate.

Update:
An SOP Annual Update was provided in May 2024 – this was the first update and it will be issued annually.
The IRA Advisory Council continues to meet. The National Taxpayer Advocate is a member of the Council.

TAS RESPONSE: Since TAS received the IRS response, the IRS released its 2024 IRA SOP Annual Update and Annual Update Supplement. To ensure accountability, annual updates to the SOP should provide a comprehensive account of progress on the SOP, not just the status of currently prioritized goals. The updates should be objective and not seek to overstate successes or minimize setbacks, and they should clearly state when the IRS has added new initiatives or materially changed or deprioritized initiatives in the original SOP. The IRS should either make the IRA Integrated Enterprise Roadmap public or release an equivalent document for external stakeholders that shows the key goals, performance metrics, and deadlines.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: There is a lot the IRS is learning from the Direct File pilot. After the conclusion of the pilot, we will be sharing information about the pilot, including data, lessons learned, and updated cost estimates.

CORRECTIVE ACTION: After the conclusion of the Direct File pilot, we will be sharing information about the pilot, including data, lessons learned, and updated cost estimates.

IRS provided a copy of the May 3, 2024 Publication 5969, IRS Direct File Pilot Program, Filing Season 2024 After Action Report which contains all of the details TAS requested in the recommendation.

TAS RESPONSE: Since TAS received the IRS response, the IRS released its Direct File Pilot Program Filing Season 2024 After Action Report, which includes analysis, lessons learned, and the costs of delivering the pilot. The report notes that the IRS had not yet developed its estimate of the future costs of delivering Direct File but stated it would be “available in the next few weeks.” As of the writing of these comments, the IRS has not yet released that estimate on the future costs of Direct File. On May 30, 2024, the IRS announced that it will make Direct File a permanent option.

The IRS should release fully transparent estimates of the future costs of delivering Direct File. The Direct File Pilot Program Filing Season 2024 After Action Report says that the IRS spent $13 million on pilot development and implementation. For 140,803 accepted returns, this translates to about $92 per accepted return, far above the roughly $10-$13 per return in anticipated costs (based on the estimated cost range of $64.3 million to $248.9 million for five to 25 million returns, respectively). As the report notes, the novelty and limited design of the pilot affected these cost averages. However, future cost estimates should thoroughly explain all assumptions on why estimated costs per return would decrease in future years. While TAS continues to believe that taxpayers should have filing options at low or no cost, the cost and feasibility of the Direct File program must be carefully balanced with funding needs for other important taxpayer services.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: The IRS actively seeks ways to incorporate taxpayer perspectives into the planning, design, and execution of its operations, including modernization initiatives. The IRS established an office, the Taxpayer Experience Office (TXO), specifically designed to identify, synthesize, and report taxpayer views. The IRS structured TXO to work with IRS Business Operating Divisions to integrate taxpayer needs and priorities into daily operations and modernization activities.

For example, the TXO uses a variety of mechanisms to gather taxpayer feedback on an array of issues from modernization efforts to specific systems to particular tax forms. These mechanisms include a suite of widely used customer insight tools such as a diverse set of survey instruments, taxpayer focus groups, and quantitative analysis from internal and external databases. After gathering this feedback, the TXO has internal capabilities to review that feedback and distill recommendations.

As such, the IRS (TXO) partially agrees with this recommendation. To address the underlying intent of Recommendation 3-3, the IRS (TXO) will continue to pursue its existing efforts to solicit and utilize taxpayer feedback on modernization efforts. In addition, it will create a landing page by December 31, 2024, to share IRS modernization initiative efforts and centralized access to available avenues for taxpayers to provide feedback.

CORRECTIVE ACTION: To address the underlying intent of Recommendation 3-3, the IRS (TXO) will continue to pursue its existing efforts to solicit and utilize taxpayer feedback on modernization efforts. In addition, it will create a landing page by December 31, 2024, to share IRS modernization initiative efforts and centralized access to available avenues for taxpayers to provide feedback.

TAS RESPONSE: TAS recognizes the important work that TXO does to gather and effectively use taxpayer feedback, and TAS supports the plan to create a landing page that will share IRS modernization initiative efforts and explain to taxpayers how they can provide feedback. The recommendation of the landing page is to supplement, not replace, other IRS outreach efforts. Taxpayers and stakeholders should have access to a centralized site where they can find information on how to provide input on all IRS modernization efforts. Expeditiously providing this information to stakeholders is important so they can provide input prior to the IRS making key modernization decisions.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2024

IRS RESPONSE TO RECOMMENDATION: ​Taxpayers will be notified when the IRS has made changes and updated features to its online tools. IRS will conduct an evaluation of the existing tools taxpayers utilize through IRS.gov and the necessity for notifications on updates/changes to the online capabilities. The evaluation will identify the tools that will require an appropriate course of action. We will work with internal partners such as IT, UES and IRS.gov to identify solution(s) that would provide the largest benefit to taxpayers.

CORRECTIVE ACTION: IRS will conduct an evaluation of the existing tools taxpayers utilize through IRS.gov and the necessity for notifications on updates/changes to the online capabilities. We anticipate the evaluation and solution phase to be complete by the end of FY24. Implementation timelines will depend on the identified solution and the current prioritized IRA and legislative scope of work. We will work with internal partners such as IT, UES and IRS.gov to identify solution(s) that would provide the largest benefit to taxpayers.

TAS RESPONSE: As the IRS notes in its 2024 update to the Strategic Operating Plan, the expansion of digital tools is a key part of the IRS’s vision for transforming taxpayer guidance. Taxpayers already rely on certain IRS tools to determine what to report on their tax returns and claims. When the IRS materially changes those tools, taxpayers need to know so that they can update their positions accordingly. The IRS needs to be clear on how they will be notifying taxpayers. For example, will the tool have a banner across the top with the corrections or increased functionality? Will the IRS be posting updates to IRS.gov, issuing press releases, or when appropriate, contacting taxpayers directly with the information?

The recent Direct File 2024 After Action Report provides a good example of why this matters. The report notes that the IRS identified three bugs during the pilot that affected the accuracy of 26 returns. After fixing the bugs, the IRS tried to correct at least some of the errors on taxpayer returns by using its math error authority. Although these remedial efforts are helpful, the IRS may not be aware of all the ways that these bugs may have affected taxpayers. Also, the use of math error authority may not fix all problems and may be confusing to taxpayers who receive these notices. Adding an explanation of material changes to the product online would allow taxpayers and tax professionals to self-identify whether their return was affected. Many IRS online tools already have FAQ pages and landing pages that would serve as good locations for alerts or notices regarding material changes to the product.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing

IRS RESPONSE TO RECOMMENDATION: The IRS has a notification process in place when correspondence is received from a taxpayer or an authorized representative. Once mail receipts are identified as account related correspondence, they are date stamped with the IRS received date, bundled, and prescreened to determine what can be closed quickly. Correspondence requiring additional work by is scanned and sent to be worked by more experienced employees and assigned based on the IRS received date.

The Correspondence Imaging Inventory (CII) programming automatically issues interim letters for dates 27 days or longer from the IRS received date. Interim letters inform the taxpayer we received their correspondence and provide an initial allotment of processing time. Subsequent interim letters are issued at appropriate intervals, normally 30 days, based on the time frame established from the previous letter. In June 2023, the Inflation Reduction Act, Transformation and Strategy Office (IRA TSO) announced a Treasury-sponsored effort to allow taxpayers, or their tax professional, to respond to notices and IRS letters using the Document Upload Tool (DUT) rather than through regular mail. This reduces communication timeframes and most cost effectively resolves taxpayer issues.

Taxpayers can use the tool to upload scans, photos, or digital copies of documents and get confirmation that we received the documents. This tool reduces the correspondence burden on taxpayers, allows for immediate delivery of information required to resolve an account issue, and helps decrease case processing time. The IRS began including online correspondence as an option for nine of the notices and letters and deployed them at the end of September 2023. They include: CP04, relating to combat zone status; CP05A, information request related to a refund; CP06 and CP06A, relating to the Premium Tax Credit; CP08, relating to the Child Tax Credit; CP09, relating to claiming the Earned Income Tax Credit; CP75, relating to the EITC; CP75A, relating to the EITC; and CP75D, relating to the EITC and other credits.

In addition, the IRS identified 53 other notices that could be appropriate for this type of secure digital communication. As part of the IRA Initiative 1.2: Expand digital services and digitalization, the IRS will be assessing the viability and technology of including these notices, as well as continuing to look for additional suitable notices to provide this online feature. Refer to https://www.irs.gov/newsroom/irs-expands-secure-digitalcorrespondence-for-taxpayers for information about the using the DUT and qualifying notices.

In January 2024, we launched a new dashboard page where taxpayers can find current wait times for correspondence, key forms, letters, and notices. It is located at https://www.irs.gov/help/processing-status-for-tax-forms. The facts and circumstances for each taxpayer’s issue(s) will factor into resolution time frames.

CORRECTIVE ACTION: The IRS identified 53 other notices that could be appropriate for this type of secure digital communication. As part of the IRA Initiative 1.2: Expand digital services and digitalization, the IRS will be assessing the viability and technology of including these notices, as well as continuing to look for additional suitable notices to provide this online feature.

TAS RESPONSE: The expanded use of the DUT and other digital communication is an important step in the right direction, and TAS looks forward to their continued implementation and development. While the dashboard provides concise information on the general status of IRS operations and wait times, the IRS needs to continue to develop methods of providing up-to-date information to taxpayers that is specific and accurate to their personal situation.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing

IRS RESPONSE TO RECOMMENDATION: ​In January 2024, we launched a new dashboard page where taxpayers can find current wait times for correspondence, key forms, letters, and notices. It is located at https://www.irs.gov/help/processing-status-for-tax-forms. The facts and circumstances for each taxpayer’s issue(s) will factor into resolution time frames. We will expand information available on this page in future versions.

CORRECTIVE ACTION: In January 2024, we launched a new dashboard page where taxpayers can find current wait times for correspondence, key forms, letters, and notices. It is located at https://www.irs.gov/help/processing-status-for-tax-forms. The facts and circumstances for each taxpayer’s issue(s) will factor into resolution time frames. We will expand information available on this page in future versions.

TAS RESPONSE: The new dashboard page provides current wait times but does not yet include the information described in the recommendation. As stated on the dashboard webpage, the dashboard does not include any information on returns that require error correction or other special handling. As the dashboard is expanded, the IRS needs to be transparent and should include information on the total number of returns in inventory, number of returns held beyond normal processing times, number of returns in suspense status, and the anticipated timeframes for working through them while acknowledging that the situation is fluid and timeframes may change along with circumstances.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: The IRS will publish any related counsel advice and final updated policies and procedures as required by law, taking into consideration the IRS’s legal obligation to protect taxpayers’ return information, deliberative discussions, and privileged information.

The IRS and Chief Counsel have taken steps to ensure that only properly approved penalties are being pursued. In addition to a thorough internal review of penalty approval practices, which included a review of all syndicated conservation easement cases, the IRS conducted mandatory penalty approval training for all Large Business & International examiners and managers involved in the development and approval of penalties and for all Small Business/Self-Employed Field Examination examiners and managers. Chief Counsel conducted mandatory training for Chief Counsel attorneys and managers as well. In addition, the IRS and Chief Counsel continue to review compliance with section 6751(b) and are committed to ensuring transparency and taking appropriate corrective action.

CORRECTIVE ACTION: The IRS will publish any related counsel advice and final updated policies and procedures as required by law, taking into consideration the IRS’s legal obligation to protect taxpayers’ return information, deliberative discussions, and privileged information.

The IRS and Chief Counsel continue to review compliance with section 6751(b) and are committed to ensuring transparency and taking appropriate corrective action.

TAS RESPONSE: TAS commends the Office of Chief Counsel for treating this issue seriously and taking steps, including trainings, to ensure that similar problems do not arise in the future. TAS would nonetheless recommend that the IRS and Chief Counsel publish a statement about how the review was conducted in addition to the above-stated materials that the IRS is already legally obligated to publish. To build trust in our system, the IRS should draft a statement to provide transparency into the investigation and its findings without disclosing taxpayer return information, deliberative discussions, or privileged information.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): Ongoing