2019 Objectives Report to Congress

FY 2019 Objectives Report to Congress

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Report Highlights

Preface

The National Taxpayer Advocate discusses the IRS’s delivery of tax reform, but at what cost? She examines the state of the IRS Customer Experience and its lag behind others in government and private industry. She addresses the IRS’s key challenges in improving customer experience and maintaining voluntary compliance in terms of taxpayer service, online services, enterprise case management, underlying IT systems, automation, artificial intelligence and big data, geographic presence, and IRS personnel challenges. She asks taxpayers, tax professionals, the Administration, and Congress to carefully consider what the IRS should look like in the 21^st century.

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Volume II

The National Taxpayer Advocate is required by statute to submit a year-end report to Congress that, among other things, describes at least 20 of the most serious problems facing taxpayers and makes administrative recommendations to mitigate those problems. The report released today includes a second volume containing the IRS’s general responses to each of the problems the Advocate identified in her 2017 year-end report as well as specific responses to each recommendation. In addition, it contains TAS’s analysis of the IRS’s responses and, in some cases, details TAS’s disagreement with the IRS’s position.

Full Report

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“In this environment, it is critical for the IRS to direct its resources where they have the greatest positive effect on achieving tax compliance, particularly voluntary tax compliance. Importantly, voluntary tax compliance is heavily linked to customer service and the customer experience.”

Nina E. Olson, National Taxpayer Advocate

Selected Area of Focus

Review of the 2018 Filing Season

During the 2018 filing season, the IRS processed most returns successfully, but taxpayers needing help from the IRS faced a more challenging experience. The IRS could not answer the majority of the calls it received, especially on its compliance telephone lines. It served fewer taxpayers who sought help at Taxpayer Assistance Centers (TACs) and continued to answer only a limited scope of tax law questions. Its identity theft and pre-refund wage verification filters and certain processing glitches significantly delayed refunds for hundreds of thousands of taxpayers who filed legitimate returns, harming some taxpayers and creating additional work for the IRS.

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Taxpayers Need More Guidance and Service to Understand and Comply With the TaxCuts and Jobs Act

Implementing tax reform will be a major effort in fiscal years 2018 and 2019. It requires the IRS to reprogram 140 systems and create or revise about 450 forms, instructions, and publications. The IRS’s Tax Reform Implementation Office and Tax Reform Implementation Council have developed a plan containing over 9,000 tasks. The IRS will deliver tax reform, but at what cost?

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The IRS’s Failure to Create an Omnichannel Service Environment Restricts Taxpayers’ Ability to Get Assistance Using the Communication Channels That Best Meet Their Needs and Preferences

To develop an omnichannel environment, the IRS should examine why taxpayers prefer and choose particular channels and optimize all aspects of that experience instead of attempting to modify their behavior. The factors most likely to shape a taxpayer’s experience seeking assistance with the IRS are the ease of accessing a particular resource, the effectiveness of that resource in addressing the taxpayer’s problem, and the emotional impact of the interaction. A favorable customer experience creates a sense of customer loyalty, which is crucial to a relational approach to taxpayer service and can increase voluntary compliance.

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The IRS’s Enterprise Case Management Project Shows Promise, But to Achieve 21st Century Tax Administration, the IRS Needs an Overarching Information Technology Strategy With Proper Multi-Year Funding

The current state of IRS technology substantially limits the IRS’s ability to carry out effective tax administration. An adequately funded, staffed, and skilled IRS IT function underpins all core tax administration activities, including taxpayer service, prompt issuance of refunds, selection and assignment of compliance work, and protection of taxpayers and the public from refund fraud and identity theft.

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High False Detection Rates Associated With Fraud Detection and Identity Theft Filters Unnecessarily Burden Legitimate Taxpayers

Tax refund fraud remains a significant concern for the IRS and taxpayers. As the nature of tax refund fraud schemes evolves, its becomes even more important for the IRS to design and implement targeted filters, rules, and data mining models to combat increasingly sophisticated refund fraud schemes while minimizing the rate at which the IRS incorrectly treats legitimate taxpayers as participants in those schemes (i.e., the false detection rate).

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The IRS’s Private Debt Collection Program, Which Has Yet to Generate Net Revenues, Continues to Unnecessarily Burden Taxpayers Experiencing Economic Hardship and Produces Installment Agreements With High Default Rates

The IRS implemented the current Private Debt Collection (PDC) initiative more than a year ago. Though the program generated net revenue in fiscal year 2018, it has not yet broken even. Additionally, the program continues to burden taxpayers who are likely experiencing economic hardship and appears to result in installment agreements with high default rates.

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Some IRS Procedures for the Certification Program Related to Denial or Revocation of Passports Ignore Legislative Intent and Impair Taxpayer Rights

In early 2018 the IRS began implementing the legislatively-directed program to certify taxpayers’ seriously delinquent tax debts to the Department of State and had certified 9,356 taxpayers as of May 4, 2018. The IRS’s passport certification notice is inadequate because it provides only two options for taxpayers to prevent the Department of State from denying, revoking, or limiting a taxpayer’s passport, and fails to inform taxpayers of emergency and humanitarian exceptions.

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