Don't Mess With Taxes

David Boeke via Flickr

The Internal Revenue Service got billions in added funding thanks to the Inflation Reduction Act, but money is still key.

Specifically, Uncle Sam's tax agency needs "consistent and multi-year funding … to achieve its goals of providing efficient, effective, modern service to the nation's taxpayers," according to the Internal Revenue Service Advisory Council's (IRSAC) 2022 annual report.

The IRSAC report lauds the Inflation Reduction Act's fiscal boost as a "once-in-a-generation opportunity to upgrade the IRS's service, enforcement, and IT capabilities." However, IRSAC members point out that the measure "was largely partisan legislation and may not foreshadow the broader bipartisan support necessary to sustain the IRS's policy objectives over the long term."

In addition to the perennial money considerations, this latest report also offered recommendations on IRS modernization efforts, improvements to the taxpayer experience while fulfilling tax enforcement efforts, transitioning taxpayers to a more digital experience, and expanded communication between the IRS and its diverse taxpaying clientele.

Modernization is a vital first step: Most of these efforts will stem from the IRS' ability to upgrade its physical systems and approaches to its myriad responsibilities.

"The adverse effect of antiquated IRS systems on taxpayers should not be underestimated," notes the IRSAC report. "The [COVID-19] pandemic highlighted this situation with unprecedented constituent complaints to Congressional members about IRS processing bottlenecks and refund delays."

Speaking to and with, not at, taxpayers: The IRS needs to make it clear to taxpayers that it is working for them. A key way, notes the IRSAC report, is through messaging about the agency's modernization that is "less functional and more personal."

Essentially, the IRS needs to use more plain language in its taxpayer outreach. For example, the report says the message "deliver a fully digital experience" can be rephrased in a more taxpayer-centric way as "Taxpayer 24/7 on-demand access to IRS services."

The panel also suggests more graphic communications. Such visuals often make the IRS message easier to grasp, such as the IRSAC created graphic below detailing IRS modernization plan objectives.

More Capitol Hill show than tell: IRSAC members also suggest that such real-life based outreach extend to members of Congress and Capitol Hill stakeholders. They need firsthand insights into the difficulty the IRS faces in supporting taxpayers.

Site visits to IRS information technology centers are helpful to demonstrate how the agency has modernized facilities. But from a taxpayer perspective, IRSAC says it may be more compelling if more elected officials could actually see or hear tangible examples of taxpayer (and IRS employee) challenges. This could be done through firsthand visits or video/audio media.

A key roadblock here, however, is limited access to IRS centers and facilities due to federal taxpayer confidentiality laws. However, IRSAC suggests for example that the Ways and Means or Senate Finance committees find ways to temporarily allow access — and still protect taxpayer privacy — so that Congressional staff would see firsthand the difficulties and inefficiencies that IRS employees experience.

Particularly problematic areas are —

• multiple internal IRS systems that agents must maneuver to respond to relatively simple taxpayer inquiries, and
• the volume of paper filings received at IRS facilities that might be eliminated or mitigated by carefully targeted mandates or increasing the number of forms that can be accepted by IRS for electronic filing.

Panel composition: The IRSAC serves as a federal advisory committee to the IRS commissioner. It is designed to serve as a public forum for discussion of relevant tax administration issues between IRS officials and the public.

IRSAC members come from the taxpaying public, the tax professional community, representatives of the low-income community, small and large businesses, tax-exempt and government entities, the payroll industry, and academia.

You can read more IRSAC recommendations in its 2022 annual report, also known as IRS Publication 5316.

And you also might find these previous blog posts of interest:

• IRS tax return backlog is dwindling
• IRS posts digital 'help wanted' sign for 700 more staff 
• IRS seeking VITA and TCE volunteers for 2023 tax season 
• IRS awards $41 million in grants to 348 VITA/TCE programs

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