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February 22, 2016
Koskinen, Olson to Face Off on Taxpayer Service 'Future State'
by William Hoffman

Full Text Published by Tax Analysts®

Under the IRS's "future state" vision for taxpayer service, taxpayers will be able to solve tax return filing problems in minutes that could've taken months before, according to the IRS's top executive, but the Service's taxpayer advocate counters that they might have trouble if they need to talk with an agency representative on the phone.

IRS Commissioner John Koskinen and National Taxpayer Advocate Nina Olson have for months been locked in a dispute over what the agency's future state initiative will mean for the 20 million U.S. taxpayers who still file their tax returns on paper; how the poor without access to the Internet and elderly without inclination to learn it will be served; and what risks and rewards tax practitioners and taxpayers will need to balance if the program is to be a success. In fact, Olson made the initiative the focus of her most recent report to Congress, saying the future state vision "redefines tax administration into a class system, where only taxpayers who are the most noncompliant or who can 'pay to play' will receive concierge-level service or personal attention."

Yet as exclusive interviews with Tax Analysts showed in recent days, the commissioner and the taxpayer advocate are agreed on many aspects of the IRS's future state program. Olson said the two agree on the benefits of online taxpayer accounts. And Koskinen said the IRS remains committed to serving taxpayers on their own terms, including over the phone.

Koskinen and Olson will square off on the agency's future state vision February 23 in Washington, when Olson holds a public forum on the topic, at which Koskinen is scheduled to speak. The discussions on February 23 should reveal hitherto unpublicized elements of the IRS's grand plan, likely spawning as many questions as answers.

Future State Overview

The IRS's future state vision, elements of which were referred to within the IRS as its "concept of operations" (CONOPS), is the subject of a series of documents recently provided to Tax Analysts. The documents describe what those terms mean and how the agency's operating divisions -- Wage and Investment, Small Business/Self-Employed, Large Business and International, and Tax-Exempt and Government Entities -- are developing and implementing projects targeted at better equipping IRS employees and improving taxpayer compliance. They also note the establishment of a new research, applied analytics, and statistics (RAAS) organization to drive the IRS's ability to innovate and perform data-driven decision-making.

According to the documents, the IRS's future state vision for the next three to five years involves looking at the future in a more comprehensive way to give taxpayers "a more complete online experience," improve taxpayer service, and provide greater security. Together, they flesh out proposals that Koskinen has mentioned in remarks delivered across the country since at least 2014 in which he has called for online taxpayer accounts and has said he wants taxpayers' interactions with the IRS to be similar to their interactions with financial institutions.

Altogether, the file constitutes the single most extensive public release about the Service's current long-term administration efforts.

In an interview February 17 and a follow-up February 19, Koskinen noted that some form of future state planning and implementation has been going on at the IRS at least since the 1998 Internal Revenue Service Restructuring and Reform Act (RRA 98). The Where's My Refund and Get Transcript apps -- allowing taxpayers to time the receipt of their refunds and to get taxpayer account documents, respectively -- are examples of future state projects, the commissioner noted.

'High Level of Abstraction'

In his interviews with Tax Analysts, the IRS commissioner repeatedly insisted that while the agency is pressing ahead with its future state plans, the process is "evolutionary," and many elements remain in flux.

"A lot [of the CONOPS] documents . . . are in a relatively high level of abstraction, but the direction we're going in, and the specific initiatives, all make good sense now," Koskinen said. "But I would stress . . . like anything, we have to make sure that we don't get locked in and are not able to adjust, to either additional thoughts from employees or stakeholders, or changes in the way the digital world operates."

However, it is precisely that high level of abstraction that gives Olson pause. "The information that is available is at a very high level, and even with that information . . . you have to see the assumptions underlying it," she said.

The IRS documents paint portraits of individual taxpayers resolving earned income tax credit eligibility problems, small business taxpayers being notified online about tax payment deadlines and arranging a limited-issue exam, and large business taxpayers dealing with a multi-issue tax examination. While a couple of the examples discuss virtual meetings and secure communications, not one involves using the phone.

"Where I differ with the IRS's hopes and expectations and assumptions is how much that will actually eliminate the need for people talking to the IRS, rather than being able to take care of their issues, cradle to grave, and have all their needs met on an online account," Olson said. "The only way the IRS's vision of the future works is if taxpayers will move on to online services for most if not all of their needs. If they don't, it won't work."

Olson said evidence suggests that getting taxpayers online and off the phone will be more difficult than the IRS seems to think. In her annual report to Congress, Olson quoted a 2015 study by the Board of Governors of the Federal Reserve Bank that showed that 72 percent of bank customers had visited a bank branch and spoken on average twice in the preceding month with a bank teller. "We are not a bank," Olson said of the IRS. "We can do terrible things to taxpayers without going to a judge."

Getting Congress 'Comfortable'

Koskinen says the IRS's future state initiatives are partly the result of taxpayer and tax practitioner demands for new and better electronic services. But they are at least equally the Service's response to its ongoing budget squeeze that only let up slightly when Congress appropriated an additional $290 million in fiscal 2016 for improved taxpayer service, cybersecurity, and the struggle against identity theft.

The fiscal 2016 budget bump "is the first recognition by the Congress that the [IRS's] problems have to do with simply not enough resources," Koskinen said. "We don't have enough people to answer the phones; we don't have enough people to answer the correspondence."

The future state plans are supposed to ensure that taxpayers receive service even under a constrained IRS budget, he said.

Olson disagreed with the commissioner's strategy. "I don't think the CONOPS should be designed out of fear that you're not going to have money in the future," she said. "The concept of operations and the future state vision of the IRS is the argument for giving the IRS more money."

Koskinen said he is hopeful the tide will turn in Congress. "To the extent that we can get the Congress comfortable that if they give us money for specific initiatives . . . they'll have a better idea than maybe in the past of exactly what they're going to buy for that money," he said. "And conversely, they'll have a pretty good idea what they're not going to get if they don't pay for it."

On the key issue of interpersonal taxpayer service, the commissioner said, "Ultimately, I think it is important for people to be comfortable that we recognize the obligation to deal with 150 million taxpayers, however they want to deal with us."

Olson said she would like congressional oversight committees to hold hearings at which the IRS could elaborate on its high-level plans; air the concerns of tax practitioners, taxpayers, and other constituents; and prioritize budget investments.

The taxpayer advocate said she hopes to open some of that conversation at her February 23 forum. "What I need to see is that [the IRS] starts their planning from the reality of the taxpayer, rather than the ideal taxpayer . . . the taxpayer that would be the most convenient for the IRS to do its job with the least amount of cost."

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