The IRS announced earlier this week that it would be transitioning away from its relationship with identity verification contractor ID.me. That’s a positive development, but it’s a situation that the IRS never should have been in — and only got out of due to widespread backlash.
ID.me rose to prominence when it was the source of an Axios report that criminals had tricked the government into paying out as much as $400 billion in fraudulent unemployment claims during the pandemic. That claim remains dubious, as it represented about half of all the enhanced unemployment benefits the country had paid out when the report was published.
Nevertheless, it got the attention that ID.me was hoping for. Soon after, ID.me became a necessary intermediary for taxpayers to opt out of automatic advance monthly payments for the Child Tax Credit.
I’ve written about how much of an issue the advance Child Tax Credit is for this year’s tax filings, but suffice it to say that taxpayers who didn’t opt out, and weren’t eligible for the advance payments they received, will likely end up with a substantial tax liability this year when they may be expecting a tax refund. Unfortunately, the need to go through ID.me in order to opt out was an added hurdle.
That’s because ID.me’s verification process, while relatively painless for most users, can take hours if the automatic process fails. That’s more likely to happen for certain groups that facial recognition technology continues to struggle with, particularly minorities and women.
Then the IRS announced that ID.me verification would soon become necessary for any taxpayer to access their online account, including to view correspondence from the agency or seek information about an ongoing audit or appeal. Taxpayers, privacy rights advocates, and legislators quickly condemned the move for the risk it posed to the privacy of taxpayer data. The IRS backed off, but not before raising fresh questions about the agency’s ability to responsibly safeguard taxpayer data.
And while the IRS was playing around with facial recognition technology that may not be ready for the big time, it remains decades behind in its implementation of more proven technologies. Last year, more than a quarter of business returns, and just under a tenth of individual returns, were filed in paper form, in large part because of the IRS’s failure to adequately accommodate and encourage digital filing. That works out to 33.7 million paper returns that the IRS had to process largely by hand, contributing to enormous backlogs of returns.
It’s not just tax return digitization where the IRS remains behind. Systems for secure online communication through email and chat are woefully lacking, leading to the IRS receiving 282 million phone calls in 2021 — of which it managed to answer 30 million.
The IRS can’t just leapfrog to the technology of the future. Embracing new methods is normally something to be applauded in the oft-archaic agency, but learning from existing identity verification processes in other agencies would have been far simpler. The IRS needs technological training wheels before it hops on a turbocharged motorcycle.