Last month, National Taxpayer Advocate Erin Collins released a midyear objectives report to Congress. Collins runs the Taxpayer Advocate Service (TAS), an office within the IRS that acts as an ombudsman for taxpayers. TAS is required by law to provide reports to Congress evaluating whether the IRS is adequately serving taxpayers and respecting their rights as outlined in the Taxpayer Bill of Rights, and the objectives report reviews the recently concluded tax filing season and makes recommendations for the year ahead.
On the plus side, TAS noted that the IRS made progress catching up in processing paper-filed forms. The IRS was able to reduce its backlog of paper-filed forms from 13.3 million at the end of the 2022 filing season to 2.6 million by the end of the 2023 filing season. This represents a reduction of 80 percent.
The IRS also eased filing burdens by providing a way for taxpayers to digitally submit correspondence and responses to notices. By April 12, 2024, the IRS received nearly 900,000 digital uploads from taxpayers replying to a notice (out of 7.4 million responses). One would expect that this would also improve the IRS’s ability to respond more quickly to taxpayers after they submit a reply to notices, but unfortunately, the IRS is still processing these in the same way as paper correspondences.
Last November, Treasury Secretary Janet Yellen gave the IRS three taxpayer service directives for the filing season: (1) achieve an 85 percent level-of-service (LOS) on its main phone lines, (2) reduce wait times on those lines to no more than five minutes, and (3) offer an automatic callback option for assistance to 95 percent of eligible taxpayers if there are long wait times.
The IRS reported meeting these goals. It reports an 88 percent LOS on its main Accounts Management phone lines, an average phone wait of 3 minutes, and a callback option available to 97 percent of eligible taxpayers. The report does reveal that calls to the collection and installment agreement/balance due lines were answered at lower rates.
However, the Taxpayer Advocate Service reiterated problems that it has raised multiple times previously about the IRS’s methodology for measuring LOS. The IRS calculates its LOS rate by dividing the number of calls assisted by a live agent by the number of calls the phone system routed to a live agent. Consequently, the denominator represents only a subset of the total calls, making it an inadequate measure of the overall service level for all incoming calls.
In its analysis of the incoming phone calls, TAS found that only 32 percent of calls were answered by a live assistor. The rest of the calls were transferred to automated assistance or reflect taxpayers who hung up.
The IRS’s flawed LOS statistic raises several questions: Did taxpayers receive the information they needed? Did they have additional questions necessitating a callback? Did they intend to speak to a live agent in the first place? To answer these questions, the IRS should adopt metrics to measure outcomes. One improvement could be adding a question about the quality of service provided at the end of a taxpayer’s call to the IRS.
The TAS review also pointed out that the IRS achieved its reported LOS rate by reassigning workers from other phone lines and other important functions, such as workers previously assigned to reducing its inventory of amended returns, or to helping victims of identity theft. It currently takes the IRS an average of 675 days to resolve identity theft cases—over five times higher than its goal of resolving these in 120 days.
TAS raised the significance of the need for the IRS to prioritize its modernization efforts. Many of the refund delays and other service challenges that taxpayers continue to experience could have been ameliorated had the IRS upgraded its woefully antiquated information technology systems. These shortcomings can be attributed to the allocation of the net $58 billion in increased funding the IRS received through the IRA favoring enforcement over customer service or modernization.
TAS’s recommendations echo those of the Taxpayers for IRS Transformation (Taxpayers FIRST) project. This initiative advocates for modernizing the agency’s business systems to expand electronic filing capabilities and improving taxpayer services and awareness of their obligations and rights. Taxpayers FIRST released four reports with ideas for action to improve the IRS.
Despite the progress highlighted in the Taxpayer Advocate Service’s midyear report, the IRS’s continued struggles underscore the critical need for comprehensive reform and modernization. While the IRS has made strides in reducing backlogs and expanding digital submission options, these improvements are overshadowed by persistent inefficiencies. By prioritizing modernization and adopting more accurate service metrics, the IRS can enhance its responsiveness and accountability, ensuring that taxpayers receive the assistance and respect that they deserve.