Tax Reform Watch: A Call for Reform Beyond the Tax Code?– August 03, 2017 by Tracy Monroe

In their “A Better Way” blueprint for tax reform, House Republicans outline their compelling argument for tax reform and state in Problem #5 that the current code enables a “broken tax collector.” The document goes on to state:
 
“While the structure of the IRS has expanded over the years to create a duplicative, inefficient and complex bureaucracy with approximately 80,000 employees across the country, the agency continues to fail hard-working American taxpayers.”
 
The issues highlighted include poor customer service, billions of dollars in improper payments through its programs and outdated technology systems. Even IRS Commissioner John Koskinen acknowledged the existing U.S. tax code is such a “mess” that even he struggles to fill out his federal return, noting that the agency fully supports tax reform efforts.
 
In addition to its internal challenges, the IRS also deals with outdated computer systems and numerous cyberattacks. A recent example of the threat to sensitive taxpayer information involved the breach of the IRS Data Retrieval Tool. This tool allows students and parents to upload tax return information to their Free Application for Federal Student Aid (FAFSA) application. Hackers were able to breach the system and gain access to the personal information of 100,000 students to file fraudulent returns and steal an estimated $30 million from the U.S. government. In 2012 the U.S. treasury inspector general for tax administration estimated the IRS could pay out $21 billion in identity-theft related tax fraud over five years.
 
Also working against the IRS is a decreasing budget and workforce. Since 2011, IRS employees have declined from 95,000 to approximately 77,000 today. All of these challenges are before any type of tax reform is enacted, which will require the IRS to navigate new rules in addition to the existing ones.
 
Probably the most concerning aspect of IRS shortcomings is in the area of payment plans. In her latest report, National Taxpayer Advocate Nina Olson noted that the IRS received 2.7 million calls on its “Installment Agreement/Balance Due” phone line. “For the most part, these calls come from taxpayers who are seeking to make payment arrangements — the sort of calls most private businesses would pick up immediately,” she said. Yet the IRS only answered 40% of these call during the 2017 filing season, and it averaged 47 minutes for each call.
 
It is well documented that the IRS does not score well when it comes to customer service in general. In fact, Olson reported in 2016 that the IRS answered only 73% of its customer service calls during the year’s filing season, and, remarkably, this was an improvement from the 2015 filing season in which they answered only 37%.
 
Obviously, I have first-hand experience working with the IRS on a broad range of issues, including payment plans, audits and some extreme cases of identity theft. It is very clear to me that in addition to meaningful tax reform, we also must have meaningful reform of the IRS so they can effectively do their job. Perhaps the answer is taking a more business-like approach to running the IRS and focus on collection of income and customer service. 
 
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