Today I am issuing my 37th, and final, Report to Congress as National Taxpayer Advocate. With my pending July 31 retirement creeping ever closer, I have approached this fiscal year (FY) 2020 Objectives Report with a great sense of urgency. The Preface for the report is particularly important this year, because it includes my reflections on the past 18 years, as well as my thoughts on the future of U.S. tax administration and the Taxpayer Advocate Service. I discuss subjects that I believe warrant the closest scrutiny and Congressional oversight. These include the following concerns:
- Taxpayer service levels are currently very poor, and the IRS does not appear to have a taxpayer-centric strategy or a budget commitment to improve them.
- Research shows that forcing customers into self-service applications for anxiety-inducing transactions erodes trust and increases customer dissatisfaction.
- To increase taxpayer trust and improve compliance, taxpayer service should be designed around a “Taxpayer Anxiety Index.”
- If you don’t have taxpayer trust, you have to control (i.e., more audits, more enforced collection).
- Appropriate use of an “Economic Hardship Indicator” would reduce anxiety, minimize taxpayer harm, reduce re-work, and get to the right answer.
- There is no more important entity for achieving trust in the tax system than the Taxpayer Advocate Service.
I also report on the status of my “short-list” of items for resolution with respect to TAS and the IRS before my retirement.
This Year’s Report Consists of Several Components
In fact, today’s release is only the first volume of the FY 2020 Objectives Report. One casualty of the 2018-2019 government shutdown is that we were prevented from working on and timely issuing the 2018 Annual Report to Congress. We finally issued that report in February 2019, and thus got a late start on the Objectives Report. While we are releasing Volume 1 of the Objectives Report today, the next two volumes of the report will be released in mid-July 2019.
Volume 1 includes an analysis of the 2019 Filing Season, an assessment of the impact of the recent government shutdown on the Taxpayer Advocate Service (TAS), a description of 12 key “Areas of Focus” for TAS during the upcoming year, and a discussion of TAS advocacy initiatives, casework, and research studies. As noted above, Volume 2, IRS Responses and National Taxpayer Advocate’s Comments Regarding Most Serious Problems Identified in 2018 Annual Report to Congress, and Volume 3, Making the EITC Work for Taxpayers and the Government: Improving Administration and Protecting Taxpayer Rights, will be published next month.
The last and most creative component of this year’s Objectives Report, The Taxpayer Roadmap 2019: An Illustration of the Modern United States Tax System, also will be released in July. This roadmap—which actually will be in the form of a subway map—builds upon the seven discrete roadmaps we published in the 2018 Annual Report to Congress. This new roadmap—available in hard copy (32” by 32”) and in digital format—shows, at a high level, the taxpayer’s “journey” through the tax system—from getting answers to tax law questions and preparing a return, through return processing, audit, appeals, litigation, and collection.
Anyone looking at this map will understand that we have an incredibly complex tax system that is almost impossible for the average taxpayer to navigate. I personally have spent dozens of hours designing and preparing this map, as have many members of my staff. For every step shown on the map, there are tens of steps and interactions that it is impossible to represent in a single document. Thus, TAS is working to develop a digital roadmap into which a taxpayer or practitioner will be able to input the document number of any IRS letter or notice and receive a plain-English summary of that letter or notice. From there, they can click through to the actual roadmap and see where they are. They can also learn more about that step in the tax process and the surrounding steps through pop-ups and links into additional TAS and IRS content, including links to TAS’s Taxpayer Bill of Rights content. You can read more about the digital roadmap here.
This digital roadmap will be the culmination of many years of work and research by TAS into human cognition and learning, notice clarity, and taxpayer empowerment. It is my firm belief that taxpayers must have knowledge about their rights within a bureaucracy as complex as the IRS. If only taxpayers who are represented by tax professionals have access to that knowledge, then we do not have a fair and just tax system. Thus, the digital roadmap will be a powerful tool to improve access to justice.
The Current State of IRS Taxpayer Service Erodes Taxpayer Trust and Voluntary Compliance.
If I were pressed to identify an overriding message of the Objectives Report, I would have to say it is this: the soundness and effectiveness of any tax administration is measured by the trust its taxpayers have that they will be treated fairly and justly. Throughout this report, we identify instances where IRS processes have fallen short in keeping faith with the taxpayer. This is most notable in the area of taxpayer service, where both the American Customer Satisfaction Index (ACSI) and the Forrester U.S. Federal CX Index rank the IRS in the bottom tier of federal agencies. The ACSI report for 2018 ranks the Treasury Department tied for 10th out of 12 Federal Departments and says that “most [IRS] programs score . . . well below both the economy-wide national ACSI average and the federal government average.” For its part, the 2019 Forrester report ranked the IRS 13th out of 15 federal agencies and characterized the IRS’s score as “very poor.”
Yet despite the IRS’s remarkably poor customer service performance as measured by the benchmarks cited in the President’s Management Agenda, the Administration’s budget proposal for FY 2020 would build up tax-law enforcement at the expense of taxpayer service. Specifically, it proposed to increase funding for the IRS’s Enforcement account by 5.0 percent while cutting funding for the IRS’s Taxpayer Services account by 6.6 percent. This approach is tantamount to robbing Peter to pay Paul.
There is no doubt that budget constraints have limited the IRS’s taxpayer service capacity. But the IRS should not blame Congress for a lack of taxpayer services funding when it is itself proposing to shift funding away from taxpayer services. What’s more, budget constraints can’t be used as an all-purpose excuse for mediocrity. As I note in the report, the Taxpayer First Act directs the IRS to develop a comprehensive customer service strategy within one year. The IRS should use that requirement as an opportunity to think creatively about better ways to truly put “taxpayers first.” At present, there is an enormous gap between the “very poor” customer service the agency provides and the “world-class” customer service to which it aspires. The IRS must think long and hard about ways to bridge that gap—and TAS and the next National Taxpayer Advocate should be intimately involved in that effort.
Of Further Interest …
I encourage you to look at the entire report, because it is chock full of information. But if you want to focus on just a few things, I suggest you look at my discussions of the Taxpayer Anxiety Index, the Economic Hardship Indicator, and Taxpayer Advocate Service’s challenges in the Preface, along with the Areas of Focus about the application of the Religious Freedom Restoration Act to the Social Security number requirement for the Child Tax Credit. For further reading, you can always check out the Table of Contents and go from there. And stay tuned for the release of Volumes 2 and 3, and the Roadmap, in July!
I am always enormously proud of each Annual Report, but because this is my last, it has particular pride of place. These reports are the creation of so many people—they are a real team effort by attorney and technical advisors, research, systemic advocacy and case advocacy analysts, and last, but certainly not least, TAS’s creative communications staff. All of them have my deep gratitude and respect. Thank you!