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Special Focus

IRS Future State: The National Taxpayer Advocate’s Vision for a Taxpayer-Centric 21st Century Tax Administration

In the 2015 Annual Report to Congress (ARC), the National Taxpayer Advocate identified the IRS’s plans for its “Future State” as the number one most serious problem facing taxpayers. Among other things, she cited concerns about the IRS’s lack of transparency with taxpayers and Congress about the plans; the move away from person-to-person assistance and compliance contacts in favor of impersonal electronic “self-service;” and the reliance on private third parties to provide for-fee assistance for core tax administration services previously provided by the IRS for free, thereby increasing taxpayer costs for the “privilege” of paying their taxes.

The IRS has partially addressed the National Taxpayer Advocate’s concerns. For example, almost immediately after the issuance of the Annual Report to Congress, the IRS created a webpage on irs.gov dedicated to the “Future State” and uploaded numerous documents. The IRS Commissioner also made clear in congressional testimony and elsewhere that the IRS did not intend to eliminate phone or in-person assistance. Moreover, during the Nationwide Tax Forums this summer, the IRS held a presentation on the “Future State,” attended by over 2,200 practitioners and preparers, and also sponsored a suggestion booth.

These steps, however commendable, have not fully addressed the core of the National Taxpayer Advocate’s concerns, namely, that the IRS has failed to adequately study and incorporate into its “Future State” plans the needs and preferences of United States taxpayers — an incredibly diverse and complex population. In a budget environment in which the IRS has seen its annual appropriation decreased by about 19 percent on an inflation-adjusted basis, it is tempting and even understandable for the IRS to try to move taxpayers to less costly methods of communication, or channels, including digital self-service options. But as tax administrators throughout the world have learned, and as the National Taxpayer Advocate discusses in this annual report, many of these shifts are only superficially less costly. This is so because even the best-designed digital environment cannot accommodate the sheer complexity of the tax code and the limitless variety of taxpayer’s lives and circumstances. This constrained communication, coupled with automated impersonal and often harmful IRS actions, can alienate the taxpayer population and over time may undermine compliance. Even if there is no negative compliance impact (which the National Taxpayer Advocate does not believe), it is not a recipe for good government if a large portion of U.S. taxpayers are alienated from and distrustful of the one government agency they interact with at least annually throughout their adult lives. For these reasons, and given her statutory role as “an independent voice for the taxpayer within the IRS”, in this Special Focus, the National Taxpayer Advocate has attempted to identify and make recommendations to address the challenges the IRS faces to become a 21st century, taxpayer-centric tax administrator.

Related Content of the Report:

“What if the tax agency adopted a different approach toward taxpayers? What if it assumed that taxpayers, by and large, wanted to obey the law and that the primary mission of the tax agency was to facilitate that compliance by providing taxpayers with the assistance, education and clarity they need to meet their tax obligations? What if we started out accepting that taxpayers will make mistakes and, until proven otherwise, assume those mistakes are not attributable to a tax evasion motive? Because, after all, tax noncompliance like all of human behavior is driven by a broad spectrum of factors, from just plain carelessness to ignorance to confusion to polemics to avarice. By focusing on the source or reasons for the taxpayer’s noncompliance and not just on the end result of their behavior, we have a better chance of changing their behavior and improving tax compliance going forward. This is not to say we should ignore those who are actively evading tax. Rather, it is to say we should design our tax system around the taxpayers who are trying to comply, instead of those who are actively trying not to.”

ARC 2016