While the IRS has been making historic progress in modernizing its tech-based capabilities to streamline workforce effort and tax processes, a new report from the agency’s taxpayer advocate office says IRS still has more work to do to eliminate paper-based processes.
The 2023 Annual Report issued today by National Taxpayer Advocate Erin M. Collins gives credit to IRS for playing catch-up on several fronts, but also points to how it can further improve operations and service.
“The IRS eliminated most of its processing backlog, generally paid refunds timely, and answered taxpayer telephone calls at pre-pandemic levels,” Collins said in the report. “The good news is that, with limited exceptions, we are back to business as usual.”
“The bad news is that the baseline level of ‘business as usual’ was not good enough,” Collins said.
“Our nation’s taxpayers deserve a 21st century tax administration agency that is fair and equitable, provides timely and clear guidance, makes it possible for all taxpayers to electronically file their tax returns, answers its phones and resolves most issues at the first point of contact, and allows taxpayers to conduct business on any follow-up matters through online accounts in the same way they conduct business with their financial institutions,” she said.
One of the significant challenges that the IRS continues to deal with, the report says, is paper-based processes.
“When I released the National Taxpayer Advocate’s 2020 report, I wrote that the IRS in most cases ‘can effectively handle whatever it can automate,’ and when I released our 2021 report, I wrote that ‘paper is the IRS’s kryptonite,'” Collins said.
“Those observations continued to hold true in 2023. The areas in which taxpayers continued to experience delays were primarily those that required employees to process tax returns and taxpayer correspondence,” stated Collins.
Other challenges that the tax agency continues to face include being able to address delays in helping nearly half a million identity theft victims, getting up to speed with delays in processing amended tax returns and taxpayer correspondences, and lingering concerns with providing assistance to taxpayers over the phone.
The report offers a series of recommendations that the IRS can adopt to meet many of the remaining challenges, including:
- Prioritize the improvement of online accounts for individual taxpayers, business taxpayers and tax professionals to provide functionality comparable to that of private financial institutions;
- Improve the IRS’s ability to attract, hire and retain qualified employees;
- Ensure all IRS employees are well-trained;
- Enable all taxpayers to e-file their federal tax returns;
- Upgrade the back end of the “Document Upload Tool” (DUT) to fully automate the processing of taxpayer correspondence;
- Require the IRS to timely process claims for credit or refund;
- Expand the U.S. Tax Court’s jurisdiction to adjudicate refund cases; and
- Enable the Low Income Taxpayer Clinic (LITC) program to assist more taxpayers in controversies with the IRS.
“With the infusion of funding the IRS received through the Inflation Reduction Act and the planning that has gone into its Strategic Operating Plan (SOP), the IRS has taken major strides forward this year,” concluded Collins. “As the IRS continues to prioritize its SOP and initiatives, I am pleased that the initial focus covers several of the most serious problems identified in this report.”
