The Taxpayer First Act (TFA), P.L. 116-25, required the IRS to submit a comprehensive plan to redesign and reorganize the IRS to Congress by Sept. 30, 2020. Due to delays caused by COVID-19, the IRS submitted its plan in January 2021. In November 2020, the U.S. Government Accountability Office (GAO) released a report assessing the IRS's implementation plan (Rep't No. GAO-21-18).
The IRS's first significant action in the reorganization process was to establish the Taxpayer First Act Office (TFAO) with senior leaders from across the IRS, including the chief of staff to the IRS commissioner. The TFAO meets regularly with management and staff at different levels of the organization to report on progress and challenges. After gathering feedback from a variety of sources, the TFAO found that the majority of the feedback fell into five categories:
- The taxpayer experience: Aligning the IRS taxpayer service with the experience expected from modernized companies;
- Training: Updating the Internal Revenue Manual, training delivery, soft skills, cross training, and professional opportunities;
- Organizational redesign: Recommendations for the consolidation of business units, and areas where units should be reduced or expanded;
- Modernization: Recommendations to upgrade IT infrastructure or equipment; and
- General: Requests for TFAO support and/or feedback not specific to the TFA.
Overall, the GAO report found that the IRS has involved its employees and key stakeholders and has considered appropriate data and evidence. And leadership within the IRS is appropriately focused on the reorganization process. The GAO report also notes that the IRS has only partially addressed other issues, so the report recommended the IRS should fully develop goals, actions, and performance measures related to:
- The desired goals and outcomes of the reorganization;
- Fragmentation, overlap, and duplication within the IRS; and
- High-risk areas and long-standing management challenges.
The November 2020 GAO report draws mainly on its prior reports on the IRS's operations, along with recent interviews with current and former IRS personnel and other stakeholders. The report describes the challenges and options to improve the IRS's structure, processes, and operations in the areas of:
- Customer service;
- Communication and coordination within the IRS;
- Technology; and
- Human capital management and training.
In the area of customer service, the GAO reported in September 2020 that two of the IRS's divisions — Wage and Investment and Small Business/Self-Employed — did not have performance goals nor did they have any performance measurements for improving the taxpayer experience. As a result, the GAO report recommended that the IRS identify performance goals, measures, and targets.
The IRS struggles to balance the competing demands for maintaining quality telephone service with timely responses to written correspondence. The IRS has defined what an appropriate level of telephone service would be; however, it has not outlined a strategy on the appropriate levels of correspondence service and wait time. Additionally, the IRS has not determined how it will manage service based on time frames, demand, capabilities, and resources. IRS officials have indicated to the GAO that their customer service strategy will not define the appropriate levels of correspondence service and wait time because it is challenging to meet performance targets for different types of correspondence.
In its interviews with stakeholders, the GAO reported challenges the IRS has with its interactions with tax professionals. One of the IRS's goals in its 2018-2022 strategic plan is to improve its collaboration with external partners such as tax professionals. However, tax professionals interviewed by the GAO said the IRS does not always consult or include tax professionals when making decisions that may affect them.
Communication and coordination within the IRS
Relying on some of its previous reports, the GAO report described some of the challenges with communication and coordination across IRS divisions. For example, the IRS does not have a lead group to design and oversee business identity theft fraud risk management activities across the agency. Instead, four IRS entities have responsibility for detecting, preventing, and resolving business identity theft. Although the GAO report found IRS officials to be knowledgeable about business identity theft in their own units, the individuals the GAO interviewed could not articulate an agencywide view of the problem.
Some of the individuals interviewed by the GAO indicated that communication and coordination gaps across divisions may be caused by disincentives for divisions to share resources. For example, each division has its own budgets, internal goals, and objectives, which may cause each division to be primarily concerned about improving its own performance measures. Divisions might also be reluctant to coordinate or share their own limited resources, including staff, with other divisions because it might divert resources that could be used to improve the division's own performance measures.
Information technology management and modernization
The IRS relies extensively on computer systems to support its operations. Previous GAO reports identified outdated hardware and a shortage of staff with the required skills as risks the IRS faces with managing and modernizing its IT systems. In a previous report, the GAO noted that IRS employees it interviewed mentioned that they frequently experienced issues with their computers that affected their ability to serve taxpayers.
IRS officials told the GAO that the IRS has made progress in managing its IT in recent years, such as upgrading its network infrastructure to support telework in response to the COVID-19 pandemic, and the GAO report says that the GAO has work underway to assess this progress, which will presumably be discussed in a future report.
Strategic human capital management and training
Referring to a January 2020 report, the GAO noted that high-quality customer service begins with IRS representatives having the necessary knowledge and skills to address the unique needs of individual taxpayers. In its earlier report, the GAO recommended that the IRS collect employee input on the strengths and weaknesses of its customer service training and incorporate that input into the training strategy required by the TFA.
The GAO report also noted the IRS has skills gaps in mission-critical positions such as tax examiners and revenue officers and also that many senior IRS personnel are approaching retirement and that funding limits prevent many vacancies from being filled.
GAO recommends actions for successful implementation
Overall, the GAO found the IRS has made significant headway in implementing the TFA. Most notably, the IRS established the TFAO with senior management within the IRS, demonstrating it is appropriately focused on the reorganization process. The IRS has also gathered a great deal of data, involving both its employees as well as external stakeholders.
Nonetheless, the GAO says the IRS must develop goals, actions, and performance measures to successfully implement its reorganization plans.
|David Taylor, CPA, is a tax partner with BDO USA in Denver. For more information about this column, contact email@example.com.