Taxpayer Advocate prods IRS to improve service, reduce backlog

National Taxpayer Advocate Erin Collins pointed to continuing backlogs at the Internal Revenue Service and difficulty reaching telephone assistance in a report to Congress Thursday.

The Taxpayer Advocate Service’s midyear report to Congress praised the IRS for its efforts in processing most tax returns and issuing most Economic Impact Payments on a timely basis despite the challenges of the pandemic, an extended tax season, new tax laws from Congress and the demand for issuing multiple rounds of stimulus checks. However, the report also pointed to problems, including a backlog of approximately 16.8 million paper tax returns waiting to be processed, and the fact that only 7% of taxpayers were able to reach assistance when they called the IRS’s accounts management phone lines.

The IRS faced plenty of challenges this past tax season and mostly managed to juggle a dizzying array of tasks, but staffing shortages and technology shortcoming remain, and many employees needed to work remotely due to the pandemic while mail piled up at IRS facilities. Paper tax returns in particular proved to be an even bigger problem than usual and subject to longer delays.

“This past year and the 2021 filing season conjure up every possible cliché for taxpayers, tax professionals, the IRS, and its employees,” Collins wrote. “It was a perfect storm; it was the best of times and the worst of times; patience is a virtue; with experience comes wisdom and with wisdom comes experience; out of the ashes we rise; and we experienced historical highs and lows.”

Approximately 15.8 million returns were suspended by the IRS during processing and required further review, while 2.7 million amended returns are awaiting processing, largely as a result of the pandemic-related evacuation order that restricted employee access to IRS facilities. The IRS reported a “level of service” on its accounts management phone lines of 15%, but only 7% of taxpayer calls actually reached a telephone assistor. On the “1040” line, which is the most frequently called IRS toll-free number, taxpayers made about 85 million calls, but only 3% actually reached a telephone assistor.

“When so few callers can get through to a telephone assistor, problems remain unsolved and taxpayer frustration mounts,” Collins wrote.

Nevertheless, the IRS managed to accomplish a herculean series of tasks despite the pandemic, processing 136 million individual income tax returns and issuing 96 million refunds totaling about $270 billion during the 2021 filing season. Collins acknowledged those figures closely match the results of the last typical filing season in 2019. Along with its usual work, the IRS was tasked by Congress with issuing three rounds of stimulus payments over the past 15 months and has made about 475 million payments worth $807 billion to mitigate the impact of the pandemic on U.S. families and businesses.

“The IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances, but there is always room for improvement,” Collins wrote.

She offered a set of recommendations for improving taxpayer service. They include improving the usefulness of the individual online accounts that the IRS has already begun providing to taxpayers upon request. Collins noted that most taxpayers who try to establish online accounts fail because they can’t pass the e-authentication requirements. The functionality of the accounts is also limited. The Taxpayer Advocate Service recommended that tax practitioners be given access to online accounts on behalf of their clients and that the IRS prioritize providing such a service to practitioners.

The report also suggested the IRS should expand its customer callback technology to all IRS toll-free phone lines, as is common at many businesses and federal agencies with call centers that get overloaded. The IRS offers a callback option on some of its phone lines, but not on most lines, including its high-volume lines.

The report also recommended that the IRS do more to reduce the barriers to electronically filing tax returns so it won’t have to deal with such a backlog of paper returns. Collins noted that many taxpayers file on paper because they’re prevented from e-filing some documents. Taxpayers are sometimes required to submit statements or other substantiation with their returns, and those kinds of attachments generally cannot be e-filed. Some tax forms are still not accepted electronically, either. When using DIY tax prep software, taxpayers sometimes need to override the default entries when preparing their returns, and some of the overrides make the returns ineligible for e-filing. The report recommends the IRS address those limitations so all taxpayers who want to e-file their returns can do so.

The report also recommended the IRS use scanning technology for tax returns that have been prepared electronically but submitted on paper, so IRS employees don’t need to manually transcribe the data line-by-line into their computer systems.

The IRS should also expand the digital acceptance and transmission of documents and digital signatures, the report recommended. The closure of IRS offices and mail facilities last year made it impossible for IRS employees to receive paper documents from taxpayers, so the IRS issued temporary guidance authorizing employees to accept and transmit documents related to the determination or collection of a tax liability by email using an established secured messaging system. Employees were also allowed to accept images of signatures (scanned or photographed) and digital signatures on documents related to the determination or collection of a tax liability. The report recommended the IRS make those temporary solutions permanent.

The report recommended that the IRS also expand its use of videoconference technology so taxpayers and their representatives can be seen and heard and share documents without being physically present. The IRS Independent Office of Appeals already offers WebEx technology for virtual face-to-face conferences among taxpayers, their representatives and IRS Appeals officers. The IRS Office of Chief Counsel and the U.S. Tax Court are also doing virtual trials using ZoomGov.com. The report recommended the IRS look into expanding the use of these technologies to ,pre taxpayer-facing functions as possible without removing the in-person options for taxpayers, pointing out that it can help fill current or future voids in face-to-face service at Taxpayer Assistance Centers and in working with revenue agents or revenue officers.

The IRS issued a lengthy set of responses to the Taxpayer Advocate report. In response to some of the challenges with taxpayer assistance, it wrote, “The IRS is continually working to improve service delivery to taxpayers who have questions or need assistance. All face-to-face and toll-free customer service was suspended in late March 2020, in response to state and local shelter-in-place orders due to the COVID-19 pandemic. The IRS immediately began developing plans to safely return to business and re-establish in-person and telephone services including the rapid enabling of employees to telework.”

The IRS also noted that Taxpayer Assistance Centers began a return to limited, appointment-only, service in late June. “In FY 2020, we provided face-to-face assistance to more than a million taxpayers, including almost 80,000 taxpayers without appointments,” said the IRS. “We continue to resolve many potential visits through the TAC toll-free appointment service line. The IRS plans to relaunch a pilot in early FY 2021 of the Web Service Delivery to assess our capability to provide face-to-face service to taxpayers via a virtual connection. The IRS continues to develop technology improvements. Text chat has expanded to 11 of the 19 [Automated Collection System] call sites (including bilingual sites), and now allows taxpayers to attach documents such as installment agreement forms and delinquent returns. The IRS plans to expand customer callback from five to 16 toll-free applications in FY 2021, with future expansions planned subject to available funding. The IRS is exploring natural language capabilities on the [Economic Impact Payment] line to allow callers to self-route to get help with queries.”