This has been a tax filing season to forget (not that taxpayers are ever particularly eager to remember them). Given that, with Internal Revenue Service (IRS) Commissioner Chuck Rettig appearing in front of the Senate Finance Committee this week, taxpayers hoped to hear acknowledgement of the IRS’s failures and a concrete plan to address the agency’s institutional failings. Unfortunately, that’s not what they got.
Going into this year, the IRS still had not processed six million tax returns from the previous year. Even with a hiring surge, the number of unprocessed returns has only risen as tax year 2021 returns continue to flow in. As of the IRS’s last update in late March, the agency had 7.2 million individual returns remaining unprocessed and a further 1.8 million business returns. Some of these unprocessed returns may date back to tax year 2020.
In the meantime, services for taxpayers and tax professionals are nearly nonexistent. Last year, just 11 percent of the 282 million phone calls the agency received were answered by an IRS employee. That means 250 million times, taxpayers called the IRS to no avail.
At the same time, the agency operates with such archaic technology that it would be humorous if taxpayers didn’t have to deal with it every year. In a world that has long moved to digital communication, the IRS still relies heavily on phone calls, physical mail, and fax machines. Its master file of tax records relies on 60-year-old code that’s only known by a small number of programmers. In one location, employees must use toothpicks to advance the count on stamps that provide returns with a reference number, instead of processing everything electronically.
Modernizing these antiquated technologies should be priority number one — especially since the rest of the modern world has largely moved on from them, or at least uses them only in an ancillary capacity to more useful technologies.
And the IRS can’t complain about the lack of a blueprint, as the National Taxpayer Advocate has laid out suggestions for how the IRS can implement broader e-filing to replace the tens of millions of paper returns the IRS receives a year, as well as more widely available email, instant messaging, document sharing, and virtual assistants to replace phone calls and mail.
But whenever asked about the agency’s failure to modernize, the IRS invariably complains about insufficient funding, as Commissioner Rettig again did at this most recent hearing. But the real issue is one of willpower, not funding.
Modern companies don’t offer virtual assistants and instant messaging as customer service options just because they are so much more convenient, though they usually are that as well. They offer them because they can offer similar levels of customer service without having to scramble to hire thousands of people to staff phones. A good way to cut down on call volume is to offer taxpayers a viable alternative to getting their problem solved.
Most modernization reforms would save the IRS money, particularly over the long term but sometimes over the short term as well. The IRS lost $56 million in interest last year because its outdated equipment could not properly identify mail that contained a check, while replacing that equipment would cost around half a million dollars. Similarly, a lack of funding cannot be the reason that IRS employees use the aforementioned toothpick-operated stamps — an automatically advancing, self-inking stamp is less than $30 on Amazon.
Taxpayers would never put up with these kinds of institutional customer service failures from a business, but they don’t have much choice with the IRS. It’s bad enough that the agency takes too much of your hard-earned money every year — the least they can do is figure out how to use modern technology to get you in contact with an IRS employee when you have a question.
