In her 2015 Annual Report to Congress, National Taxpayer Advocate (NTA) Nina E. Olson raised concerns about the IRS’s comprehensive “Future State” plan to overhaul agency operations as it adapts to an environment of constrained funding and expanding responsibilities.1 A central component of this Future State plan is to transition from relatively costly telephone and face-to-face interaction with taxpayers to online taxpayer accounts as the primary means of interaction.2 Although the NTA praised many of the IRS’s goals as laudable, she expressed concern that the IRS had not adequately disclosed its plans or solicited input from taxpayers and tax professionals.3 She also questioned whether the IRS would be able to achieve the desired level of cost-saving while still meeting taxpayer needs. In response, she announced a series of public forums around the country to permit taxpayers and tax professionals to comment on the IRS Future State. 4
The first of these public forums was held at the IRS Headquarters in Washington, DC, on February 23, 2016. The forum featured three panels, each followed by a question-and-answer session with the NTA and questions from the audience.5
The first panel featured Pamela F. Olson, Washington National Tax Services Practices Leader at PricewaterhouseCoopers, and Leslie Book, Professor of Law at Villanova University Law School. Both panelists discussed the importance of openness and public trust in designing the Future State, but each from a different perspective. Ms. Olson’s remarks focused on corporate taxpayers and the planned reorganization of the IRS Large Business and International (LB&I) division. Ms. Olson applauded efforts by the IRS to improve the tax administration system, but emphasized two critically important and interrelated items that the IRS should bear in mind in designing its future state: opening the design process to the public and working to build trust. The distrust and suspicion that the IRS and taxpayers often exhibit toward each other could impede the success of the reorganization of LB&I. She called for more collaboration between the IRS and the taxpayer and tax professional communities to improve the tax administration system.
Focusing on the experiences of lower-income taxpayers within the system, Professor Book’s remarks also emphasized the importance of trust in tax administration. He called for acknowledgement of the trend for the IRS as the primary administrator of a growing list of federal benefits. Because of that role, it is imperative that the IRS bear in mind the particular kinds of challenges and limitations that low-income taxpayers face.
The second panel featured representatives from various IRS advisory committees, including Jennifer MacMillan and Timothy McCormally, chair and vice chair, respectively, of the Internal Revenue Service Advisory Committee (IRSAC); Michael Gangwer, chair of the Information Reporting Program Advisory Committee (IRPAC); Jim Buttonow, chair of the Electronic Tax Administration Advisory Committee (ETAAC); and Gina Jones, chair of the Taxpayer Advocacy Panel (TAP).
Each of the panelists spoke favorably of the IRS’s plans to improve administrative efficiency and agreed that expanding digital services for taxpayers is a much-needed step. That said, panelists found a number of matters of concern facing the IRS. Among the primary issues the panelists discussed were the threat of identity theft and other online security concerns, the decline in taxpayer service, and the need for clear and up-front guidance on emerging issues. Each of these matters is worsened by the ongoing budget constraints under which the IRS operates.
The third and final panel of the day, made up of individuals from outside the tax profession, focused on social science research that may shed light on the behaviors and attitudes of taxpayers and tax professionals. Michael Best, Senior Policy Advocate at the Consumer Federation of America, discussed recent research regarding public views on paid tax-preparers. As most will recall, in 2014 the D.C. Circuit Court in Loving affirmed the District Court’s holding that a Circular 230 regulation requiring testing and registration for paid tax-return preparers was not authorized under the 1884 statute that authorizes the agency to “regulate the practice of representatives of persons before the Department of the Treasury.” Congress has so far refused to legislate a remedy. This creates a quandary: many taxpayers utilize paid return preparers, but there is a quite high error-rate in those prepared tax returns. Mr. Best called for federal or state oversight of paid return preparers to protect consumers from errors and fraud.
Aaron W. Smith, Associate Director of the Pew Research Center’s Internet Project, reported on American adults’ internet usage and access. Research indicates that 15% of American adults do not use the internet from any location or device. Two-thirds of Americans have access to a dedicated, high-speed home internet subscription, but broadband adoption has slowed in recent years. Among non-broadband users, cost factors are the most common reason for not subscribing to home internet. Many of these individuals rely primarily on a smartphone to access the internet, but such reliance can make many tasks—such as applying for a job or filing a tax return—challenging.
Arturo Gonzalez, Chief, Consumer & Community Development Research, Division of Consumer and Community Affairs, Board of Governors, Federal Reserve, discussed a March 2016 Federal Reserve report on consumers’ use of mobile financial services. Mobile banking use continues to rise. Among other findings, however, the surveys discovered that banking customers continue to rely—either exclusively or in conjunction with mobile banking—on traditional brick-and-mortar banks and ATMs. These findings suggest that banking customers prefer in-person interaction, even when online accounts are readily available.
All of the panelists’ materials are available online on the Taxpayer Advocate Service website at http://www.taxpayeradvocate.irs.gov/news/nta-forum-wdc. Information about subsequent and future public forums can be found at http://www.taxpayeradvocate.irs.gov/public-forums. ■
3 Id. at viii.
4 Id. at xv.