chevron-down Created with Sketch Beta.

The Tax Lawyer

The Tax Lawyer: Fall 2020

Moving Tax Disputes Online Without Leaving Taxpayer Rights Behind

Walter Edward Afield III


  • This article discusses the IRS's shift towards online tax dispute resolutions and the importance of integrating technology without compromising taxpayer rights.
  • The article highlights three key areas for technological implementation in dispute resolution: online information about notices, improving online tax obligation fulfillment, and developing technology platforms with nonprofit and academic sectors.
  • These proposals aim to expedite controversy resolution, improve service quality, and ensure fair tax payments without sidelining taxpayer rights.
  • Emphasizing the balance between efficiency gains and affirming taxpayer rights is central to the IRS's strategy in enhancing its online interaction with taxpayers.
Moving Tax Disputes Online Without Leaving Taxpayer Rights Behind
Catherine Falls Commercial via Getty Images

Jump to:


As the Service’s technological infrastructure continues to show its age, both the Service and Congress appear to be recognizing the importance of the Service having technological infrastructure that allows it to take advantage of the capabilities of modern computing systems to improve both its enforcement and service efforts. The National Taxpayer Advocate has entered this conversation as well, encouraging Congress and the Service to prioritize improvements to the Service’s technological infrastructure but simultaneously raising legitimate concerns about the impact that an overreliance on technology might have on taxpayer rights, particularly rights of vulnerable population groups who may not be able to utilize technology.

Fortunately, increasing technological deployment as part of taxpayer service is not a zero sum game that requires sacrificing taxpayer rights in the name of efficiency. The Service can accomplish the goal of deploying technology in a pro-taxpayer rights manner if it brings considerations of affirming taxpayer rights to the forefront of its deliberations about how best to utilize technology. Both the academic literature and Service strategic documents have focused on a wide variety of taxpayer interactions with the Service in proposing how this can be done. There is one type of interaction, however, that has thus far been underexplored both in the academic literature and in the Service’s strategic efforts to move more of its taxpayer interactions online: taxpayer controversy resolution.

This Article argues that the Service has insufficiently considered whether it can increase its use of technology-based interactions with taxpayers in the controversy-resolution process in a manner that both achieves efficiency gains and affirms taxpayer rights. Specifically, three areas in controversy resolution could lend themselves to such rights-affirming technological implementation. First, the Service should focus on how to provide online information about notices sent to taxpayers. These notices exist at the time at which taxpayer rights and the Service’s dual roles as an enforcement and service agency intersect the most, given that these notices bring taxpayers into a direct controversy with the Service, are often difficult to understand, and frequently require a specific taxpayer response to avoid a waiver of rights. Second, the Service should focus on improving its ability to allow taxpayers to satisfy their tax obligations online, including the limited use of algorithmic decision-making for routine disputes. Judicious use of online dispute resolution provides the government efficiency benefits while safeguarding taxpayer rights. Third, to address justice gaps that would remain if it addresses the first two areas, the Service should focus on developing partnerships with the nonprofit and academic sectors designed to produce new innovative technological platforms that might enhance taxpayer access to information and dispute-resolution tools.

These proposals would allow the Service to resolve controversies more quickly and prioritize the allocation of its personnel for dispute-resolution and customer-service issues that do not lend themselves to online resolution. In addition, these proposals can help taxpayers receive quality service and ensure that taxpayers do not have to pay more tax than they are either legally required or can economically afford to pay. Consequently, these proposals will allow the Service to move more of its controversy-resolution service and enforcement efforts online without abandoning the very taxpayer rights it is entrusted to protect.

I. Introduction

During the 2018 filing season, Service computers temporarily crashed, delaying the ability of taxpayers to file tax returns, pay their liabilities, and, even more crucially from the perspective of taxpayers, obtain refunds.1F The damage from this failure was fortunately minimal, but it served as a harbinger of the increasing likelihood of a Service technological computer failure that could cause significant damage to both taxpayers and the government.2F The reason for this increased risk is relatively straightforward: the Service operates the oldest computer system in the federal government, with legacy code that dates back to the 1960s and that is badly in need of a significant update.3F The need to overhaul the Service’s technology infrastructure comes at a time in which the Service is increasingly seeking to rely on technological solutions to replace in-person service that the Service can no longer afford to provide.

Accordingly, both the Service and Congress appear to recognize the importance of the Service having a technological system that allows it to take advantage of the capabilities of modern computing systems to improve both its enforcement and service efforts. In April 2019, the Service announced its Integrated Modernization Business Plan that described its goals for improving some of the core aspects of its technological systems.4F A few months later in July 2019, Congress indicated that it considered Service technological improvements a priority when it enacted the Taxpayer First Act, a part of which requires both a multi-year strategic plan for information technology and a comprehensive customer-service strategy to be submitted to Congress by July 1, 2020.5F

The National Taxpayer Advocate (the NTA) has entered this conversation as well, encouraging Congress and the Service to prioritize improvements to the Service’s technological infrastructure but simultaneously raising legitimate concerns about the impact that an overreliance on technology might have on taxpayer rights.6F Specifically, the NTA has noted that a predominantly online-oriented approach to taxpayer service can negatively impact the 14 million individual taxpayers who do not have internet access and the over 41 million taxpayers who do not have broadband, as well on those who would simply prefer having their tax questions answered either in person or over the phone.7F For these taxpayers (many of whom are members of already economically vulnerable groups, such as the elderly and those living in isolated rural areas or in poverty), the Service’s efforts to replace individualized service potentially violates the right to be informed in the taxpayer bill of rights.8F This is to say nothing of the negative impacts felt by taxpayers who have both technological access and expertise but whose efforts to interact with the Service through a technological platform are stymied due to failures in the Service’s own technological infrastructure.9F

Accordingly, the NTA has called on the Service to implement an omni-channel approach to service in which the Service ensures that there are multiple communication channels that are available and that no one channel is preferred over another.10F While this recommendation is sound in that it represents an ideal form of Service-taxpayer service, the Service’s very real resource challenges make it unlikely that it will implement such an omni-channel approach in which all communication channels are treated equally. Rather, given that in-person service is the most costly type of service to provide, it is more likely that the Service will continue to prioritize technological solutions to customer service if it believes that it can implement such solutions in a cost-effective manner to reduce its personnel costs.11F Indeed, in its recent IRS Modernization Business Plan, the Service implicitly admitted this when, after stating that the provision of a multi-channel service approach is one of its strategic goals, it then implied that a multi-channel approach really means utilizing technology for simpler tasks so that limited personnel are reserved to handle the more complex tasks.12F

Given the likelihood that the Service will not be able to implement a truly omni-channel approach to taxpayer service across the full range of issues confronting the full spectrum of taxpayers, a question arises regarding whether the Service can effectively solve at least some of the NTA’s concerns about how an increasing reliance on technology will impact taxpayer rights. This question is particularly relevant in regards to vulnerable population groups that consist of the many taxpayers whose only meaningful access to justice in the tax system is through a technological interface but who are at risk of having important taxpayer rights disregarded through this type of interaction with the tax system.13F Indeed, this question is only destined to increase in importance as technological access for vulnerable populations continues to increase.14F

Increasing technological deployment as part of taxpayer service is not a zero sum game that requires sacrificing taxpayer rights in the name of efficiency. The Service can in fact accomplish the goal of deploying technology in a pro-taxpayer-rights manner if it brings considerations of affirming taxpayer rights to the forefront of its deliberations about how best to utilize technology.15F Indeed, scholars over the past few years have begun suggesting ways in which the Service can do just that, and the Service has shown sensitivity to certain taxpayer rights, most notably the right to confidentiality, in the decisions made concerning how it interacts with taxpayers online.16F Both the academic literature and Service strategic documents have focused on a wide variety of taxpayer interactions with the Service, but there is one type of interaction, however, that has thus far been underexplored in the academic literature as well as in the Service’s strategic efforts to move more of its taxpayer interactions online: taxpayer controversy resolution.

Given that a controversy often sits at the direct intersection of taxpayer rights and the Service’s dual role as an enforcement and service agency, an approach seeking to balance efficiency with taxpayer rights through increased technological use must include efforts to improve the controversy-resolution system. In fact, because the controversy-resolution system is both personnel intensive and implicates a range of taxpayer rights, it arguably should be a priority area of focus for the Service to explore whether it can achieve significant efficiency gains in a rights-enhancing manner.

This Article argues that the Service has insufficiently considered whether it can increase its use of technology-based interactions with taxpayers in the controversy-resolution process in a manner that both achieves efficiency gains and affirms taxpayer rights. Specifically, there are three areas in controversy resolution that could lend themselves to such rights-affirming technological implementation. First, the Service should focus its efforts towards moving information delivery online, something that is already well underway, albeit in a manner that appears to be exhibiting a tradeoff between simplicity and accuracy of the information provided. Professors Joshua Blank and Leigh Osofsky have already begun to highlight through their research the design challenges that the Service faces in regards to moving towards understandable online guidance, particularly in regards to the Service’s efforts to explain the law to taxpayers.17F Given the breadth of information that the Service must communicate to taxpayers,18F addressing these design challenges across the board is important but likely a very daunting and time-consuming task. Thinking about how the Service should prioritize these online information-delivery efforts in a manner that puts taxpayer rights at the forefront, however, suggests a possible priority for the Service’s initial online efforts: Service notices. These notices exist at the time at which taxpayer rights and the Service’s dual role as an enforcement and service agency intersect the most,19F given that these notices bring taxpayers into a direct controversy with the Service, are often difficult to understand, and frequently require a specific taxpayer response to avoid a waiver of rights.20F Thus, an effective and easy-to-understand online mechanism for taxpayers to have their questions about their notices answered would both reduce the number of inquiries that Service personnel are required to answer while helping taxpayers preserve foundational rights in the controversy process.

Second, the Service should focus on improving its ability to allow taxpayers to satisfy their tax obligations online. Professor Kathleen DeLaney Thomas has proposed an array of sound ideas for how the Service can provide more opportunities for online tax compliance, particularly in regards to compliance before a dispute with the Service arises to make front-end compliance a smoother experience for taxpayers.21F The Service could take these proposals further, however, to include the online resolution of certain taxpayer disputes after a controversy has already arisen. A more provocative proposal would be for the Service to further streamline such an online dispute-resolution process by incorporating some algorithmic decision-making, at least for certain routine disputes. As with the case of improving online information delivery about Service notices, judicious use of online dispute resolution provides the government the efficiency benefits it seeks while safeguarding taxpayer rights. Such a system allows the Service to resolve controversies more quickly and prioritize its personnel for disputes that do not lend themselves to online resolution. In addition, these proposals can help taxpayers receive quality service and ensure that taxpayers do not have to pay more tax than they are legally required or can economically afford to pay.22F

While these first two proposals can be implemented in a way that provides both efficiency benefits to the Service without sacrificing taxpayer rights, they do not by themselves entirely assuage the NTA’s concern about certain taxpayers falling by the wayside when personal service is replaced with a technological platform. There will still be access-to-justice gaps both in regards to taxpayers who do not have access to technology and in regards to taxpayers who may require service outside of what the Service is able to provide in person and through its formal technology portals.23F To fill these gaps, the Service’s third area of focus should be to develop partnerships with the nonprofit and academic sectors designed to produce innovative technological platforms that can enhance taxpayer access to information and dispute-resolution tools.

Part II discusses how and why the Service should prioritize its online information delivery towards providing better explanations of Service notices. Part III describes how the Service could begin experimenting with online dispute-resolution mechanisms, including some algorithmic decision-making, for routine taxpayer disputes. Part IV describes how the Service should develop partnerships with academic and nonprofit organizations to develop collaborative technological platforms that could help fill some of the access gaps that taxpayers currently face when trying to successfully navigate the tax system primarily through a technological interface. Part V describes the benefits of these proposals and illustrates how these benefits flow to both the government in the form of improved efficiencies and to taxpayers in the form of enhanced protections of taxpayer rights. Part VI considers some of the potential drawbacks of these proposals and illustrates how these drawbacks do not outweigh the potential benefits.

II. Improved Online Information Delivery: The Importance of Focusing on Notices Issued by the Service

Given the federal tax system’s inherent complexity combined with the relatively low reading grade-level of many taxpayers,24F one of the most critical functions of the Service’s online approach is simply to provide information to taxpayers in a comprehensible format. This function is in fact a legal requirement under the Plain Writing Act of 2010.25F While the Service has made some strides in this regard and has incorporated this concept as a broad objective in its most recent technological strategic plan,26F more work is still required, particularly with respect to information delivery that is essential to enable taxpayers to resolve controversies with the Service. While having comprehensive information available about all aspects of the controversy process is important, a critical need exists for improved delivery of online information about controversies involving notices from the Service. These notices bring taxpayers directly into contact with the Service, often indicate a controversy between a taxpayer and the Service, and often trigger critical taxpayer rights. Improved communication regarding the meaning of Service notices is important because, while Service notice research continues to be one of the more popular online resources that taxpayers access, taxpayers nevertheless indicate that this is an area in which they generally prefer in-person help, which is becoming more and more difficult to obtain.27F In addition, unlike issues that require an understanding of the tax law generally for which the Service has provided online tools in the form of lengthy IRS publications to explain the law in simpler terms to untrained taxpayers, the efforts that the Service has taken to explain notices have been much less robust.28F The fact that taxpayers seem to be initially interested in searching online for help understanding tax notices only to determine that they need a person to answer their questions suggests that the Service is correct to think that notice explanation is a good use of technological resources, but that such technological deployment requires more thoughtful execution to be effective.

An examination of the pages on the Service’s current website that explain critical notices reveals the weakness of the current approach that renders it unfriendly to a large portion of taxpayers. The Service has taken steps to allow taxpayers to obtain more information about a particular tax form through its Understanding Your IRS Notice or Letter site.29F While this feature is helpful in that it provides concise explanations of a wide range of Service notices and letters, it does not go far enough in highlighting the most critical aspects of particular forms in a manner that is easy to understand and that would be useful to taxpayers. The way the website explains two common and significant controversy forms, the statutory notice of deficiency (SNOD) and notices that describe collection due-process rights, both of which contain critical information concerning the preservation of important taxpayer rights, illustrates this point.

One of the most critical notices that a taxpayer can receive in the controversy process is the SNOD, which serves as a “ticket to the tax court,” provided that the taxpayer files a petition within 90 days (a non-waivable jurisdictional requirement).30F This document is incredibly important to all taxpayers, but especially so to those taxpayers with modest incomes. Petitioning the Tax Court after receiving a SNOD is often the only realistic path to judicial review of a Service determination because, unlike a refund suit, it does not require payment of the tax before judicial challenge.31F The NTA has rightly observed that, without even factoring in the steps that the Service has taken to try to use technology to explain this notice, this notice on its face is designed in a manner that is likely to confuse taxpayers about their rights.32F

Given the importance of the 90-day petition window and the inherent confusion in the design of the form itself, this information should be highlighted in an easy-to-understand format on the Service’s explanation page for SNODs.33F The Service’s attempts to provide online assistance in understanding this critically important form, however, are a prime example of why the National Taxpayer Advocate is skeptical about the Service’s ability to replace in-person assistance with technological assistance. Searching for “3219” on the “Understanding Your IRS Notice or Letter” site produces results for only two types of SNODs: the CP3219N and the CP 3219A.34F Other forms of the notice are not referenced at all.35F While all three explanatory webpages begin with some bolded text designed to attract the reader’s attention, only one of these webpages (the Understanding Your CP3219N Notice36F) includes in the initial bolded language the fact that the taxpayer must petition the Tax Court within 90 days of the date of the notice to challenge the liability determination. For the other SNOD explanation sites, this information, however, is placed approximately half-way down the page with little to no emphasis, where a taxpayer could easily overlook it if the taxpayer did not scroll down the page and not appreciate the notice’s significance as the taxpayer’s only “ticket to the tax court.”37F

Another example involving the collections process also illustrates the difficulties that the Service confronts in its current efforts to disseminate notice information in an easily digestible format. Taxpayers against whom the Service is seeking to file a notice of federal tax lien or to levy in collections have an opportunity to challenge the procedures that have led to the potential levy in an independent administrative collection due-process hearing with the Service appeals function and, crucially, to have the outcome of that hearing reviewed in Tax Court.38F Obtaining this collection due-process hearing with judicial review rights, however, requires that the taxpayer request a collection due-process hearing in writing within 30 days of receiving a notice that specifically raises collection due-process rights.39F Taxpayers who fail to make such a request may still obtain administrative review in an equivalency hearing, but such a hearing does not carry with it the right of judicial review.40F Much like the SNOD, the notice that the Service sends to taxpayers that triggers collection due-process rights (typically a Letter 3172 in the case of filing a notice of federal tax lien or a LT11 or a Letter 1058 in the case of the Service seeking to initiate a levy action) is confusing. Despite the important rights associated with this notice, these rights often go unexercised, suggesting that taxpayers may not understand the notices that they are receiving.41F

Given the importance of these collection due-process hearing notices and the poor design of the notices themselves, it is helpful to examine how the Service provides information about this notice online to determine whether the Service is effectively deploying a technological solution to assist taxpayers who attempt to understand and to exercise their rights. When accessing the page for “Understanding your LT11 Notice or Letter 1058,”42F a taxpayer is immediately informed that the letter indicates an intention to seize property, which is useful.43F Significantly, however, buried in the middle of the page is an oblique reference to the taxpayer’s collection due-process rights that the taxpayer has in regards to this notice (rights that taxpayers do not have in regards to all notices) as well as a link to another page that provides information about collection due-process rights. A taxpayer looking at this explanation would quite understandably not appreciate the significance of the LT11 notice and the significance of collection due-process rights as well as what is required to request a collection due-process hearing (including the critical 30-day time limit for making such a request).

These are just two examples involving two of the most foundational notices that taxpayers may receive in a tax controversy. They are indicative, however, of the existing problems with the Service’s efforts to use online platforms to replace in-person taxpayer service and may well explain why taxpayers likely still prefer in-person interaction to understand Service notices after their initial attempts to find answers online.44F These two types of notices are two of the most critical notices that taxpayers can receive because of the critical due-process rights that are associated with them and that can be waived through improper taxpayer responses to these notices. Failures to provide easy-to-access explanations of these notices raise questions about whether technological platforms can be a meaningful substitute for in-person service.45F Satisfactorily addressing these concerns depends on whether the problem is inherent to the technological platform itself or whether implementation and design changes can resolve the problem.

Considering the potential effectiveness of some possible implementation changes that would not require significant alterations to the technological delivery infrastructure indicates that the problem is indeed one of execution and that effective solutions can be accomplished with design choices that produce information that has higher salience and influence for taxpayers.46F Professor Susan Cleary Morse has emphasized the importance of the government providing communications that have salience and influence in helping to reduce the tax gap, but these same principles have equal importance in addressing how the Service provides service to taxpayers.47F Professor Morse succinctly describes these concepts:

Salience here means relevance, prominence and accessibility. A salient communication grabs the attention of the audience. . . . Salience is also relevant to the relationship between the IRS and the taxpaying public because taxpayers give more attention and focus to more salient IRS communications.

Influence as used here means persuasion, typically through methods that do not rely on logic or argument. A communication may prompt a certain reaction because it activates a certain behavior pattern or heuristic. But this does not necessarily make it influential as the term is intended here. Influence implies intent. A person making an influential communication crafts it to take advantage of a particular behavior pattern or heuristic to produce a desired result.48F

The problems that exist concerning how the Service provides information over a technological platform as seen in the examples discussed above are not the result of the platform that the Service is using. Rather, these problems result because the Service is not providing the information in a salient and influential way designed to capture the taxpayer’s attention and to produce the desired result of informing taxpayers about critical rights and how to exercise those rights.49F

Returning to the notice examples discussed above, a variety of ways exist through which the Service could provide information in a more salient and influential manner based on principles of web design simplification that focus on the importance of usability.50F For example, any webpages providing information about notices that contain critical deadlines should have that information as well as the information about how to respond to that deadline featured prominently in the informational page so that it could not be easily overlooked.51F While the current website does helpfully link to pdfs of the actual form, this service could be improved by annotating those pdfs to illustrate exactly where critical information can be found on the page. The Service could also provide pdf examples of each version of a particular form that it uses. In addition, the Service could provide links for taxpayers with limited English proficiency that would take them to informational pages explaining how to obtain assistance in other languages.52F Annotations and links would help make these forms less intimidating to taxpayers, particularly those in vulnerable groups who may lack in-person assistance and who might struggle to navigate the structure of a Service notice.53F This highlighting of information could be further accompanied by information designed to influence taxpayers to pay attention to their rights and to exercise them by illustrating to taxpayers that they are part of a community of taxpayers that exercises its rights.54F The Service could accomplish this by publishing statistics showing how many taxpayers filed Tax Court petitions or collection due-process hearing notices in a given year to encourage other taxpayers to exercise those same rights. In addition, the Service could publish portions of the LITC Program Report near these notices to illustrate to taxpayers in vulnerable population groups, who might feel the least amount of comfort in exercising their rights, success stories that illustrate the benefits that can accrue to taxpayers when they exercise their rights.55F

Steps such as these are relatively straightforward to implement because they only involve thoughtful design choices and do not require any significant expenditure of resources or redesign of the fundamental technological architecture involved in providing online information access. All they require is that the Service prioritize taxpayer rights at a level that at least equals budget efficiency in determining how it can best utilize technology to improve taxpayer access to critical information.56F As will be discussed in Parts III and IV, there are additional ways through which the Service can effectively use technology in a rights-affirming manner but that likely require a greater initial investment of Service resources as well as innovative changes to the Service’s controversy-resolution process. Providing easy-to-understand explanations to taxpayers on its website is relatively “low hanging fruit” for which the Service can use technology in a way that conserves resources while enhancing taxpayer rights. Nevertheless, it is a critical first-step towards rights-affirming technological deployment that simplifies the controversy-resolution process; failing in this regard would make the possibilities discussed in the next parts of this Article less likely to succeed.

III. Online Dispute Resolution as a Viable Tool for Routine Taxpayer Disputes

Moving away from the low hanging fruit of improved information delivery through improvements in design implementation, additional and more provocative steps exist that the Service could take to better deploy technology in its dealings with taxpayers in the controversy-resolution process. Both academic commentators and government advisory committees have recommended that the Service develop a single online platform through which taxpayers can interact with the Service.57F Thus far, these calls for better online taxpayer access have focused on “integrating online services already available to taxpayers . . . like checking tax refund status, retrieving tax transcripts, and making tax payments . . . [and] allowing taxpayers to view communications from the IRS online, view the status of unresolved tax issues, address underpayments and penalties, and respond to IRS inquiries.”58F These are sound ideas that would be helpful in smoothing some of the interactions that taxpayers have with the Service in resolving a controversy. They are limited, however, primarily to smoothing information delivery and do not consider whether the benefits of such proposals to both taxpayers and to the government could be enhanced through extending online information delivery to a more formalized online dispute-resolution (“ODR”) platform.

In addition to improving its online delivery of information to and receipt of information from taxpayers, the Service could indeed make advances in improving taxpayer access to justice by investing more heavily in a reliable ODR mechanism that includes at least some automated algorithmic decision-making, at least for certain routine types of disputes.59F ODR systems, properly executed in a manner designed to protect procedural due process,60F can reduce costs and improve access to justice by providing a dispute-resolution mechanism to taxpayers in a format that does not negatively impact the time commitments of their other responsibilities.61F These systems can also increase the comfort level of parties who might fear being the victim of stereotypes or biases in a face-to-face interaction or who might struggle in properly responding to questions posed face-to-face in real time.62F

An algorithmic ODR mechanism would be inappropriate for more complicated forms of Service disputes, particularly those involving difficult liability determinations or equitable considerations.63F Nevertheless, it could be effective at streamlining the process of routine collections issues that rely on more mathematical determinations of collectability proved by routine document production.64F The Service already has an online mechanism for installment agreements for liabilities of $50,000 or less in which determinations can be made immediately after the online application is submitted.65F This approach could be extended to other types of collection disputes in which determinations turn more on whether objective data establishes taxpayer eligibility and involve little consideration of qualitative or equitable factors. Examples of such collection disputes include offers-in-compromise based on doubt as to collectability,66F decisions regarding currently-not-collectible status based on financial hardship determinations,67F first-time penalty-abatement eligibility,68F and at least certain components of collection due-process hearings in which a taxpayer is not contesting specific alleged due-process violations but is simply requesting the hearing because of an inability to pay.69F

Even for disputes that involve qualitative determinations that would not lend themselves to algorithmic decision-making, ODRs could still be beneficial, particularly in regard to controversies that can cause significant economic harm to vulnerable taxpayers if they are not resolved quickly. Earned Income Tax Credit (EITC) frozen refund disputes are a prime example of a type of controversy that fits into this category.70F These EITC disputes might not lend themselves to algorithmic decision-making71F because, depending on which aspect of eligibility is under examination, the determination as to whether the taxpayer is entitled to the credit might depend on more qualitative analysis of the taxpayer’s family situation for which there is little systematic data available.72F Nevertheless, a modified form of ODR that still involved Service personnel review would be beneficial because it would make it easier for the Service to assign one individual employee to a taxpayer’s audit by creating an online portal in which the taxpayer and the Service employee could communicate to resolve the controversy more efficiently.73F In addition, taxpayers could have the ability to make real time changes to their accounts to upload certain qualitative information about their family situation, which could create a more systematic data set that the Service could use to approve EITC claims without having to freeze refunds in the first place.74F The efficiency gains in administrability that such a system might achieve would not only benefit individual low-income taxpayers who might be able to receive critical refunds more quickly but would also enhance the viability of the EITC as a whole. In turn, such an approach would free up resources for the Service to pursue other claims, both inside and outside the EITC arena.75F

The application of ODR to collections disputes that can be resolved through a review of objective and quantifiable data as well as to liability disputes in which delays in resolution can be harmful to the most economically vulnerable is a logical starting point as part of the prudent adoption of ODR for tax disputes. Because ODR systems are still in their relative infancy, only limited data exists as to how much of the hoped-for benefits of such programs may actually materialize.76F Furthermore, the design of these systems, if not done carefully, can create a new set of problems in resolving tax disputes fairly for both the government and taxpayers that will counteract the benefits of these programs.77F While limited data and realistic concerns about unforeseen consequences of incorporating ODR suggest a slow and deliberate process of experimentation with such programs, these concerns should not serve as insurmountable roadblocks that prevent the Service from ever attempting ODR in tax controversy resolution. Rather, a slow and deliberate process of experimentation will allow the Service to collect data as to whether such a program is worthwhile, address implementation concerns as they arise, and better engage in simultaneous efforts to fill in any of the inevitable gaps created by a limited initial deployment of this technology. Indeed, as will be discussed in Part IV, there are ways that the Service can be proactive in addressing some of these potential gaps.

IV. Filling in the Gaps: Partnering with the Academic and Nonprofit Community

Improving its own technology information-delivery system and implementation of ODR in the tax controversy arena would achieve important gains in the Service’s ability to better inform taxpayers of critical information they need to resolve a tax dispute and in the Service’s ability to resolve a dispute more efficiently. Nevertheless, these steps would likely still leave gaps that the Service would need to address, particularly in regard to vulnerable population groups. These gaps would manifest themselves in two primary ways: (1) lack of technological access, because of either cost, availability, or expertise; and (2) taxpayer questions in a controversy that are not addressed by the limited technological solutions discussed previously and that that Service does not have sufficient personnel to address. Partnerships between the Service and nonprofit organizations and academic institutions to develop innovative access-to-justice technological solutions can at least partially fill these gaps in both of these primary areas.

A. Technological Access

Despite increased access to and familiarity with technological platforms among taxpayers as a whole, the needs of those taxpayers who either do not have such access or who do not have sufficient proficiency or comfort in the use of technology to resolve a legal dispute must still be accommodated.78F If it is unrealistic to expect the Service to maintain an omni-channel approach to taxpayer service because of budgetary constraints, the Service must find another way to fill this gap, particularly for the most vulnerable taxpayers, and doing so must be an essential component of any technological deployment designed to replace in-person service.

To address concerns regarding limited access to technology by vulnerable taxpayer population groups, the low-income taxpayer-clinic community can serve as a natural bridge between taxpayers who lack direct technological access and the technological interfaces described above that can help resolve taxpayer disputes more efficiently. Even if taxpayers who lack technological access have to use clinics as an intermediary between them and the technological platforms that allow their disputes to be resolved more easily, the presence of these platforms allows the clinics to better leverage their resources and to reach a larger percentage of taxpayers who require this assistance. Low-income taxpayer clinics have grown to provide coverage to most of the United States, and these clinics are already engaged in helping taxpayers resolve controversies as a part of their mission.79F Accordingly, these clinics are well positioned to act as “technological translators” for taxpayers with technological access issues that would still allow these taxpayers to receive the benefits from these technological platforms.

B. Unanswered Taxpayer Questions

As to how the Service can fill in taxpayer service questions that are left unaddressed by the proposals discussed above and for which it cannot provide routine in-person service, partnerships with the academic community, and with the nonprofit legal service community as a whole, can help leverage additional technological resources to answer these questions. While such partnerships do not necessarily need to exclude the for-profit sector outright, the focus of this piece is squarely on the role that the academic and nonprofit sector can play in these potential partnerships because of the inherent problems that partnerships with for-profit entities may entail. Partnerships between the Service and the for-profit sector can produce negative externalities for taxpayers because the focus on achieving a profit can lead to rent seeking by private partners, as seen with Intuit’s efforts to prevent the government from pre-filing a tax return for most taxpayers.80F Partnerships with the nonprofit sector, and the nonprofit academic sector in particular, avoid these profit-oriented and rent-seeking problems and create opportunities for technological solutions focused on benefitting the public, even in regards to complex questions.81F In addition, the academic sector is uniquely situated to create these platforms, because making them truly accessible to a large and diverse population often requires collaboration between numerous academic disciplines such as law, linguistics, and psychology.82F While such efforts need not necessarily be limited to law schools, law schools are well positioned to be natural leaders in this space, as such efforts connect relatively seamlessly with their overall educational and research missions as well as with their status in the community.83F Looking again at the role that academic low-income taxpayer clinics could play in this regard, the presence of these clinics has effectively already established a partnership between the Service and many academic institutions that could be leveraged by expanding the scope of grant-funded activities to specifically include design and implementation of technological solutions to improve access to justice.84F

Examples of the legal academy taking steps to design technology platforms to improve the public’s access to justice abound in other contexts but have so far left tax problems largely unaddressed.85F Following the example of other academic initiatives to create access-to-justice platforms, the academic low-income taxpayer clinics could be enlisted to have students use a program like A2J Author to create guided interviews or smart forms that could be used by the public to help diagnose a tax issue and to tackle various other tax justice projects.86F Examples of these potential projects are: (1) automating the tax petition form; (2) suggesting potential resolution mechanisms based on taxpayer inputs and referring taxpayers to the appropriate resolution form;87F and (3) automating the completion of common collection forms such as the Form 433 and 656 and providing a mechanism by which such forms could be electronically validated and checked for completeness or potential errors.

These types of projects would be an ideal means to provide additional resources to taxpayers about the most commonly encountered issues with the tax controversy process without requiring significant ongoing personnel involvement from either the Service or the partnering organization outside of maintaining and updating the software platform. Certainly, other potential uses of technology from the nonprofit sector come to mind, such as using it to facilitate an interface between taxpayers and pro bono tax practitioners who can answer questions.88F These uses would unquestionably be beneficial in bridging a geographic gap between users and individuals who can assist them. Such proposals, however, should not be prioritized over the technological proposals discussed above because they do not do much to reduce the need for personnel to provide assistance. Thus, they would not have the scaling benefits that partnerships centered around designing additional technological platforms would have by reducing the need for personal assistance, and consequently they would have limited benefits because they would likely replace Service personnel shortfalls with shortfalls in the nonprofit sector.89F

V. The Benefits of Improved Technological Deployment for Both the Government and for Taxpayers

Thus far, one of the most salient critiques that the NTA has raised against the Service’s technological deployment as a substitute for in-person service is that the benefits from such a deployment flow to the government at the expense of taxpayer rights. If this is the case, then the use of such technology is indeed problematic—the benefits should not flow to the government while the burdens flow to taxpayers forced to forego their rights. The proposals discussed above should only be pursued if they can withstand such a critique. In other words, are they likely to have efficiency benefits to the Service and rights-enhancing benefits to taxpayers that outweigh any potential drawbacks? This Part answers that question affirmatively.

A. Benefits of Improved Technological Deployment for Tax Controversies

In evaluating the potential benefits of proposals discussed in this Article, it is important to determine not only what the benefits are but also whether they flow to taxpayers, to the Service, or to both. Examining the benefits of these proposals shows that these benefits do indeed flow to the government in the form of increased efficiency in case resolution and to taxpayers in the form of enhanced protection of multiple taxpayer rights as well as benefits that taxpayers also incur from more efficient case resolution.

B. Benefits That Flow to the Government: Increased Efficiency and Improved Taxpayer Compliance

As to the benefits that these proposals provide to the government, the most readily apparent benefits are the efficiency gains that the government would realize in administering its dual role of service and enforcement in the tax controversy process. Through an improved online information-delivery system with respect to core notices that trigger critical taxpayer rights, the Service will be better able to ensure that the public receives critical information to navigate the controversy process.90F A platform for quick online resolution of taxpayer disputes that either relies on objective financial analysis or that involves critical benefits to the most vulnerable allows routine disputes and those in which delay could cause the most harm to taxpayers to be resolved more quickly.91F Establishing partnerships with the nonprofit sector to expand further the ways in which taxpayers can utilize technology to resolve controversies supplements both of these efforts. These partnerships could provide additional resources to taxpayers outside of these formal Service technological platforms to improve both information-delivery and case-resolution times and provide resources to taxpayers who might not be well positioned to receive benefits directly from the Service’s technological platforms.

The government would likely experience indirect benefits from these proposals as well in the form of increased taxpayer compliance rates more generally. Simplified information-delivery systems regarding the controversy-resolution process and increased speed in case-resolution times improves taxpayer compliance rates by reducing taxpayer mental depletion that serves as a barrier to higher levels of voluntary compliance. Such systems also reduce the actual economic costs associated with taxpayer efforts to comply with the current system.92F Crucially from the Service’s perspective, these proposals accomplish all of these goals without requiring significant investments in additional personnel, which allow the Service to better allocate its existing personnel to controversy service and enforcement tasks that do not lend themselves to online service.93F

Initial data from pilot programs in states that have begun experimenting with ODR in routine municipal disputes, including tax disputes, indicate that these efficiency gains are not merely speculative.94F Of particular relevance in thinking about how ODR could be utilized in federal tax collection is the ODR program of the Franklin County Municipal Court Dispute Resolution Department in Ohio created to resolve city tax disputes.95F In this program, taxpayers are able to use an ODR system free of charge to both upload pertinent files and to review and accept or decline settlement offers.96F Initial data from the first two years of the program indicate that this ODR system resulted in the more rapid resolution of cases and an increased likelihood in reaching an agreed resolution than in cases that did not use the ODR system.97F The increase in settlements was particularly beneficial because an increased number of negotiated settlements and agreed judgments benefitted both the taxpayer, who usually receives more favorable terms in a negotiated settlement than in a default judgment, and the government because taxpayers were more likely to pay agreed amounts than default judgments.98F While care should be taken in extrapolating too much from limited state pilot programs, this initial data at least suggests that the proposals discussed above would provide tangible efficiency gains to the government.

C. Benefits that Flow to Taxpayers: Enhanced Protection of Taxpayer Rights

Efficiency gains to the government are not enough of a justification to adopt proposals for additional technological deployment in tax controversy resolution. To be justifiable, any proposals must, at a minimum, provide these benefits without making taxpayers worse off with respect to the protection of taxpayer rights and ideally should provide rights-enhancing benefits to taxpayers as well. This Part demonstrates that efforts to improve the Service’s internal technology platform combined with innovation-enhancing partnerships with the academic community do indeed serve as a critical bulwark for the protection of taxpayer rights and thus provide additional benefits to taxpayers as well as to the government.99F

Improving the flow of information delivery surrounding tax controversies enhances both the right to be informed and the right to quality service because the efficiency benefits to the Service described above redound to taxpayers as well. Limited Service personnel are better able to target their service more towards those who do not have technology access or who have a controversy issue that cannot be resolved through an online interaction.100F As a result, taxpayers with more routine questions should be able to receive quick and useful answers to their questions online, and taxpayers who have more complex questions or technological access issues should be able to receive the priority of the Service’s limited personnel assistance or assistance through one of the vehicles designed by the partnerships described above.101F

Effective use of improved information delivery, ODR, and applications that assist taxpayers to understand their tax issue and direct them to an appropriate resolution mechanism can also enhance the right to pay no more than the correct amount of tax, the right to challenge the Service, and the right to appeal a Service decision. Foundational to these three rights is the ability for taxpayers to easily understand the available options to contest a tax liability or to demonstrate that they are reasonably unable to afford to pay the liability through a process that imposes minimal transaction costs on the taxpayer. Salient online information regarding taxpayer rights enhances the ability of taxpayers to understand when and how to exercise their rights to contest liability or to demonstrate a lack of collectability. An ODR system designed to reduce resolution times for taxpayers for whom a delayed controversy resolution could be economically catastrophic and for taxpayers with routine disputes that could be resolved quickly through a more automated process allows taxpayers to more quickly and painlessly arrive at their correct tax liability based on their ability to pay any resulting tax liability.102F Innovative supplemental technological information-delivery and controversy tools designed by members of the nonprofit and academic communities most focused on enhancing taxpayer rights bolster these initiatives by providing resources to taxpayers who have technological access difficulties as well as to those taxpayers who have technological access but who might have additional service needs above the level that the Service is able to provide in its formal systems.

Finally, the proposals discussed in this Article can help protect the right to a fair and just tax system. These proposals enhance this right by removing some of the inequities associated with the differences between outcomes obtained by sophisticated taxpayers who routinely interact with the tax system and those obtained by less sophisticated taxpayers interacting with the system for the first time. To the extent that these proposals improve information delivery, simplify the process of taxpayer interaction with the Service to resolve a dispute, and, at least in some cases, remove human decision-makers from the equation, they minimize the procedural advantages enjoyed by repeat players in the tax system and reduce decision-maker bias towards less sophisticated taxpayers.103F In addition, more efficient technological information delivery furthers the Service’s goals of using more plain language to level the playing field for all taxpayers by making sure that the benefits of using more plain language in Service communications are not lost because taxpayers are unable to access the information.104F

Apart from enhancing taxpayer rights specifically, it is worth noting that improved technological deployment can also help promote human rights more broadly, given the connection between taxpayer rights and human rights that, while not obvious to scholars and policymakers at first blush, is nevertheless an inextricable one.105F Tax policy intersects human rights in three fundamental areas: (1) the state’s ability to have sufficient resources to fulfil its obligations in protecting human rights; (2) the ability of the state to reduce inequality through redistribution and economically incentivizing particular activities; and (3) the state’s ability to instill confidence in its citizens that it is accountable to the public and upholds democratic processes through its tax system.106F Accordingly, an information-delivery and controversy-resolution system that bolsters taxpayer rights by improving access to justice and allowing taxpayers to comply with their tax obligations in a manner that is not overly burdensome does not just improve the tax system in a vacuum. Rather, it more broadly enhances human rights by allowing the tax system to better function as it should in a fair and accountable manner that both raises revenue and serves as a vehicle for social welfare and civic engagement.107F

VI. Evaluating Potential Drawbacks to Increased Technological Deployment

There are, of course, potential drawbacks to increased technological use, although these drawbacks can likely be mitigated and do not outweigh the benefits described above. The first potential drawback is that identified by the NTA in cautioning against an overreliance on technological solutions—namely, that increased technological use runs the risk of reducing critically needed personal service to taxpayers from the Service.108F Certainly, the NTA’s concern cannot be dismissed and indeed is reflective of worthy goals to encourage the Service to adopt an ideal form of taxpayer service. Given the Service’s budget realities, however, the Service will inevitably rely more heavily on technological solutions instead of personal service.109F Thus, to a degree, the NTA’s concern becomes somewhat moot because the Service simply does not have the resources necessary to implement a more ideal omni-channel approach. The most pertinent question is not whether the Service should employ technology to make up for personnel shortfalls but how it should do so and at the same time minimize any reduction in personal service and better utilize its personnel to provide personal service in those cases for which a technological solution would truly not be sufficient. The recommendations above attempt to address this question of “how” by focusing on steps that the Service can take to realize its desired efficiency gains in a manner that meaningfully increases service to taxpayers; improves access to justice; frees up Service personnel to respond to those taxpayers for whom a technological solution is inappropriate; and enhances, rather than curtails, taxpayer rights.

A second potential drawback to increased technological deployment, particularly in the context of algorithmic technological interfaces designed to assist taxpayers in obtaining customized information or resolving a dispute online, is the risk that poor design choices in creating such interfaces might bias outcomes in favor of particular groups.110F Such poor design could be either intentional or unintentional. As to intentional design flaws, there is a risk that for-profit actors will seek to leverage the benefits of the technological efficiencies that result for the purpose of extracting profits from vulnerable taxpayers. Even if the Service makes a concerted effort to coordinate solely with the nonprofit and academic communities to develop technological solutions, private actors will inevitably seek to leverage the technological interfaces that result to develop products of their own.111F Should these interfaces become profitable, then private actors will seek to protect those profit-centers at the expense of vulnerable taxpayers just as Intuit was able to do for so long with its successful lobbying efforts to limit the scope and reach of the government to provide an opportunity for taxpayers to file their tax returns electronically for free.112F Apart from intentional rent seeking, there is an additional design risk in that algorithmic decision-making can be unintentionally discriminatory because it “can rely on skewed databases, reflect the programmer’s own biases in their design, and, perhaps most disturbingly, operate in unpredictable ways, in particular when we are dealing with learning algorithms.”113F Furthermore, there is a risk that such unintentional design bias could end up paradoxically imposing additional burdens on the very taxpayer groups that the Service is attempting to help. This is because of the ability of sophisticated taxpayers to better detect when government-provided information might be erroneous, while more vulnerable and less sophisticated taxpayers would be more likely to rely on erroneous government information to their detriment.114F

These design risks are real, but they are not an insurmountable roadblock to the deployment of more efficient technological solutions. Rather, these risks can be confronted head-on through a simultaneous increase and development of additional regulation of software providers and designers to ensure that they do not exploit vulnerable taxpayers through unjust rent seeking.115F Indeed, the Service Advisory Council, despite being critical of the potential ability of return software providers to exploit vulnerable taxpayers as part of the current free file program,116F has indicated that more transparent and robust Service oversight combined with changes to program participation requirements can allow for technological return preparation in a manner that still protects vulnerable taxpayer groups.117F

Finally, there could also be a potential drawback regarding taxpayer privacy and confidentiality, particularly when considering the utilization of an ODR platform. Such a streamlined system could provide the Service with the ability to demand more documentation to establish certain taxpayer claims, resulting in problematic intrusions on taxpayer privacy.118F Professor Michael Hatfield has observed that while those concerned with taxpayer privacy typically focus on the unauthorized disclosure of taxpayer information, which is indeed a concern, there are equal or greater concerns about the information that the government is authorized to collect from taxpayers.119F Historically, the only check on the Service has been the practical difficulties it confronts in collecting information from a large number of taxpayers.120F As Professor Hatfield states:

Yet, the ongoing information technology revolution will challenge both individuals and societies in unprecedented ways. As information technology revolutionizes tax administration in the coming decades, those benefits may include lower compliance burdens on individual taxpayers and lower administrative costs for the government. But, given how much personal information will be covered by the coming technology and how much personal information is potentially tax relevant, it is hard to have anything but a dystopian vision of this future—a vision in which individuals’ inner lives are so burdened that the great achievements of our society shrivel.121F

These privacy concerns certainly require attention given the fact that the Service might find it much easier to request increasingly more detailed taxpayer documentation about private aspects of their lives in order to resolve a tax controversy if that documentation can be more easily processed and reviewed. In addition, for the system to remain usable to a large number of taxpayers, the Service might have to limit the number of security verification protocols that are in place, which can increase the risk of a data breach.122F These two facts taken together (i.e., an increasingly centralized collection of taxpayer data combined with the tension between security safeguards and usability) increase the risk of a privacy breach in a usable system and creates a risk that such a breach could cause outsized privacy harms to a large population of taxpayers.123F Furthermore, vulnerable taxpayer populations, such as low-income taxpayers receiving information requests about their familial relationships, would not be in a position to simply refuse to provide the information in exchange for not receiving the tax benefit because of the economic significance of such benefits.124F

Without minimizing these privacy concerns, a consideration of the overall impact on taxpayer privacy suggests that these concerns might be overstated. In regard to safeguarding data, the Service can take steps to minimize the likelihood and impact of a breach. Admittedly, successfully addressing these privacy concerns might require changes in how the Service provides certain benefits and changes in the remedies available to taxpayers who are harmed by a data breach.125F The Service may, however, have an incentive to implement such changes if, in doing so, it is allowed to capture some of the efficiency gains from increased technological deployment as discussed previously.

Furthermore, any potential privacy harms need to be weighed against any potential privacy benefits that might accrue. There could, in fact, be some privacy enhancing benefits from increased technological deployment that would help mitigate the concerns over reduced taxpayer privacy and confidentiality. ODR does not have to be viewed as a risk to taxpayer privacy that must be weighed against other potential benefits. Rather, ODR could potentially protect taxpayer privacy by reducing the number of Service employees who need to review taxpayer information. The streamlined dispute resolution that can occur through an online platform could make it easier to assign fewer Service employees to a matter, which could help lessen some of the privacy concerns inherent in the Service’s broad ability to request documents in an examination by limiting the Service personnel who would need to access this data.126F In addition, to the extent that algorithmic decision-making is employed in ODR, Service employees may not need any access to taxpayer information submitted to the algorithmic decision-maker.127F

VII. Conclusion

Given the Service’s commitment to continue to use technology to lower its personnel costs, at least some level of technology replacing in-person service seems here to stay, and a truly omni-channel approach to taxpayer service will remain elusive. The NTA and taxpayers more broadly are rightly concerned that the Service may simply attempt to utilize technology as a budget-saving device by replacing core personal service functions with technological solutions that either create access-to-justice problems or make an already complex administrative system more unwieldy, particularly for vulnerable taxpayer populations. Indeed, much about how the Service has thus far deployed technological solutions has confirmed this point, with technology’s impact on taxpayer rights being very much an afterthought, particularly in regard to tax controversies, which is the area in which the Service’s dual mission of service and enforcement intersect most directly. This does not need to be the case, however.

By taking relatively simple short-term steps to redesign current online information-delivery systems and by considering more transformative long-term steps in regard to how technology can be used to resolve controversies more efficiently as well as enhance taxpayer access to justice, the Service can in fact accomplish its goals while protecting and even enhancing taxpayer rights.

The Service can and should begin implementing the design improvement proposals discussed in Part II and begin leveraging potential partners in the academic and nonprofit sectors to help fill in technological access gaps and to design additional information-delivery systems that would better enable taxpayers to navigate the controversy process. These steps do not require any fundamental changes to the Service’s underlying technological infrastructure that would require significant up-front funding or planning or both. Unlike these design improvement proposals, the proposals regarding ODR discussed in Part III admittedly would take considerably more time to implement and would almost certainly involve more up-front costs for necessary technological infrastructure investments. Given that the Service has yet to receive full-funding for its more modest technological modernization plan,128F it is unrealistic to assume that the Service will have the capabilities necessary to implement the proposals in Part III in the near future. Nevertheless, these proposals are still worthy of consideration. Considering how ODR could be incorporated into its current tax controversy-resolution program would allow the Service to better argue before Congress that such an effort would be worthy of the up-front investments necessary for implementation as a result of the efficiency benefits that would flow to the government combined with the rights-enhancing benefits that would flow to taxpayers.129F Taken together, these proposals will help the Service move more of its controversy-resolution service and enforcement efforts online without abandoning the very taxpayer rights it is entrusted to protect.

I am particularly grateful for helpful comments on this project from Benjamin Alarie, Stephen Black, Leslie Book, Mirit Eyal-Cohen, Bobby Dexter, Michelle Drumbl, Heather Field, Miranda Perry Fleischer, Stephanie Hoffer, Brian Galle, Christine Kim, Shu-Yi Oei, Orli Oren-Kolbinger, Erin Scharff, Michael Simkovic, and all of the participants at the 22nd Annual Critical Tax Conference and the Association for Mid-Career Tax Law Professors Conference.