IRS Hoping to Use Web to Meet Budget Challenges, But Security an Issue

By:
Chris Gaetano
Published Date:
Jul 24, 2015

Fresh off a tax season that the IRS itself has characterized as miserable, with the strapped service able to field just a fraction of the calls it received, an official speaking at the Foundation for Accounting Education’s IRS Practice and Procedures Conference said the agency was trying to find ways to work better with its diminishing resources.

Mary Beth Murphy, the service’s Deputy Commissioner of Small Business/Self Employed (SB/SE), said the IRS was looking to consolidate its efforts in order to improve efficiency and “do more with less.” According to the Center on Budget and Policy Priorities, the IRS’s budget has been cut by 18 percent since 2010. At the same time, the service’s responsibilities have increased—it is now expected to administer the Affordable Care Act (ACA) and oversee compliance with the Foreign Account Tax Compliance Act (FATCA). A report entitled, “Interim Results of the 2015 Filing Season,” released by the Treasury Inspector General for Tax Administration (TIGTA) at the end of March, found that while, as of March 7, approximately 45.6 million taxpayers contacted the IRS, assistors answered just 4.2 million calls. TIGTA plans to issue a final analysis in September.

“Our work continues to grow, and we continue to reduce our workforce, so we have to change the way we do business,” Murphy said.

During the conference, held on June 25 at the NYSSCPA’s Wall Street headquarters, Murphy described a sprawling service with various operations and functions that had not been interacting with each other: For example, the IRS’s Automated Underreporter Program, in which the agency identifies unreported income, was in one department; correspondence exams, where certain returns are selected for further verification, was in another; and collection operations somewhere else. Murphy said the service had decided to bring the disparate operational functions under one roof, going from six directors to one in the process. 

This effort, she said, is already bearing fruit, with the IRS seeing some improvement in taxpayer response time and accountability. However, the drive toward consolidation isn’t only happening on the organizational end; according to Murphy, the IRS is planning to take this approach to the taxpayer experience, as well. Right now, she said, when a taxpayer needs support from the IRS on multiple issues, it means talking to multiple people in multiple departments, each unaware of the other because “our taxpayer service reps, revenue agents and revenue officers don’t have universal access to your account.” 

Instead, she explained, the IRS wants to be able to link taxpayers to single accounts that can be accessed by multiple areas of the service, allowing for easier support. Moreover, the IRS wants to let taxpayers view their own accounts, in order to see, for example, payments that have been made or when a return was posted. This would be done through a new integrated enterprise case management system. Currently, Murphy admitted, the service uses 48 different case management systems. 

Relying more heavily on the Web

Key to being able to do this is accelerating the virtualization of IRS functions. Murphy said that taxpayers want to be able to email the IRS or chat online with a rep like they do with private financial institutions, as well as to have the ability to upload required documents instead of having to send hard copies to the office. At the same time, a more virtual case environment would allow the IRS to handle taxpayer issues from anywhere in the country, vs. the traditional setup of having field agents in multiple regions. 

“If everything was online … we [wouldn’t] have revenue agents going hundreds of miles to work a case,” Murphy said. “People don’t want to travel with reams of papers. If taxpayers could upload those documents like they do in private industry, it would benefit both the taxpayer and the IRS.”

Moreover, she added that the service is trying to drive more people to the online payment system because its costs are a fraction of those for other payment channels. According to Murphy, a face-to-face meeting with a taxpayer costs the IRS about $65. A phone call costs around $33. An online transaction? 15 cents. 

“If we can drive more people to self-help where it’s appropriate, it would benefit both the taxpayer and the IRS,” she said. 

Beyond this, she said that the service has also been looking into allowing IRS
Form 2848, which addresses power of attorney, to be filed electronically, noting that it takes a number of people to manually input those forms. The service is also considering allowing amended returns to be filed
electronically. 

Of course, all of these efforts run into a major stumbling block that has been in the news a lot lately: identity theft. Relying more heavily on the Web, Murphy said, depends on the IRS’s ability to authenticate that the person they’re interacting with is really who he or she claims to be. Pointing to a recent major data breach within the IRS, in which hackers gained access to information on 104,000 taxpayers, Murphy acknowledged that there was much that needed to be done in this area. “We’re just not there when it comes to authentication.” 

To that end, the IRS met with other federal agencies and private sector organizations in June to discuss ways to increase security and better protect taxpayers so that the service can safely expand its digital initiatives. 

Security breaches are such a serious concern for the IRS, she said, that the service has considered drastic measures, even toying with the idea of turning off the Internet entirely in some areas. At the very least, she said that the IRS has been working to make sure that its systems are up-to-date, doing upgrades about once a month.

While enacting these changes won’t be easy, in the end, Murphy felt that the IRS didn’t really have much choice in the matter, considering the rapidly changing world and the rapidly dwindling resources to accommodate it. 

“Our commission and our senior leadership team [are] committed to providing services to the American taxpayer,” she said. “But we’ll have to do it in a different way.”

cgaetano@nysscpa.org

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