The IRS is developing a “Future State” plan that it says will transform the way the service interacts with taxpayers.
Many parts of the plan may ease the processing of filing returns, the issuing of refunds, and the identification and resolution of problems. But the Tax Advocate Service – an independent part of the IRS that defends and assists taxpayers – warns that parts of the new plan are going to aggravate taxpayers and make it more difficult to find answers and solve problems.
One of the trickier parts of the plan may actually benefit tax preparers. The plan calls for the IRS to try to outsource some of its services to the private sector. The idea is to make it easier for tax preparers, software companies and other providers to answer taxpayer questions, resolve issues and prepare returns.
That sounds good until people figure out that will mean they will have to start paying for parts of the process that used to be free.
How it Changes Tax Preparation
This could be a big-time boon for CPAs and tax preparers. If the plan gets executed as it now seems to stand, taxpayers will have little choice but to seek professional services. But don’t expect them to be happy-go-lucky as they come through the door.
Another component of the plan that is getting mixed reactions is the creation of online taxpayer accounts. Taxpayers will be able to interact with IRS agents (human and automated) via the internet.
On the downside of that is need to reduce interaction by telephone. The plan doesn’t state that objective, but internal documents at the IRS explicitly indicate that the service is going to try to get out of the telephone response business.
How Will the “Future” Look Like?
The IRS receives something on the order of 100 million phone calls every year. You can probably bet that a few of those calls are not best wishes for the new year or questions about the weather in the District of Columbia.
Quite the opposite, those phone calls represent 100 million problems. Will online accounts be able to offer 100 million solutions? Six crucial factors make this scenario unlikely:
- While many of the phone inquiries are people trying to prepare their tax returns, many are issues that came up after filing – questions about delays, identity fraud, questionable adjustments, audits, etc. Last year, that was more than 9 million people. Many needed information on complicated issues that probably require a conversation, not a robotic suggestion to go see the FAQ page.
- Many people – an estimated 16 percent of American adults – have no access to or do not use the Internet. Sixteen percent of the 150 million individual tax returns filed last year would be 24 million people who have no access to a federal agency that has the ability to truly complicate their lives.
- Many people – millions – are reluctant to engage in complex financial discussions and transactions over the Internet. A staggering 37 percent of Americans say they do not trust the federal government with their personal data. And only 10 percent of people making less than $30,000 are willing to interact by computer.
- Even people who are willing and able to handle finances online are unlikely to find “cookie-cutter” solutions to complex or unique tax situations online.
- People trying to straighten out identity theft issues and delays caused by suspected identity theft are going to be extremely reluctant to use the same information medium (the Internet) that probably caused their problem in the first place.
- Taking a look at the number, IRS technology has not reduced taxpayer demand for personal service. In fact, calls to the IRS Accounts Management lines have increased from 64 million in 2006 to 102 million in 2015.
It might sound cold to say that each of these problems is an opportunity for tax preparers, but that’s the ugly truth. A nicer way to look at it is to see patriotic American tax preparers coming to the aid of their fellow citizens.
If the IRS proceeds with its Future State plan and succeeds in getting out of the telephone business, tax preparers will have to become tax problem-solvers. In a way, that’s an entirely new business. As such, it’s an opportunity to enhance revenues. But making customers happy is going to be the real challenge.