The IRS response to the coronavirus pandemic is exposing shortfalls and technology gaps it hopes to address in ongoing reform efforts.
The virus has presented unprecedented challenges for the IRS. It has forced the agency to test remote working capabilities for nearly its entire workforce—all while implementing new relief laws, processing millions of stimulus payments, and carrying out an extended tax filing season. But the challenges also provide a unique opportunity for the agency to learn and test out ideas for reforms, IRS officials said.
“Watching how the agency responded to this crisis, and participating in that response, gave us an opportunity to test some aspects of those evolving strategies, and to step back and observe and learn,” said Jim Clifford, a project director in the Taxpayer First Act Office, which has been tasked with implementing changes under the reform law (Pub. L. 116-25).
The virus has especially exposed the need for more digital self-service options and increased ways for the IRS to interact with taxpayers online, Clifford said Monday on a call with Bloomberg Tax.
Taxpayers and their advisers have complained that it’s difficult to interact with the agency during the pandemic, especially since so much correspondence still occurs by mail. The IRS has had trouble sorting through incoming mail due to staffing limitations resulting from stay-at-home orders and the need to maintain proper social distancing at facilities.
These issues may tempt the IRS to overemphasize technological improvements and remote capabilities in its reform plans, but “that can’t be seen as a panacea for all that’s happening,” said former IRS Commissioner Mark Everson.
The agency can’t lose sight of its staffing needs in this process, Everson, who is now vice chairman of alliantgroup LP, said.
Balancing Security Needs
The 2019 Taxpayer First Act is intended to enhance taxpayer services, modernize technology, improve training for IRS employees, and spur the agency to plan for a potential reorganization. The IRS plans to issue a report to Congress by the end of this year that will recommend ways for achieving those goals.
Agency officials said recommendations could include enabling people to file more forms electronically, expanding the use of electronic signatures, and developing ways for taxpayers to securely exchange documentation with the IRS via digital platforms.
The IRS has been slow to adopt these changes on a broad scale in the past, but the pandemic has forced it to try, at least on a temporary basis.
The agency, for example, has temporarily loosened its policies for accepting e-signatures.
Going forward, the IRS should establish a formal policy around e-signatures that allows software vendors to update their systems so that the signatures can be used in a safer and more secure way, said Jeff Trinca, vice president of Van Scoyoc Associates in Washington and legislative counsel of the National Association of Enrolled Agents. Trinca helped lead the last IRS restructuring in the late 1990s.
The pandemic has also highlighted processes that are working at the IRS, including electronic tax filing, Trinca said.
During the last government shutdown and this current pandemic, the agency has been able to continue processing e-filed returns, despite staffing constraints, he said. The IRS expects about 90% of individuals to file their returns electronically this filing season.
Even so, many processes and millions of returns, including amended returns, are still filed by paper.
The IRS should find a way to streamline how it communicates with taxpayers who file on paper, including beefing up its remote call center capability, Everson said.
But overall it isn’t enough for the agency to just expand upon its existing processes and procedures, he said.
“They’ve got to build a better mousetrap,” Everson said. “They can’t just take what they have and add to it.”