New Tax Year, New Attitude at the IRS
By Albert B. Crenshaw
At midnight tonight, as the bell tolls on the first income tax filing season since Congress ordered an overhaul of the Internal Revenue Service, taxpayers can take comfort in the agency's response.
It is as though the IRS went to charm school. Its employees are becoming almost affable in their dealings with taxpayers and their representatives. The agency is more accommodating to people who need help with their returns or who are in a financial bind.
Taxpayers even have less reason to fear an audit than in previous years, though that is because of budget constraints rather than the IRS's new-found heart.
For many of the estimated 126 million taxpayers who have filed or will file returns this year, the new IRS attitude is largely academic, as they rarely come in contact with the agency.
"Most ordinary taxpayers don't have dealings with the IRS except to file a return and get a refund," said Phil Brand, a former IRS compliance director who is now with the big accounting firm KPMG International here.
But for those who do have close encounters with the IRS, the early reports are that the agency's workers as well as its leadership are taking seriously Congress's and the public's demand for good manners and pleasant service.
"IRS agents, on the phone and in person, have suddenly taken 'nice pills,'‚" said Robert G. Nath, a Fairfax lawyer who represents taxpayers.
Some of the changes are purely cosmetic – making your check out to the U.S. Treasury instead of to the IRS, for example – but both Congress and the agency have taken steps to make life easier for certain types of taxpayers. These include so-called innocent spouses, who are on the hook for an ex-spouse's liability, and taxpayers who are struggling financially and can't pay or need extra time to do so.
And the agency has tried to be more accommodating in various mechanical ways. This filing season, for the first time, the IRS kept its information telephone lines open 24 hours a day, seven days a week. In addition, taxpayers are now allowed to use credit cards – albeit with a fee – to pay their tax bills.
The IRS has also stepped up electronic filing and assistance. Taxpayers can obtain forms and publications more easily over the Internet or via fax, and the agency has made it easier to file returns electronically.
But IRS Commissioner Charles O. Rossotti remains cautious – some would say realistic – about the difficulties that lie ahead in making fundamental and lasting change. The coming year, in which the agency will attempt to reorganize itself completely while planning to buy new computers and keeping the old ones working on Jan. 1, 2000, "is a big turning point in the history of the IRS," he said.
Because of the computer problems, "we were facing a major risk" that something would go horribly wrong during this filing season, he told a House Ways and Means subcommittee this week, so that "perhaps the best thing we can say [about this year] is what didn't happen . . . at least so far."
Rossotti conceded that even the agency's efforts to be helpful didn't always go as planned. For example, keeping the phone lines open round the clock caused staffing and equipment problems, leading to a sharp deterioration in the number of calls answered and the quality of the information provided to taxpayers.
Other technical problems emerged as well.
The agency has a telephone "refund hot line" that allows taxpayers to track their refunds, but according to the National Association of Enrolled Agents, a tax-preparer group, the hot line isn't hooked into the Treasury Department program that intercepts refunds of taxpayers who are behind on such things as student loans or child support.
Thus some taxpayers who called were told their refunds were in the bank or on the way, when in fact they had been intercepted by the Treasury.
The agency's reorganization and computer modernization are taking place in an era of essentially flat budgets. The Clinton administration is asking for slightly more than $8 billion for the IRS next year, about the same funding as this year's.
Under budget pressure, the IRS has shrunk by the equivalent of 15,000 workers over the past five years, but has done so by "cutting off virtually all hiring," Rossotti said.
Currently it has about 14,000 revenue agents – the workers who do much of the in-person auditing – and is losing some 450 a year to retirement and for other reasons. Over the past four years the agency has hired a total of 28 replacements, the commissioner said.
Partly as a result, the audit rate has fallen to 1 percent of returns, according to the most recent figures.
Technology holds great promise for solving many of the IRS's remaining problems. Customer service will improve when IRS employees have easy access to taxpayer records, and audit rates will rise as automation frees workers to be retrained for work in that area.
But the IRS has been plodding toward a technology breakthrough for more than a decade and has never achieved it. Whether this time will be different remains to be seen.
© Copyright 1999 The Washington Post Company