The recent government shutdown and aging information technology systems have forced the IRS to deal with several challenges. At least, that's what National Taxpayer Advocate Nina E. Olson told Congress today in her 2018 Annual Report.
Included in the report is a section titled the "The Taxpayer's Journey," which outlines at least 20 of the most pressing issues that taxpayers face when dealing with the IRS. It also investigates what taxpayers go through when trying to get answers from the IRS about a variety of topics, from tax law and litigation to filing tax returns and notices.
Olson said the 2018 report was crafted to help lawmakers understand some of the difficulties that regular Americans go through when trying to navigate the U.S. Tax Code.
"One of our goals in creating these roadmaps was to help readers understand the complexity of the taxpayer journey," she wrote. "It was challenging for us to create these roadmaps and will probably be difficult for readers to follow them, which hints at the extreme frustration many taxpayers experience when they have to interact with the IRS."
Shutdown politics affect IRS and taxpayers' rights
Information on the legislature's impasse on President Donald Trump's proposed border wall and the following government shutdown is not hard to find in Olson's report. Starting in the document's preface, the report dives into the issue by looking at what powers the IRS has during a shutdown.
According to the U.S. Anti-Deficiency Act, "federal funds may not be spent in the absence of an appropriation except where otherwise provided by law." An exception to that rule, according to the law, is for "emergencies involving the safety of human life or the protection of property." Leading up to the recent shutdown, the IRS Office of Chief Counsel interpreted the language referencing the "protection of property" to specifically mean the government's property, rather than a taxpayer's.
Calling that decision a "narrow interpretation" of the law, Olson wrote that the determination could "cause severe harm to taxpayers."
Additionally, the IRS's Lapsed Appropriations Contingency Plans did not allow employees of the Taxpayer Associate Service to open mail unless it was to receive checks for repayment to the government. They do not allow employees to help taxpayers when things get financially tough during a shutdown.
"The IRS's authority to collect revenue is not unconditional," Olson wrote. "It is conditioned on statutory protections, and a lapse in appropriations does not eliminate those protections." To that end, Olson recommended in the report that the Anti-Deficiency Act be amended to bolster taxpayer protections and rights during a shutdown.
The report also said that the shutdown significantly gummed up the works at the IRS. Since the agency opened its 2019 filing season right after the shutdown ended on Jan. 25, taxpayers have had a harder time getting in contact with agents during the first filing week.
In the first week of the 2018 filing season, Olson reported that taxpayers were able to connect with a representative 86 percent of the time, with an average wait time of four minutes. This year, those numbers have gotten worse, with only 48 percent of calls being answered and an average wait time of 17 minutes. The trend continues with callers to the IRS's Installment Agreement/Balance Due and Automated Collection System lines.
"Make no mistake about it," Olson wrote. "These numbers translate into real harm to real taxpayers. And they represent increased re-work for the IRS downstream, at a time when the IRS is already resource-challenged. The IRS will be facing tough decisions in light of the shutdown's impact."
IT funding needed to replace 1960s tech
Among the report's key legislative recommendations to Congress was the push for a major boost in funding for the IRS to replace its IT systems, which are the oldest still in use by the federal government. According to the report, the federal government's Individual Master File and Business Master File date back to the 1960s. Additionally, taxpayers' information is kept in more than 60 different case management systems that are not networked with each other at all.
Without a central database to contain all of a taxpayer's account information and interactions with the IRS, the federal agency can't efficiently pull necessary data, the report argues.
The lack of a modern case selection system also means that the IRS can't "focus on the right taxpayers or the right issues in its outreach, audit, and collection activities," according to the report.
There's also the risk of the technology suffering a "catastrophic systems collapse" – especially after a system crash last year forced the IRS to extend its filing deadline by a day.
"That risk does, indeed, exist," the report says. "But there is a greater risk: IRS performance already is significantly limited by its aging systems, and if those systems aren't replaced, the gap between what the IRS should be able to do and what the IRS is actually able to do will continue to increase in ways that don't garner headlines but increasingly harm taxpayers and impair revenue collection."
Despite the fact that the IRS collected $3.5 trillion on a budget of $11.43 billion, the report says funding for IRS tech upgrades has been limited. In fiscal year 2017, funding in that department was $290 million. The following year, it was slashed to $110 million.
To address those concerns, the report suggests that Congress provide the IRS with more money on a multiyear basis to replace existing antiquated systems.
More to consider
While the government shutdown and the lack of IT upgrades for the last 50 years remain key aspects of the Taxpayer Advocate Service's 2018 Annual Report, Olson brought up various other issues. The entire report addresses at least 20 of the "most serious problems" facing taxpayers, with recommendations for legislative and administrative changes to address those problems.
The report also includes the second edition of the "Purple Book," which makes nearly 60 legislative recommendations to bolster taxpayer rights and improve tax administration. While many of them are addressed in previous National Taxpayer Advocate Reports, the book also presents some issues for the first time.
For more information on the Taxpayer Advocate Service 2018 Annual Report and the "Purple Book," visit the Taxpayer Advocate Service's IRS website.