IRS Lacks Strategy to Reach Underserved Communities, TIGTA Says

Services to Underserved Communities Have Been Ongoing; However, an Agencywide Strategy Has Not Been Developed

May 31, 2023

HIGHLIGHTS

Final Audit Report issued on May 31, 2023

What TIGTA Found

The IRS has long recognized that improving customer service to taxpayers in underserved communities is a key component of a voluntary tax system and began taking steps to make improvements as an organizational priority before the enactment of the TFA. Some of these efforts were designed to assist taxpayers in specific underserved communities, while other efforts are more broadly focused on larger segments of the taxpayer population, which often include taxpayers in underserved communities. The IRS engages with a community of more than 16,000 partners to help deliver services and assistance to taxpayers.

The TXS included details about how the IRS would implement service improvements for two of the eight underserved communities, but the IRS has not yet developed detailed plans to address the other six communities, nor has it created a comprehensive agencywide strategy to implement and monitor service improvements. The TXS included service improvement strategies for taxpayers with limited English proficiency and international taxpayers. However, the TXS strategies for the remaining six communities were all similarly generically worded to conduct focused research to learn more about the communities and to work with partners.

In addition, the IRS has not yet defined the underserved communities or identified their populations. Many underserved communities overlap with each other, so defining the populations would allow for more efficient use of IRS resources. The TXS requires the IRS to develop customized strategies for each underserved community based on focused research that will improve outreach, education, communications, and services to support taxpayers. Focused research should include establishing the definitions and populations of each underserved community.

There is a risk that the IRS will not use resources optimally when assisting underserved communities because the IRS could duplicate its efforts if it does not determine how communities overlap. Additionally, initiatives focused solely on specific underserved communities may not be as effective in increasing voluntary compliance or reducing taxpayer burden because they may address only one particular topic for taxpayers that potentially have multiple concerns.

What TIGTA Recommended

TIGTA recommended that the Chief Taxpayer Experience Officer work with other IRS functions to define and identify the populations of each underserved community, and to develop and implement a comprehensive agencywide strategy to improve programs, products, and services for underserved communities when the Taxpayer Experience Office is fully operational. The IRS partially agreed with this recommendation.

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May 31, 2023

MEMORANDUM FOR:
COMMISSIONER OF INTERNAL REVENUE

FROM:
Heather M. Hill
Deputy Inspector General for Audit

SUBJECT:
Final Audit Report — Services to Underserved Communities Have Been Ongoing; However, an Agencywide Strategy Has Not Been Developed (Audit # 202210534)

This report presents the results of our review of the progress made in implementing service improvements to taxpayers in underserved communities as described in the Taxpayer Experience Strategy. This review is part of our Fiscal Year 2023 Annual Audit Plan and addresses the major management and performance challenge of Improving Taxpayer Service.

Management's complete response to the draft report is included as Appendix II. If you have any questions, please contact me or Bryce Kisler, Assistant Inspector General for Audit (Management Services and Exempt Organizations).

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Table of Contents

Background

Results of Review

Appendices

Appendix I — Detailed Objective, Scope, and Methodology

Appendix II — Management's Response to the Draft Report

Appendix III — Abbreviations

Background

In July 2019, Congress enacted the Taxpayer First Act (TFA) to re-imagine and enhance the way the Internal Revenue Service (IRS) serves taxpayers, enforces the tax laws, and trains its employees.¹ The Act consists of 45 provisions, including one provision that requires the IRS to develop a comprehensive customer service strategy [hereafter referred to as the Taxpayer Experience Strategy (TXS)], which includes proposals to improve customer service in the short-term (current and following fiscal year), medium-term (approximately three to five fiscal years), and long-term (approximately 10 fiscal years).² The goal of the TXS is to provide taxpayer interactions that are efficient, informative, personalized, and convenient, and to ensure that taxpayers have the information they need to understand and comply with their tax obligations. The TXS outlines six key focus points:

Taxpayers in underserved communities may also benefit from the other focus points in the TXS.

The TXS requires the IRS to develop an agencywide strategy to enhance existing programs, products, and services for underserved communities. Working with partners such as the Taxpayer Advocate Service; Low Income Tax Clinics; Taxpayer Advocacy Panel; the Equity, Diversity, and Inclusion Office; and the Wage and Investment (W&I) Division's Customer Assistance, Relationships, and Education (CARE) function, the IRS plans to learn more about the unique needs of each underserved segment. The IRS also plans to identify best practices to customize its approach to meet each segment's specific needs, and to provide personalized education and outreach through the service networks and in the languages preferred by these taxpayers. Figure 1 lists the underserved communities identified in the TXS.

[Editors note: The reference mark for footnotes ³, ⁴, ⁵ and ⁶ appears in the image above]

Results of Review

Improving Customer Service to Taxpayers in Underserved Communities Has Been a Continuing Priority

The IRS has long recognized that improving customer service to taxpayers in underserved communities is a key component of a voluntary tax system and began taking steps to make improvements as an organizational priority well before the enactment of the TFA. Some of these efforts were designed to assist taxpayers in specific underserved communities, while other efforts are more broadly focused on larger segments of the taxpayer population, which often include taxpayers in underserved communities. For example, although veterans are not included in the IRS's list of underserved communities, veterans could be members of underserved communities such as elderly taxpayers, and these elderly taxpayers could potentially benefit from veteran-focused initiatives.

The IRS's mission is to provide taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all. Taxpayers have the right to know what they need to do to voluntarily comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. The IRS engages with a community of more than 16,000 partners to help deliver services and assistance to taxpayers, including those in underserved communities.

Strategies and efforts initiated prior to the TFA

The IRS has been taking actions to help taxpayers in underserved communities for years. For example, the Volunteer Income Tax Assistance (VITA) Program was established in Calendar Year 1969, and it uses IRS-certified volunteers to provide free tax preparation assistance for low-to-moderate income taxpayers who need assistance preparing their tax returns. In addition, the Tax Counseling for the Elderly Program was established in Calendar Year 1978, and it offers similar free tax assistance to individuals who are age 60 or older. Additional initiatives and strategies in place before the TFA include:

• Low Income Tax Clinics — Assists low-income individuals who have a tax dispute with the IRS and provides education and outreach to individuals who speak English as a second language.

• Disability Program — Educates disabled individuals about specific tax credits and deductions, offers them free tax return preparation, and provides asset building strategies.⁷

• Native American Initiative — Partners with Native American organizations intended to increase access to tax services and benefits throughout Native American communities.

• High School, College, and University Initiative — Expands VITA participation into high schools, colleges, and universities nationwide to increase tax return preparation in difficult to reach communities.

• Earned Income Tax Credit Awareness Day — Engages with partners nationwide to increase awareness among taxpayers potentially eligible for the Earned Income Tax Credit.⁸

• Rural Strategy — Expands IRS programs and partner services to underserved geographic rural areas across the country.

Actions taken since the enactment of the TFA

After the TFA was passed in July 2019, the IRS expanded services and assistance to taxpayers in underserved communities. These include:

• Indian Tribal Government Online Videos — The IRS's Office of Indian Tribal Governments created three new online videos intended to help Indian Tribal Government customers: 1) search for available online IRS resources, 2) avoid employment tax penalties, and 3) know who to telephone for information.

• Housing and Urban Development Initiative — The IRS partnered with the Department of Housing and Urban Development to provide low-income individuals and families free tax preparation, electronic filing, educational outreach, and asset building assistance.

• Orphaned Children Initiative — The IRS works with partners, including adoption and foster agencies, schools, and senior citizen associations, to educate taxpayers about tax credits that may be available to them if they have dependent children.

• Domestic Violence Shelters Initiative — The IRS works with partners to distribute information about eligible credits, offers in compromise, and innocent spouse relief to taxpayers housed in shelters.

• Homeless Youth Initiative and Former Foster Children — The IRS works with partners to provide tax credit information to taxpayers experiencing homelessness or who were formerly fostered youth.

• Lifting Communities Up Initiative — The IRS helped with efforts to rebuild underserved communities by creating IRS jobs and careers for people in these communities. For example, in May 2022, the Mississippi Delta Program hired collection contact representatives in Clarksdale, Mississippi, to staff an IRS Automated Collection System site, in which they will answer calls from taxpayers to help them resolve their tax-related issues.⁹

• Veteran's Program — The IRS has a partnership with the Department of Veterans Affairs to provide tax education, free tax preparation, and financial education/asset building to veterans and their families.

• Unemployment Outreach Initiative — The IRS works with partners to educate taxpayers about the taxability of unemployment benefits.

• Puerto Rico Initiative — The IRS offered assistance through Taxpayer Experience Day events held in June and August 2022 for Puerto Rico taxpayers after the Child Tax Credit became available to them.¹⁰

However, CARE management stated that many of these initiatives were planned before the TFA, and they have not yet initiated any new efforts as a direct result of the TFA.

Future plans to improve services to underserved communities

According to CARE management, the IRS is planning new initiatives that it anticipates will further benefit taxpayers in underserved communities. For example:

• Community Assistance Visits Initiative — An expansion of taxpayer services to areas without a Taxpayer Assistance Center or with limited Internet to facilitate access to taxpayers in remote parts of the country. The IRS planned to pilot this program for the 2020 Filing Season; however, the events were cancelled and nothing was planned for the 2021 or 2022 Filing Seasons because of the Coronavirus Disease 2019 pandemic.¹¹ The IRS is in the process of implementing the Community Assistance Visits Initiative, and visits will begin after the 2023 Filing Season.

• Expanded VITA Self-Employed Pilot Initiative — A collaboration between the VITA Program and New York City partners that will focus on the promotion of educational outreach, financial education, and asset building as well as free quality tax preparation for self-employed taxpayers who are part of the gig economy.¹² The Expanded VITA Self-Employed Pilot Initiative plans to begin providing services when the participating partners' sites open for the 2023 Filing Season.

A Comprehensive Agencywide Strategy to Improve Initiatives, Products, and Services for Underserved Communities Has Not Been Developed

The IRS has not developed a comprehensive agencywide strategy for underserved communities to enhance initiatives, products, and services. In addition, the IRS has not defined or identified the underserved communities and their populations. The TXS requires the IRS to develop customized strategies for each underserved community based on focused research that will improve outreach, education, communications, and services to support taxpayers. Focused research should include establishing the definitions and populations of each underserved community.

A comprehensive agencywide strategy has not been developed

The TXS included details about how the IRS would implement service improvements for two of the eight underserved communities, but the IRS has not yet developed detailed plans to address the other six communities, nor has it created a comprehensive agencywide strategy to implement and monitor service improvements.

The TXS included service improvement strategies for taxpayers with limited English proficiency and international taxpayers. For example, the TXS's multilingual strategy includes a five-year plan to expand notices and letters into 20 languages including Spanish, Chinese, Russian, and Korean.¹³ Its international strategy includes new mechanisms and networks to provide service and communicate with international taxpayers, such as virtual face-to-face options. However, the strategies for the remaining six communities were all similarly generically worded to conduct focused research to learn more about the communities and to work with partners. For example:

• Elderly Strategy: Develop customized strategies based on focused research that will improve outreach, education, communications, and services to support elderly taxpayers' needs.

• Low-Income Strategy: Develop customized strategies based on focused research that will improve outreach, education, communications, and services to support low-income taxpayers' needs.

In addition, TFA § 1302, Modernization of IRS Organizational Structure, mandates the IRS to develop an organizational redesign strategy that prioritizes the taxpayer experience to ensure that taxpayers can easily and readily receive the help they need. The TFA Report to Congress proposed the development of the Taxpayer Experience Office (TXO) and the Relationships and Services Division. According to the TFA Report to Congress, the TXO was created to drive the strategic direction for improving the taxpayer experience across the IRS. The TXO has responsibility for overseeing, monitoring, tracking, and reporting the progress in implementing the TXS.¹⁴ By February 2023, the IRS filled 103 (76 percent) of the 135 approved TXO positions throughout all six of the offices within the TXO, with the goal to fill the remaining positions by the end of Calendar Year 2023. On December 18, 2022, the TXO filled the Deputy Chief Taxpayer Experience Officer position; however, the Chief Taxpayer Experience Officer remains in a dual role while also serving as the Commissioner, W&I Division. The TXO leadership structure is still being established, and the TXO's Insights and Analytics management told us that they were still unsure of what their roles would be in supporting the TXS. Additionally, TXO management advised us that the TXO's future direction could change as IRS management determines how the organization will implement the Inflation Reduction Act of 2022.¹⁵

The Relationships and Services Division was proposed to work with the Strategic Planning and Legislative Implementation Office and the TXO to implement the TXS. With all taxpayer-facing service networks under one division, the Relationships and Services Division would be uniquely suited to oversee implementation of a service delivery model that integrates digital, telephone, virtual, and face-to-face networks seamlessly. The division would deliver the services to taxpayers across all networks in accordance with the strategic direction set out by the TXO and agency leadership.

However, the organizational chart published in the IRS Strategic Plan for 2022 - 2026 described changes to the proposed organizational structure of the IRS. The plan includes a strategic objective to review the IRS's organizational design to increase collaboration and maximize efficiencies, but it excluded the Relationships and Services Division. W&I Division management stated that they are unsure if this division will be established because of other priorities in the organizational redesign and responses to additional tax law changes, including the Inflation Reduction Act. TXO management is not sure who will assume the responsibilities of the Relationships and Services Division if it is not established as described in the TFA Report to Congress, but most of the work is already being performed in the W&I Division and other business units. TXO management also stated that decisions about the agency's structure and assignment of responsibilities were made outside the purview of TXO staff, who only recently on-boarded.

The IRS has not defined or identified the populations of the underserved communities

The IRS has not yet defined the underserved communities or identified their populations. For example, the TFA Report to Congress included Native Americans as an underserved community, but the IRS has not yet determined if this community is comprised of only Federally recognized tribal governments or if it also includes Hawaiians. Furthermore, many underserved communities overlap with each other, so defining the populations would allow for more efficient use of IRS resources. For example, some low-income taxpayers could also be considered elderly or disabled. Figure 2 shows that when counted separately, the populations of underserved communities combined exceed the population of the entire country, highlighting the potential for overlap among underserved communities.

[Editors note: The reference mark for footnotes¹⁶ appears in the image above]

CARE management stated that the IRS does not have definitions or populations of the underserved communities because they are continuously changing and evolving mainly due to changes in the law.

There is a risk that the IRS will not use resources optimally when assisting underserved communities because the IRS could duplicate its efforts if it does not determine how communities overlap. Additionally, initiatives solely focused on specific underserved communities may not be as effective in increasing voluntary compliance or reducing taxpayer burden because they may address only one particular topic for taxpayers who potentially have multiple concerns.

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Appendix I
Detailed Objective, Scope, and Methodology

The overall objective of this audit was to determine the progress made in implementing service improvements to taxpayers in underserved communities as described in the TXS. To accomplish our objective, we:

• Determined how the IRS identified and defined the underserved communities outlined in the TXS.

  • Obtained and reviewed the TXS reported in the TFA Report to Congress.

  • Identified and reviewed the data sources and methodology used to identify the populations of the underserved communities in the TXS.

• Determined the progress made on the established strategies for reaching the underserved communities described in the TXS.

  • Obtained and reviewed documentation showing the IRS's progress in serving the underserved communities.

  • Evaluated the IRS's progress in serving underserved communities.

  • Interviewed W&I Division and TXO officials to identify and obtain other information sources showing the IRS's progress in serving underserved communities.

  • Interviewed IRS employees who developed and are developing actions/materials to better serve the underserved communities.

Performance of This Review

This review was performed with information obtained from the TXO and the W&I Division located in Atlanta, Georgia, during the period of May 2022 through March 2023. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.

Major contributors to the report were Bryce Kisler, Assistant Inspector General for Audit (Management Services and Exempt Organizations); Carl Aley, Director; David Bueter, Audit Manager; Allison Sollisch, Lead Auditor; and Nicole Pangallo, Senior Auditor.

Internal Controls Methodology

Internal controls relate to management's plans, methods, and procedures used to meet their mission, goals, and objectives. Internal controls include the processes and procedures for planning, organizing, directing, and controlling program operations. They include the systems for measuring, reporting, and monitoring program performance. We determined that the following internal controls were relevant to our audit objective: the W&I Division's CARE function and the TXO responsibilities and procedures for expanding taxpayer services to underserved communities. We evaluated these responsibilities and procedures by reviewing the TFA Report to Congress, program guides, fact sheets, job aids, outreach status reports, and outreach action plans, as well as interviewing IRS management and employees.

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Appendix II
Management's Response to the Draft Report

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Appendix III
Abbreviations

CARE	Customer Assistance, Relationships, and Education
IRS	Internal Revenue Service
TFA	Taxpayer First Act
TIGTA	Treasury Inspector General for Tax Administration
TXO	Taxpayer Experience Office
TXS	Taxpayer Experience Strategy
VITA	Volunteer Income Tax Assistance
W&I	Wage and Investment