TSCPA Seeks Transparency as 'Future State' Plan Progresses

• Improved Telephone Technology

  Practitioners and taxpayers are intensely frustrated by poor IRS telephone technology and service. Long holds that are sometimes cut off (“courtesy disconnects”), recorded messages and long periods of hold music, calls being handled by personnel who do not have the answer and either cannot transfer the call or do not make the transfer to a correct person, adding to wasted time, and so forth, all of which have been documented repeatedly by the National Taxpayer Advocate.¹⁵

  To avoid or minimize hold times, the IRS should consider the California Franchise Tax Board’s system, which informs the caller that all representatives are busy and allows them to provide a callback number, so they can be called in order — not an indeterminate time in the next 24 to 48 hours, without having to remain on hold.¹⁶ This technology is becoming widespread in the commercial sector of our economy and would avoid the long hold times, allowing the taxpayer or practitioner to work more productively while waiting to be connected.

The future of federal tax administration or the Future State is important to taxpayers and tax practitioners, as well as the IRS, and we encourage you to seek public input from them. We thank you for considering these comments and would be pleased to discuss them further with you. Please contact Kenneth Horwitz at 972-419-8383 or kmh@gpm-law.com.

Sincerely,

Kenneth M. Horwitz, JD, LLM, CPA
Chair, Federal Tax Policy Committee

Michael D. Williams, CPA
Chair, Relations with the IRS Committee

Texas Society of Certified Public Accountants
Dallas, TX

Principal responsibility for drafting these comments was exercised by Kenneth M. Horwitz, JD, LLM, CPA; Christina A. Mondrik, JD. CPA; Michael D. Williams, CPA; and R. Byron Ratliff, CPA.

Enc.:
TSCPA Federal Tax Policy and Relations with IRS Committees’ joint letter dated March 4, 2016
TSCPA statements provided at the Taxpayer Advocate Forum; San Antonio, Texas; August 30, 2016

cc:
The Honorable Orrin G. Hatch. Chairman, U.S. Senate Finance Committee
The Honorable Ronald L. Wyden, Ranking Member, U.S. Senate Finance Committee
The Honorable Kevin Brady, Chairman. U.S. House Ways and Means Committee
The Honorable Richard Neal, Ranking Member, U.S. House Ways and Means Committee
Members of Congressional Caucus on CPAs and Accountants
Texas Members of U.S. Congress
Nina E. Olson, National Taxpayer Advocate

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Enclosure 1

March 4, 2016

The Honorable Jacob J. Lew
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

The Honorable John A. Koskinen
Commissioner
Internal Revenue Service
1111 Constitution Avenue NW
Washington, D.C. 20224

RE: Request that the IRS Expose its “Future State” Vision and Concept of Operations for Public Comments

Dear Secretary Lew and Commissioner Koskinen:

The Texas Society of Certified Public Accountants (TSCPA) is a nonprofit, voluntary professional organization representing more than 27,000 members. One of the expressed goals of the TSCPA is to speak on behalf of its members when such action is in the best interest of its constituency and serves the cause of CPAs in Texas, as well as the public interest. TSCPA has established a Federal Tax Policy Committee (FTP) to represent those interests on tax-related matters. TSCPA has also established the Relations with IRS Committee to create and maintain communications with the Internal Revenue Service (IRS). These committees have been authorized by TSCPA’s Board of Directors to submit comments on such matters of interest to committee membership. The views expressed herein have not been approved by the Board of Directors or Executive Board and, therefore, should not be construed as representing the views or policies of the TSCPA.

We are pleased to learn that the IRS is creating a “future state” plan within its Concept of Operations (CONORS) to improve service to taxpayers and practitioners. However, we are concerned the plan may substitute electronic interaction for in-person communications in many situations where this may not be efficient or efficacious either for the IRS or for the public. We appreciate the recent inclusion of material on the IRS website relating to this plan, acknowledging the receipt of input from specified, but limited groups and persons. However, we urge you to expose the CONORS plan for general public review and comment, as parts are in development, from time to time during the planning process. This process should occur well before any adoption or implementation of any part so that the IRS may benefit from the practical perspective of practitioners and the public.

In many instances, electronic interactions will be less adequate than in-person communications. Tax issues are often complex, and we expect taxpayers and their professional advisors, however sophisticated, will frequently not ask the right questions online or, the online answers will be incomplete or will lead to additional questions. Many of us see this problem now in our communications by email with clients that impel actual interactive direct telephone or in-person communication. In contrast, a brief discussion with an IRS staff person could help clarify the issues and provide an opportunity for any necessary follow-up questions, thereby enhancing efficacy for both the IRS and the taxpayer.

Additionally, many individuals, including lower-income and elderly taxpayers, may not have access to appropriate technology or may be less than adequately technologically oriented. Taxpayers who do not fluently speak or read Standard American English, who are not cognoscenti in respect of the special language used in connection with federal tax Issues, or who have difficulty with written communication, such as relatively lower educated persons or dyslexic persons, may be severely hindered by the move toward more electronic and fewer spoken taxpayer communications.

As noted in the National Taxpayer Advocate’s 2016 Report to Congress, the CONORS plan may drive the most vulnerable classes of taxpayers to rely on third parties, not all of whom may be scrupulous (or trained) tax professionals, to assist them in communicating with the IRS.¹ Especially if these communications are not limited to Circular 230 regulated practitioners, taxpayers run the risk of increased cost, not to mention increased risk, in communicating with the IRS.

Many taxpayers are very reasonably suspicious of communicating with the IRS using technology. Frequent reports identify IRS data breaches of sensitive taxpayer information.² As recently as Feb. 9, 2016, the IRS reported additional data breaches in its Electronic Filing PIN system, which was designed to protect taxpayers from harm.³

As the IRS moves toward increased use of technology to serve taxpayers, we want to help identify situations where technology will be most useful and efficacious, as well as those circumstances where it may not be an efficient substitute for personal taxpayer service.

The process of “modernizing” communications, as well as other initiatives that might be proposed in the CONORS, is important to taxpayers and tax practitioners. Accordingly, for the reasons stated above, we believe that the CONORS and its parts should be presented for collaborative review and comment by the public well before any anticipated adoption or implementation date.

We appreciate this opportunity to present our comments and would be happy to discuss this further with you. Please contact me at 972-419-8383 or kmh@gpm-law.com if you would like to discuss our comments.

Sincerely,

Kenneth M. Horwitz, JD, LLM, CPA
Chair, Federal Tax Policy Committee
Texas Society of Certified Public Accountants

Michael D. Williams, CPA
Chair, Relations with IRS Committee
Texas Society of Certified Public Accountants
Dallas, TX

cc:
The Honorable Mark J. Mazur, Assistant Treasury Secretary for Tax Policy
The Honorable Orrin G. Hatch, Chairman, U.S. Senate Finance Committee
The Honorable Ronald L. Wyden, Ranking Member, U.S. Senate Finance Committee
The Honorable Kevin Brady, Chairman, U.S. House Ways & Means Committee
The Honorable Sander M. Levin, Ranking Member, U.S. House Ways & Means Committee
Members of Congressional Caucus on CPAs and Accountants
Texas Members of U.S. Congress
Nina E. Olson, National Taxpayer Advocate

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 Enclosure 2

Statement of James A. Smith
On Behalf of The
Texas Society of Certified Public Accountants
Before The
National Taxpayer Advocate
Public Hearing on IRS Future State

August 30, 2016

Good morning, my name is Jim Smith. I have been a licensed CPA in Texas for over 43 years, serving individuals and entrepreneurial businesses. I am a past chairman of the Texas Society of CPAs and the Dallas CPA Society, a founding member of the TSCPA Federal Tax Policy Committee and a member of the American Institute of CPAs Tax Practice Responsibilities Committee. I am speaking on behalf of the Texas Society of CPAs whose more than 28,000 members represent all types and sizes of taxpayers and who interact regularly with the Internal Revenue Service (IRS) in serving their clients. I believe my comments reflect our members' concerns, but I should add they have not received official approval by our Executive Board.

I want to thank the Office of the Taxpayer Advocate and Congressman Doggett for giving this panel the opportunity to speak on matters that are so important to all taxpayers and tax practitioners. I also want to thank you for the great work you, as National Taxpayer Advocate, do in serving taxpayers and helping make the tax system work better for everyone.

As the IRS fulfills its responsibility for administrating the tax system, it must cope with limited funding and the resulting personnel shortages, expanded responsibilities imposed by new laws, the impact of information technology, accelerating complexities in the tax law and the negative reaction many, including members of Congress, have to it. How it manages these challenges is critical to the viability of our voluntary compliance tax system. To effectively and efficiently administer our federal tax law, the IRS should focus transparently and with public input on four important areas:

• inadequate staffing,

• identity theft,

• technology, and

• Future State Plan.

I will address each of these areas separately and hope my comments will be viewed as constructive and supportive of the IRS' essential role in our government.

Inadequate Staffing

The staff shortage manifests itself in the following:

• inordinately long “hold” times for telephone calls that are often terminated without explanation,

• reduced or eliminated IRS personnel presence in many locales,

• long waits for unscheduled face-to-face meetings,

• difficulties and delays in trying to schedule face-to-face meetings in other locales, a major problem in a state the size of Texas,

• extraordinarily long timeframes to resolve problems through IRS correspondence.

It is critical that the IRS utilize the limited funds it has efficiently in the administration of tax law while serving the taxpayer base. Online services are an essential, but not exclusive, way of serving taxpayers. Many tax issues cannot be addressed solely through technology. It is common that the answer to one question leads to another question or requires a further clarification that can be most easily resolved with direct communication either by telephone or in a face-to-face meeting. Many individual taxpayers, arguably those most in need of assistance, do not have computer skills or access to the Internet and must address an issue through personal contact either by telephone or a face-to-face meeting. Our knowledgeable members frequently complain of the great difficulty in working with the IRS website; we can only imagine the difficulties faced by taxpayers or less well trained preparers who prepare the preponderance of returns. The long waits on the telephone or long lines at IRS Taxpayer Assistance Centers contribute to reduced taxpayer compliance, which must be factored into IRS planning.

We believe having adequate numbers of well-trained personnel who can serve taxpayers and tax practitioners over the phone and in face-to-face meetings will improve the efficiency of tax administration. In the difficult task of allocating scarce resources, providing competent, timely service to the taxpaying public and the professionals who assist them in complying with the law needs to be a priority of the IRS equal to processing returns and collecting taxes due. The lack of adequate taxpayer support leads to increased involuntary non-compliance with the tax law and, in many cases, to unfair treatment of taxpayers who lack the resources to find the correct answers.

Identity Theft

Most federal tax returns are filed electronically, and it is critical to both the IRS and taxpayers that more stringent safeguards be put in place to detect and deter unauthorized access to confidential taxpayer and return information.

Identity theft is a serious issue for tax practitioners, taxpayers and the IRS. Protecting the privacy of our clients' records is a great concern for CPAs. We strive to maintain client confidentiality while processing, storing, and communicating tax and financial information. The IRS must maximize its efforts to protect taxpayer records. A security breach damages the reputation of the IRS, undermines public confidence, and costs the government and taxpayers.

In addition to more electronic safeguards, we believe identity theft could be reduced significantly if taxpayers and their representatives were able to verify their authenticity using their adjusted gross income as reported on the last return filed rather than, or in addition to, their Social Security number. This would at least limit a thief to access for only one year and would not infringe on the taxpayer's other personal information.

We believe that the IRS should further build on a partnership with the regulated financial institutions to exercise greater controls over the processing of refund checks. Positive steps have already been taken with the limits on the number of refunds that can be direct deposited to the same account or included on the same prepaid debit card, but we believe that further steps can be made. We realize that the debit card refund is important to many taxpayers who do not have a bank account, but the use of such cards has proven to be a serious weakness in controlling identity theft fraud. The continued use of these cards should be carefully reconsidered on a cost/benefit basis. Tightening the limits on direct deposits to only one per account would also be a positive step that we believe would impact very few taxpayers.

We have also encountered increasing problems with obtaining Employer ID numbers and Individual Taxpayer Identification Numbers. Some of these problems result from staffing issues, but many are the result of overly burdensome IRS procedures, on which the Taxpayer Advocate's office has previously commented. Despite concerns about identity theft and related security concerns, the process for obtaining both of these numbers should be streamlined to facilitate rapid response and efficiency for both the IRS and taxpayers. Our recommendations for improvement have been submitted in writing (which letters of comment are attached hereto) and we would reiterate those comments and recommendations.

Technology

All tax practitioners support technological improvements. However, it is important to keep in mind that many taxpayers do not have access to or are not comfortable with computers. Accordingly, technological improvements should not be undertaken assuming that doing so will enable a significant reduction in staffing.

That said, the IRS' current technology needs improvement. System outages and instances of programming deficiencies are too frequent. While many tax questions cannot be adequately addressed on a website, better programming of the IRS public website would be a step in the right direction. Many of our members have found that it is often easier to get an answer to a tax question by using a Google search rather than using an IRS website search. The IRS needs to make its website more user friendly.

Future State Plan

I also want to comment specifically on the “Future State Plan” initiative of the IRS. Attached is a comment letter dated March 4, 2016. It is important that the development process of such plans be transparent with real input from taxpayers and tax practitioners prior to adoption and certainly prior to implementation. Doing so will both improve the efficiency of the process and the “buy-in” to the plan by stakeholders. The Texas Society of CPAs is ready to support the IRS in the development process.

We call your attention to comments we have submitted recently that are directly relevant to improving IRS taxpayer services in the future. Attached letters are included as part of our testimony.

We very much appreciate the opportunity you have given us to express our concerns on these most important issues.

I will be glad to answer any questions you might have.

Attachments:

Request that the IRS Expose its “Future State” Vision and Concept of Operations for Public Comments (March 4, 2016)

Concerns with Deficiencies in the Individual Taxpayer Identification Number (ITIN) Program (April 5, 2016)

Concerns with Deficiencies in the Employer Identification Number (EIN) Program (May 2, 2016)

Preserving and Improving Access to Face-to-Face Appeals Conferences (May 13, 2016)

Request for Proposed Regulations for Public Comment before Implementing Section 7345, Revocation or Denial of Passport in Case of Certain Tax Delinquencies (July 12, 2016)

Statement of Jim Oliver
On Behalf of The
San Antonio Chapter of The
Texas Society of Certified Public Accountants
Before The
National Taxpayer Advocate
Public Hearing on IRS Future State

August 30, 2016

Good morning, my name is Jim Oliver. I'm a CPA and have been providing tax services here in San Antonio for 35 years, serving individuals, fiduciaries and businesses, from low-income widows to some of San Antonio's most successful families. I am a past president of the San Antonio Society of CPAs and current chairman-elect of the Texas Society of CPAs, and a former chairman of our Taxpayer Education and Relations with IRS committees. I believe my comments today will reflect the concerns of our tax practitioner members, but I should clarify they have not received the official approval of our Executive Board.

Thank you very much for the opportunity to comment on what I believe should be the most important goals of the Future State Plan.

Inadequate Staffing

Let me begin by talking about the lack of IRS staffing in San Antonio, a problem that I understand from other members of the Texas Society is prevalent throughout the state. San Antonio is the seventh largest U.S. city. The lack of staffing here impacts many taxpayers, particularly older or lower-income individuals, who want to comply with our tax laws, but may not have Internet access or online skills and therefore must rely on telephone or face-to-face meetings. The lack of staff often means waiting on the phone or in line when they visit an IRS Taxpayer Assistance Center for long periods. Frequently, these are working individuals who simply do not have the time for these long waits. Unfortunately, many important taxpayer service functions previously performed by local offices have already been pared back.

In San Antonio, there is no “walk in” availability to meet with an IRS representative. Taxpayers must make an appointment. While that presents a mere scheduling problem for practitioners, it can be a major problem for individuals with full-time jobs who prepare their own returns. I recently called to book an appointment in the San Antonio Taxpayer Assistance Center. The representative took five minutes to respond that no time slot was available for the next two weeks. She then asked if I wanted her to look beyond that timeframe or at other locations' availability. She could not quickly give me a clear answer as to when the next availability would be, which was not only inefficient, but frustrating. I can imagine for a taxpayer facing a potential collection action on a delinquent account that it would be frightening that no one is available to assist them.

As difficult as it is to gain access, at least we have an IRS office in San Antonio. IRS offices in many Texas communities (like Beaumont, Wichita Falls and Longview) no longer exist. Texas is a large state with long distances between the few cities where the IRS has maintained a presence. For individuals in the many communities that do not have IRS offices, getting an appointment is the least of their problems. A face-to-face meeting is prohibitively expensive and time consuming because of required travel.

In effect, these restrictions attributable to lack of staff have made face-to-face meetings an unfortunate rarity whether it is for purposes of, for example, obtaining an ITIN, resolving an exam or participating in the appeals process. Why is this important? It is a matter of efficiency for the taxpayer, the practitioner and the IRS. Tax issues that arise in an exam or are going through the appellate process are typically complex matters that are not resolved with a simple exchange of letters. In our experience, issues that could have been settled in a single meeting of an hour or less have expanded into an exchange of multiple letters over a period of months, with the IRS frequently sending letters requesting more time to respond while simultaneously issuing threatening letters to the taxpayer demanding immediate payment. With each exchange of letters, the practitioner and IRS staff must take time to re-familiarize themselves with the facts of the case, which wastes time and effort when a simple conversation might have effectively resolved the issue.

While this is a major problem for our practice, it is an even greater difficulty for individuals who prepare their own returns. Often the language in the letters requesting information is so technical that the average person cannot understand how they need to respond. In a face-to-face meeting, such a problem is easily resolved by the taxpayer merely saying, “I don't understand. What is it that you need?”

Another problem resulting from inadequate staffing occurs in correspondence audits, which are particularly frustrating for taxpayers dealing with IRS personnel who often take a long time to respond. In our experience, the IRS correspondence personnel are not as focused on the issues as they would be if the communications were live.

What is the solution to this problem? Obviously, the IRS needs more staff in Texas and, I suspect, the rest of the country. Increasing the staff may require some additional funding, but I strongly believe an increase in efficiency will offset some, if not all, the additional staffing cost. Processing multiple letters to resolve a single issue is not only time consuming for practitioners and taxpayers, but also consumes significant IRS staff resources and availability, further bogging down the system.

I do understand states like Texas where communities are spread far apart pose a problem for the IRS because they might not be able to efficiently staff all of those communities. To resolve this problem, the IRS should consider providing reasonably located local centers with high-quality teleconferencing capabilities. Alternatively, the IRS may want to consider commercially available web-based services that already provide this technology. Teleconference capability would make face-to-face meetings available for geographically isolated taxpayers without the inconvenience of long-distance travel for the taxpayer or practitioner, saving substantial time and costs. However, we continue to believe that face-to-face meetings are superior and the ongoing IRS staffing reductions even in major cities harms effective tax administration. Another alternative previously available would be for the IRS to consider having personnel “ride the circuit” to serve taxpayers in areas distant from the major cities.

Improvement of the Website

Another idea that would help with the IRS staffing issue is to make the IRS website user-friendly. Most taxpayers want to do the right thing, but the tax law is very complicated. Taxpayers often need help preparing their returns and cannot afford professional assistance. They can call the IRS with their questions, but the phone lines usually have long delays and even when the call is answered, the response is only as good as the IRS staff on the other end of the line. This is particularly stressful for a taxpayer trying to resolve a delinquent account.

We are aware the IRS is developing a Future State Plan. We are concerned that an over-emphasis on technology with dramatic staffing reductions to deal with taxpayers directly will exacerbate currently existing problems. Current IRS technology is inadequate and more of the same is not a good plan. The planning has, to date, been secretive without adequate public exposure and comment. One goal of the plan should be to make the website much more user-friendly. Currently, it is difficult to research an answer to any question on the website because search bar responses are frequently non-targeted or non-responsive to the inputted query. This issue has been successfully addressed by many commercial websites that provide a question space on the home page where the customer can either type in the name of any product and receive an immediate targeted response or access an online assister through a chat window. The IRS has much to learn from the private sector.

We suggest the Future State Plan include a process to gather feedback from those staffing the phone calls about what questions they receive most often and then post those questions and answers on the website after a technical review as some of the existing FAQs now do. That will give the IRS a way to provide technically accurate, but simplified answers to the questions most often asked and, at the same time, save significant staff time answering calls.

Electronic Communication

Some of the paperwork and processing delays could be reduced by use of currently available technology. For online accounts, the IRS should provide Circular 230 practitioners a way to send and receive information electronically on behalf of their clients. Powers of attorney should be fileable electronically. Electronic communications with authorized practitioners would significantly reduce the time and effort required to resolve questions raised by the IRS. The IRS should permit electronic signatures. Currently, electronic signatures are widely accepted in other financial matters and are arguably more secure than a handwritten signature given that electronic signatures are generally password protected. U.S. taxpayers are spread throughout the globe and many may not have immediate access to scanners and fax machines, making the electronic signature their only efficient form of providing authorization to someone in the United States or signing their e-file authorizations for their domestic CPAs.

*******

To summarize, the failure to provide timely, efficient and reliable support to taxpayers and tax professionals can inadvertently result in non-compliance with our self-assessing tax system. The vast majority of taxpayers want to be compliant. The primary focus of the IRS Future State Plan should be to assure taxpayers prompt and accurate answers to their questions and resolution of their issues, but not by eliminating human contact. Service is an important word and the IRS, in many instances, has lost sight of that concept.

We commend the National Taxpayer Advocate and Congressman Doggett for holding these hearings that allow us to be more involved in shaping the IRS of the future.

Thank you again for the opportunity to speak on these issues. I would be delighted to answer any questions you might have.