From its very beginning, the Internal Revenue Service (IRS) has sought ways to modernize the tax collection process. Technology first entered the scene when, in 1867, Congress authorized the use of a hydrometer to establish a uniform system to inspect and gauge alcoholic spirits subjected to tax.
The ubiquitous Form 1040 was introduced in January 1914. In 1950, the first computers were introduced. And in 1962, IRS implemented a trailblazing nationwide automatic data processing system. Technology and best practices intersected to enhance the collection process.
1988’s Your Rights as a Taxpayer was the agency’s first major effort to view tax collection from the taxpayer’s perspective. As technology rapidly advanced, it became more and more difficult to balance the efficiencies of tax processing with the engagement of a genuine taxpayer experience, all while protecting taxpayer data.
Today the IRS faces challenges of providing support to the nation through a pandemic, remote working, and system modernization. This current situation is met with the imperative to effectively respond to the Taxpayer First Act (TFA), which challenges the IRS to incorporate best practices in customer service. Commissioner Charles Rettig has fully embraced this challenge, driving his leadership to a vision of an IRS that is “responsive to all communities, all taxpayers, and all practitioners.”
To embrace such a vision is necessary, but to execute on such a vision is very difficult. Modernization cannot disrupt ongoing operations, yet it must enhance the taxpayer experience and add value to everyone.
Much like the response to the Whiskey Rebellion and the advent of the Form 1040, the TFA will significantly impact the IRS and the method of collecting taxes for the U.S. Treasury. These impacts will be driven by best practices incorporated into one of the world’s most complex tax systems. Some of those impacts will include:
- A reorganization of the IRS to be more citizen-centric. As U.S. demographics and the tax code evolves, the IRS must adjust to be responsive. We will see an alignment that will provide a much tighter focus on the individual and business taxpayer accounts. We will see operations that were logically disjointed in the past, joining together for increased effectiveness. The result of this will be the IRS taking a holistic approach to serving the taxpayer, regardless of their status or economic wellbeing. For all practical purposes, this is the next generational step in enhancing performance to support 1988’s Your Rights as the Taxpayer.
- Improved identity protections. As the IRS becomes more citizen focused in its mission, they must continue to eliminate the ability of cyber criminals from having access to citizen information. This is a challenge that never sleeps and is difficult to combat effectively. The IRS has some of the tightest security requirements in the government, but they must remain strong and ever vigilant.
- A true “customer service” point of view. Nobody ever expected the IRS to be a customer service organization providing welcoming hospitality when interacting with the citizen. Their job is, and always will be, to collect tax revenue. However, the digital experience of taxpayers has evolved to a point where a customer service-centric approach is expected. When people call the 800-number to get help, they expect to get their question(s) answered — in their native language — so they do not have to pay for a lawyer to interpret for them. The technology to do this is available today and the challenge is how to do it effectively with the resources and budget provided.
- Enforcement enhancements. Our tax system is built on voluntary compliance, which provides non-trustworthy citizens an opportunity to avoid paying taxes. Enforcement is difficult because it is based on known and verified intent to defraud the U.S. Today, detection methods are evolving at a very rapid pace, but as the IRS embraces these methods, they must balance them with the customer service attitude required.
Similar to the 16th Amendment, which authorized the Bureau of Internal Revenue to start collecting income tax from individuals and businesses in 1913, it will take several years for the results of the TFA to be fully incorporated by the IRS, and ultimately experienced by the taxpayer. The IRS has a strong team of experts reporting directly to the Commissioner who are taking on this challenge daily, while government contractors are supporting this team and introducing many of the best practices TFA requires.
The Whiskey Rebellion may have been the first time Congress authorized technology to be used in tax collection. It certainly will not be the last. Technology mixed with best practices will bring the next generation of customer service to the IRS.