Jun 10th 2013
By Jim Buttonow, CPA, CITP
The IRS confirmed June 7 that it plans to retire two major e-services incentive products used by CPAs, attorneys, and enrolled agents to file authorizations and resolve IRS account problems.
The IRS announced it will retire the Disclosure Authorization and Electronic Account Resolution e-services products August 11, "due largely to low usage." The IRS stated it increased the number of employees and improved its internal processes in response to this change.
The two major e-services products slated for retirement serve several common functions for tax professionals:
- Disclosure Authorization (DA) allows for real-time input of Form 2848, Power of Attorney and Declaration of Representative, and Form 8821, Tax Information Authorization, eliminating the waiting period resulting from IRS processing delays that occur when mailing or faxing disclosure authorizations to the IRS. According to the IRS announcement, the current average processing time for mailed or faxed authorizations is ten days.
- Electronic Account Resolution (EAR) gives tax professionals electronic access the IRS Practitioner Priority Service (PPS) to resolve client account problems. There are seven EAR inquiries available, allowing tax professionals to address such client issues as notice research, installment agreement requests, and refund issues. This allows for convenient communication with the IRS about client issues and eliminates time spent waiting to speak with a PPS representative by phone.
IRS Move Draws Sharp Criticism from Practitioners
After learning of the IRS announcement to retire the two e-services products, many practitioners were upset and disappointed to learn they will lose the convenience of interacting with the IRS electronically.
"It is just insane that they made such progress in customer service with the e-services program, and now they are shoving everything into reverse," said CPA George Prytula, III. "This is tantamount to all major banks telling us that they are shutting down all of their ATM machines and going back to just lobby counter service."
Some practitioners also pointed to a lack of IRS outreach when it comes to educating practitioners and publicizing the various uses of e-services incentive products.
"I think they just haven't promoted it enough generally to practitioners," said Pamela Britz, EA. "I use these two [DA and EAR] – especially filing POAs – quite often."
A Look at the Alternatives
The IRS has not been explicit about electronic alternatives it will offer to support functions previously available in DA and EAR, though it promised in its announcement June 7 it would look for electronic solutions going forward.
As an alternative to DA, the IRS instructed tax professionals to fax or mail authorizations to the appropriate IRS location and allow at least four days for processing.
Tax professionals can use the Online Payment Arrangement tool in lieu of the installment agreement request in the EAR product, although a number of practitioners have expressed difficulty using this tool. There are currently no other online options to replace the other six EAR functions. As a general alternative, the IRS directed practitioners to call the PPS line at 1-866-860-4259 for help resolving account-related issues.
However, many practitioners expressed dissatisfaction with that alternative, citing long wait times. According to the Government Accountability Office (GAO), in 2012, the average PPS hold time was more than twenty-two minutes per call – up from just under five minutes per call in 2009.
CPA John Stanbery is one practitioner who prefers using e-services to calling the IRS. "It certainly beats being on hold for forty-five minutes," Stanbery said.
Reduced IRS budgets and staffing may also affect PPS customer service, as representatives are forced to accommodate the extra workload resulting from e-services cutbacks.
In 2012, the IRS experienced its second straight year of budget cuts, brought on by the sequester, totaling almost $1 billion over the past two years. From 2010 to 2012, the IRS also reduced its staff by 7,000 employees.
With budget and staff reductions at the IRS, many practitioners think it is a surprising decision for the IRS to move from an electronic customer service system back to one-on-one, phone-based support.
A Step Backward?
Although the IRS announced it is responding to e-services cutbacks with more employees to process authorizations, the IRS decision to retire two online tools appears out of step with government reports and advisory board recommendations on enhancing technology for tax administration. A variety of reports point to the IRS' need for new and better technology – at a time when taxpayers and practitioners are increasingly adopting electronic tools.
According to an electronic road map set forth by the Office of Online Services and reported by the GAO earlier this year, the IRS continues to plan for enhanced online tools for taxpayers. However, providing electronic tools to tax professionals, who prepare 60 percent of all tax returns, is a cost-effective strategy described by the Internal Revenue Service Advisory Council in its 2012 Public Report:
"The IRS would like to increase practitioner reliance on e-service tools and decrease reliance on one-on-one contact through the IRS Practitioner Priority Service. Transferring practitioners to e-services when appropriate can increase assistor availability for issues that require an assistor's support."
The IRS decision to retire two e-services products also appears counterintuitive in light of several technology initiatives being developed by the IRS, such as various information matching and identity verification programs. On April 9, in his testimony before Congress, former IRS Acting Commissioner Steven Miller made clear the agency's IT priorities.
"If you were to ask me, 'If you had one last dollar . . . and that dollar was for bodies or for IT,' I would take it for IT, because that is the lifeblood of our efficiency," Miller said.
Practitioners Are Using e-Services
In its announcement about retiring DA and EAR e-services products, the IRS cited low usage of the products as a reason for the scale back. However, according to a Treasury Inspector General for Tax Administration (TIGTA) study from June 2012, there has been a demonstrated and steady increase in practitioner usage of e-services DA since its inception.
In October and November 2011, there were more than 153,000 authorizations filed via DA, according to TIGTA.
DA is popular among practitioners because it offers an efficient alternative to filing authorizations with the IRS Centralized Authorization File (CAF) unit, which experiences long average processing times. Currently, processing of disclosure authorizations by faxing the CAF is taking ten business days, according to the IRS. Access via DA is instantaneous.
Without electronic filing of authorizations, delays like Prytula's will be inevitable for practitioners.
"I mailed a power of attorney to the IRS two weeks ago and then faxed another one two days ago, and both of them are still not yet in the IRS CAF system," Prytula said.
Many practitioners are upset about the IRS' decision to retire these products. Their responses have spurred a grassroots movement to petition the IRS to abandon its plans to retire the e-services products or replace the products with other electronic solutions.
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About the author:
Jim Buttonow, CPA/CITP, is cofounder of New River Innovation, creator of Beyond415. He has more than twenty-five years of experience in IRS practice and procedure. Reach Jim at [email protected].