IRS Catches Up On EINs, Learns Valuable Lessons

In a recent letter to Larry R. Levitan, chairman of the Internal Revenue Service (IRS) Oversight Board, IRS Commissioner Charles O. Rossotti said the Service is well on the road to recovery, following some fairly significant delays in the processing of employer identification numbers (EINs) earlier this year. He also said the IRS learned some valuable lessons along the way.

Altogether, the IRS issues over 4 million EINs a year to sole proprietors, corporations, partnerships, estates, trusts and other entities for tax filing and reporting purposes. In January 2002, the IRS implemented a new system for issuing these numbers. The system consists of a single toll-free telephone number (1-866-816-2065), consolidation of the IRS's operations from ten to three campuses, and a revised application that allows tax practitioners to request an EIN by telephone or fax on behalf of their clients. In the early weeks of implementation, practitioners complained it could take up to three weeks to get an EIN. Local taxpayer advocates said they were unable to obtain EINs even in cases of hardship or emergency.

"We have made dramatic improvement in processing these requests," Commissioner Rossotti reported. He said the IRS had a significant gap in January between incoming calls and calls answered, but the gap has been nearly closed and the Service's level of telephone service is hovering just below 90%. Similarly, its "paper inventory status" shows closures are now running hand-in-hand with receipts.

Looking back, Commissioner Rossotti admitted, "The transition to this new operation was anything but smooth… We have learned some valuable lessons." The first lesson is that some of the implementation problems could have been avoided with better coordination in the planning and development stages. For example, the IRS simply didn't realize its decision to issue new prefixes to replace state-specific prefixes would cause so many complications for its partners in the software industry. The second lesson is that the beginning of the filing season was not an optimal time for implementing a new initiative.

Commissioner Rossotti concluded his report to the oversight board by saying the IRS is committed to greater stakeholder involvement in the development of future initiatives, and it plans to do a better job in the future of integrating its processes with its stakeholders' workload.

-Rosemary Schlank

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