Nina Olson: IRS Out of Touch with the People it Servesby
National Taxpayer Advocate Nina Olson minced few words in a recent assessment of the future of the IRS and its current interactions with taxpayers: The agency’s growing disconnect from the people it serves will lead to its failure.
Despite the IRS’s focus on its Future State initiative, which is laden with goals of easier transactions through digitalization of services, the agency must focus more on physically engaging with taxpayers, Olson said during the American Institute of CPAs’ National Tax Conference in Washington, DC, on Nov. 15.
Her year of nationwide travel, interacting with taxpayers and listening to focus groups, provided an overarching mantra: Improving the IRS’s current state preempts its future state.
“Go online to the IRS website, and they have these vignettes of how they envision different taxpayers interacting [with the agency] in the future, and it’s all through computers and digital notifications,” she said. “People think it’s arrogant, that it shows taxpayers losing and the taxpayer being wrong.”
The message conveyed is that the future state is all about the IRS big-footing taxpayers faster and electronically.
“I’m not making this stuff up,” Olson said. “It’s coming from the audiences and panel members.”
The answer lies in engagement with taxpayers, she said. Electronic access to six years of tax returns and transcripts is all well and good, but if there’s a problem or action to be taken, people want to talk to a real, live person.
“That’s where you learn what taxpayers are concerned about,” Olson said. “That you, IRS, may be wrong.”
What’s more, the electronic vignettes can’t account for all of the nuances in someone’s life.
“In a conversation with a taxpayer, you might tease out family status issues,” Olson said. “A Supreme Court justice once referred to ‘life in all its fullness should be our guide.’ How do you do a drop-down menu for that? You have to have a conversation to tease out the details of taxpayers’ lives.”
And taxpayers have the right for the IRS to take that approach, she added.
So, how to do this? One way is more feet on the ground – a geographic presence, as Olson put it.
“In order to administer tax laws, the IRS has to know what’s going on on the ground,” she said. “Compliance is local; people’s relationships are local.”
And the agency has to reach out to understand the locals’ needs and preferences so that compliance efforts focus on a particular location’s challenges.
Time was, IRS employees lived and worked locally, playing on the softball team, volunteering, fundraising, and going to religious services, Olson said.
“Their neighbors knew and saw them, so even if they heard something [negative] on the news, they would say, ‘Well, I know so-and-so and they’re a good person,’” she continued.
That, in turn, offsets the “broadbrush painting” of government power and IRS employees as negative, and local IRS agents could have conversations with people, “which is a qualitative value,” Olson said.
“We’ve lost that and it’s huge,” she added. “This tax system fails and falls if we don’t have taxpayer trust. You don’t build that trust by just telling them they owe more money or creating an online account so they can look up what they owe. You build trust by engagement and providing service.”
Still, there’s no escaping the fact that the IRS has had significant budget and staffing cutbacks. IRS Commissioner John Koskinen emphasized that repeatedly during a presentation after Olson’s on Tuesday.
Olson acknowledged that, but added that she sees “every day how they waste resources by doing stupid things upstream and then creating more work for themselves.” She didn’t elaborate, but said she’s advised Congress that oversight hearings are in order.
“Ask ‘if we give you these resources, what and how will you do it?’ Congress has given more money for services and I think that’s a recognition of where they want the IRS to go,” Olson said.
The bottom line? “Do the audits, but think about other ways to service taxpayers like we’ve talked about,” she added.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.