IRS tries to balance service, enforcement roles

IRS Commissioner Charles O. Rossotti Monday acknowledged his agency's struggle to balance the dual roles of law enforcer and customer service provider.

In testimony before the House Government Reform Subcommittee on Government Management, Information, and Technology, Rossotti highlighted the agency's smooth Y2K transition and "considerable progress" in expanding electronic filing as successes. However, he also pointed out that a workforce reduction coupled with a workload increase have made providing optimal customer service difficult. Rossotti is requesting more funding from Congress for fiscal 2001 to maintain current operations, stabilize staffing, and continue updating information systems.

Congress passed the IRS Restructing and Reform Act (RRA) in July 1998, in response to calls for better service from the IRS. The act required the agency to implement 71 new or modified taxpayer rights provisions, which expanded taxpayers' rights and made collection agents more accountable for their cases.

Since the passage of that act, the agency has had to restructure and reorganize itself on virtually every level. Rossotti said the agency receives numerous recommendations on ways to improve service and fix problems, but that it is necessary to prioritize issues and problem-solve within the agency's capabilities.

"Addressing and managing these changes requires significant management attention, and many require additional resources, including information systems resources," he said.

Rossotti, who has focused on improving customer service, employee satisfaction, and business results, was praised by the members of the subcommittee and panel members for his efforts to turn the beleaguered agency around and for working with the IRS' numerous stakeholders on challenges confronting the agency. "He is responsible for planning and implementing the most fundamental changes in the IRS in nearly a half century," said Chairman Stephen Horn, R-Calif. in his opening statement.

However, there was ample criticism leveled at the agency. Panel members pointed out major weaknesses including:

  • Heavy reliance on a paper-based system.
  • Outdated technology and tax processing methods.
  • Service problems with a toll-free service number.
  • An inefficent and ineffective auditing system.

David L. Keating, senior counselor for the National Taxpayers Union, expressed concern over the agency's failure to notify taxpayers who overlook the child tax credit, resulting in over-collection by the IRS.

"If the Child Tax Credit is overlooked by as many American families this tax season as apparently failed to claim it last year, the IRS will over-collect perhaps $7 million just from returns that are filed today, while we talk about their performance," Keating said in his testimony.

The 1998 reform act also called for the creation of an IRS oversight board comprised of the Treasury Secretary, IRS Commissioner and business experts from the private sector. However, the process in establishing this group has been lengthy: the administration took over 18 months to get its nominations to the Senate and confirmation of the seven candidates is still pending.

Margaret T. Wrightson, associate director for tax policy and administration issues at the General Accounting Office, discussed the challenges the IRS faces in the areas of business practice, performance management, and information technology. She also emphasized that "customer service and compliance are meant to be complementary," but acknowledged that "understanding that customer service and compliance are not competing, but complementary, values will take time and an ample amount of clear communication and training."

The IRS this year is projected to collect $1.8 trillion in revenues, process 213.1 million tax returns and issue more than 93 million individual refunds. The agency audited about one-third fewer tax returns in 1999 than it did in 1997.

"We are wholly committed to implementing each and every taxpayer rights provision and making them work as intended, while still fulfilling our mandate to collect taxes that are due," Rossotti said. "We will get the job done and we will get it right. However, we will also make mistakes along the way and we are not yet at an acceptable level of quality, efficiency and effectiveness in the way that we are implementing some of these provisions."

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