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Internal Revenue Service Advisory Council 2009 Public Report: Wage & Investment Subgroup

INTRODUCTION/EXECUTIVE SUMMARY

The IRSAC Wage & Investment Subgroup (hereafter “Subgroup”) is comprised of a diverse group of tax professionals, including three certified public accountants, two enrolled agents, an attorney, and a national tax director of a large retired-person organization.  This group brings a broad range of experience and perspective from both tax preparers’ and taxpayers’ views, and includes unique experience in the issues faced by many W&I taxpayers.  We have been honored to serve on the IRS Advisory Council and appreciate the opportunity to submit this report.

The Subgroup would like to thank W&I Commissioner Richard Byrd for his recognition of the value of the Subgroup as an integral part of his leadership team. Commissioner Byrd and the W&I senior leadership team met extensively with the Subgroup in August 2009.  The Subgroup has had the privilege of working with the professionals within the W&I Division of the IRS and found them to be extremely helpful in providing the information, resources, and IRS personnel necessary to develop our report.  The Subgroup has researched and is reporting on the following four issues.

  1. Tax Professionals Visiting Taxpayer Assistance Centers for Assistance - Tax Professionals routinely visit IRS Taxpayer Assistance Centers (TAC) for services that can be provided more efficiently via Internet, telephone, or mail (e.g. tax return transcripts, tax forms & publications, delivery of payments & returns).  This diverts TAC resources from serving individual taxpayers seeking face-to-face assistance who may not have access to other options. Overall capacity to service taxpayers is dependent on available resources (on-site staffing). As a result, wait times for service fluctuate and are often difficult to control.
  2. Publication 590, Individual Retirement Arrangements (IRAs) - Publication 590 discusses personal savings plans that provide tax advantages for setting aside money for retirement. The publication is over 100 pages and covers a wide range of information regarding IRAs (traditional, Roth, and SIMPLE) and outlines penalties and additional taxes that may apply when the rules are not followed. The IRS has made every effort to include all necessary information in an easy-to-use format.  However, in-depth research into the Publication’s audience, including what IRA information taxpayers want and when they want it, has not been captured.
  3. Use of the Interactive Tax Law Tool on IRS.gov by Taxpayers - In FY 2008, IRS received 4.6M telephone calls from taxpayers who were seeking tax law information for completing their federal tax return.  Studies show that one of the most cost-effective channels to deliver information is over the Internet.  Customer Online Decision Support Release 2—which has been renamed Interactive Tax Assistant (ITA)—will allow taxpayers to use an interactive on-line question and answer tool to resolve their individual tax law inquiry.  We want to ensure that the ITA interface on IRS.gov is user friendly so taxpayers are willing to use the tool.
  4. Automated Collection Systems (ACS) Telephone Navigation - The primary method customers use to contact ACS is through their toll-free telephone number.  W&I ACS handles over two million calls annually.  ACS conducts customer satisfaction surveys on a random sampling of these contacts at their conclusion.  The results of these surveys are used to measure the overall ACS customer satisfaction. While the overall ACS customer satisfaction is high, two questions regarding telephone navigation consistently receive high dissatisfaction scores.  These questions are related to the ease of understanding the automated self-service menus and instructions, as well as the time it takes to get through to the IRS.

ISSUE ONE:  TAX PROFESSIONALS VISITNG TAXPAYER ASSISTANCE CENTERS FOR ASSISTANCE

Executive Summary

IRSAC was asked to assist the IRS in dealing with tax professionals who routinely visit IRS Taxpayer Assistance Centers (TACs) for services that can be provided more efficiently via the Internet, telephone, or mail (e.g. tax return transcripts, tax forms & publications, delivery of payments & filing of returns). 

Background

The IRS believes that professionals routinely visit IRS Taxpayer Assistance Centers (TAC) for services that can be provided more efficiently via the Internet, telephone, or mail (e.g. tax return transcripts, tax forms & publications, delivery of payments & filing of returns).  The use of the TACs by professionals diverts TAC resources from serving individual taxpayers seeking face-to-face assistance who may not have access to other options. Overall capacity to service taxpayers is dependent on available resources (on-site staffing). As a result, wait times for service fluctuate and are often difficult to control.

TACs see an increase in customer traffic from taxpayers during the filing season, with a corresponding increase in practitioner visits during the April 15th and October 15th filing due dates.  Tax professionals use the TACs during this time to submit multiple returns, extensions and payments.  This diverts employee resources from being able to assist individuals needing return preparation or other services.     
The IRS does not track practitioner visits; however, they locally make arrangements for filing bulk returns on or around the dates mentioned in TACs that traditionally experience increased volumes.    

A Customer Satisfaction Survey is distributed at the TACs through use of a survey card; however, the card does not identify the customer as a tax professional and does not ask why they are using the TACs instead of other available services.

Our informal contacts with one TAC and with several practitioner groups indicate that the use of TACs by tax professionals might no longer be a major concern due to increased use of the e-services and the Practitioner Priority Service (sometimes referred to as the Practitioner Hotline).  The Subgroup recently visited a TAC to observe its processes. Our discussion with the manager confirmed that tax professionals using TACs might not be an issue for all TACs. The downtown TAC that the Subgroup visited does not see as many professionals as does a nearby suburban location with better parking.

The usage of the Practitioner Priority Service by professionals is increasing. The best measure of usage is summarized by the number of calls answered. From fiscal year 2006 to 2008 calls answered increased by 28%, from 992,724 to 1,267,191. Through May 16, 2009, calls totaled 799,736. Satisfaction with the Practitioner Priority Service has been very high based on surveys completed by users. 
The IRS Web site, IRS.gov, lists “Contact My Local Office” as an IRS resource for both individuals and tax professionals. The information provided is the same for both types of users.

The IRS’ Nationwide Tax Forums are attended by thousands of practitioners annually. Past presentations have covered tools available to resolve issues, but have not strongly discouraged using the TACs. A 2008 presentation entitled “IRS Services: File, Pay, and More” highlighted services available at TACs such as transcripts, payments, account/adjustments, and W-7/ITIN. The presentation suggested using e-services first, but did not discourage use of the TACs. We reviewed the types of issues handled at the Case Resolution Rooms at the Nationwide Tax Forums. The majority of the cases involved complicated issues more likely to require in-person contact. A very small percentage consisted of routine requests such as transcript requests and account inquiries. This indicates that the requests for in-person assistance by tax professionals were appropriate.  

Recommendations

  1. Determine if practitioner use of the TACs is still an ongoing problem based on actual visits by inserting two questions into the survey card: A) Is the customer a tax professional? B) If a professional, what is the purpose of the visit to the TAC? 
  2. Distinguish the “Contact My Local Office” page in the Tax Professionals Section from the similar page in the Individual Section by emphasizing the advantages of using services available through the Web site and through the Practitioner Priority Line and outline the services available.  
  3. Conduct a presentation at the IRS Nationwide Tax Forums on a topic such as “We’ll miss you, but we really don’t need to see you.”  The presentation should cover specific examples of the issues that practitioners bring to the TACs and provide better ways to resolve them.
  4. Continue to promote e-services and the Practitioner Priority Line in e-News for Tax Professionals and in meetings with practitioner groups.
  5. Provide Publication 4389, “e-Services Brochure,” to tax professionals visiting TACs and develop a tax professional brochure with all of the available services that can be obtained through IRS.gov.
  6. Display notices at TACs that specifically provide tax professionals with alternative resources available on IRS.gov.
  7. Schedule problem-solving days (Solution Saturday is currently in place. One is scheduled for November 7, 2009, at five different locations). Consider expanding Solution Saturday to every TAC and on additional days throughout the year.

ISSUE TWO:  PUBLICATION 590, “INDIVIDUAL RETIREMENT ARRANGEMENTS (IRAs)”

Executive Summary

IRSAC was asked to assist the IRS in reviewing Publication 590, “Individual Retirement Arrangements (IRAs)” for clarity and ease of use.  An August 2008 GAO report found the publication complex with respect to the requirements for distribution rules and explanations for the calculations used.  Additionally, the W&I division wants to determine who requests the publication.  W&I is concerned the publication is too long and should be shortened. 

Background

Publication 590 discusses personal savings plans that provide tax advantages for setting aside money for retirement.  The publication is over 100 pages and covers a wide range of information regarding IRAs (Traditional, Roth, and SIMPLE), Disaster-Related Relief and Retirement Savings Contributions Credits (Saver’s Credit). The publication explains the rules for setting up an IRA, Roth or SIMPLE plan, contributing to it, transferring money or property to and from it, handling an inherited IRA, receiving distributions and taking a credit for contributions to such plans.  It also outlines penalties and additional taxes that may apply when the rules are not followed. 
The IRS has made every effort to include all necessary information in an easy to-read format.  However, there is too much ambiguity in the current text.  Some minor information, such as “When can a traditional IRA be set up?” does not need to be a separate section, and could be incorporated into the discussion of “Where you can open an account?” or “When you can contribute?”  Other information is unnecessary or confusing.  For example, page 4 of the 2008 Publication 590 tells the taxpayer not to report IRA interest as tax-exempt interest.  This begs the question – where do you report it?  The text does not say that the taxpayer does not report it at all, of course.  This could be incorporated into a discussion of deferral.

The tax rules on this topic are complex, which makes the publication difficult to read, even as you try to simplify this publication.  Many third parties have developed helpful tools that are referenced by many professionals including financial planners, pension companies, tax professionals and accountants.  We have provided multiple well-done examples to the IRS team working on Publication 590.   The 2008 Publication 590 says property cannot be contributed, but continually references property as a contribution throughout the 2008 publication (pages 12, 25, 26, 27, 49, 53, etc.).  In-depth research into the publication’s audience, including what IRA information taxpayers want and when they want it, has not yet been captured.

Recommendations

  1. Incorporate more tables, text charts and flow charts that show comparisons between Traditional, Roth and other IRA plans.
  2. Create a flow chart which could be particularly helpful in the area, “When you Must Withdraw Assets” for owners, spouses, designation beneficiary and beneficiaries who are not individuals. 
  3. Develop a web-based “Required Minimum Distribution” calculator to eliminate the complication of multiple reference charts each with important requirements, as well as the potential of significant confusion of 70½-year-old taxpayers with multiple IRAs.  
  4. Solicit feedback from professional groups who work with the publication.  We believe the publication is more widely used by professionals seeking IRS information, especially those in the pension, benefits and investment fields. A list of some of these professional organizations was provided to the appropriate IRS personnel.  Additionally, many of these organizations train and test new professionals in these fields, and Publication 590 is used in this learning environment.  Feedback from members in these groups and, especially, students who use the publication to study IRA areas could help identify especially tough or unclear topics for the IRS to review for clarity in Publication 590.
  5. Develop a feedback mechanism via the Internet and IRS.gov from Publication 590 users, especially those with lingering questions.  This could help the IRS identify ambiguous areas of Publication 590 needing review and clarification.
  6. Delete the “What’s New” sections in each subsection (Traditional, Roth, SIMPLE, etc.). Eliminate duplication of text, especially since it is noted in the appropriate text within the subsections.  Consider including “What’s New” before the text identifying new content to highlight that the item is new within each section.
  7. Develop a repeated grouping of “who, what, when and how” within the subsections.
  8. Create a frequent errors section, to address common errors often reported on tax returns and/or provide an IRA checklist for taxpayers to review before submitting returns.
  9. Introduce more plain language, e.g. instead of “set up” an IRA, which sounds hard and vague, use “open an IRA account” instead.  Clarify the definition of “Active Participant.”  
  10. Include the very special interest sections (veterans, disaster areas, volunteer firefighters, etc.) in an appendix in the back of Publication 590, to keep the text focused on the majority of situations.
  11. Provide better clarification on whether property can or cannot be contributed.  
  12. Clarify the text on recharacterizations on page 30 of the 2008 Publication 590, which is especially confusing.

ISSUE THREE:  USE OF THE INTERACTIVE TAX LAW TOOL ON IRS.GOV BY TAXPAYERS

Executive Summary

IRSAC was asked to make recommendations on how the IRS can design the Interactive Tax Law Assistant/Customer Online Decision Support Release 2, now called Interactive Tax Assistant (hereafter “ITA”), interface to be more user-friendly.  Additionally, IRS asked IRSAC to assist the IRS by studying and researching other interactive online tools and identifying ways IRS can ensure the tools it is creating will be easy for taxpayers to use.

Background

Interactive Tax Law Assistant is an interactive tool used by IRS assistors on the toll-free Customer Assistance Service telephone lines and the assistors at the Tax Assistance Centers to provide taxpayers with answers to some tax questions.  This tool is currently available only to IRS employees.  The IRS is working with outside contractors to develop ITA for use by taxpayers and representatives.  The goal is a publicly-available, interactive program of tax law questions and answers and decision trees in plain English to direct the public to the web as an alternative to calling the IRS.  The desired result is better-educated taxpayers leading to increased compliance.  It may be difficult to measure the positive effect of this tool.   

There are currently 114 Tax Law Categories (TLCs) available to IRS telephone assistors.  IRSAC provided a list of recommended TLCs to be included in the initial public rollout of ITA based on IRSAC member experience.  Members of the W&I sub-group met with members of the project team at each of its 2009 meetings.

The initial process to launch TLCs on ITA involves:

  1. selecting the first group of TLCs to convert;  
  2. converting the TLCs to plain language; 
  3. reviewing the program by IRS subject matter experts;
  4. reviewing by IRS for policy, procedures and guidance; and
  5. testing by a small group of practitioners.

ITA is similar to an IRS online tool called Tax Trails, which is currently available to the public on IRS.gov.  ITA is different from Tax Trails because of the interactive nature of questioning to assist a taxpayer with tax law questions.  There are currently 37 questions/topics (links) on Tax Trails. Some of the Tax Trail links pose one or more questions that must be answered yes or no.  Many of the Tax Trail links provide a list of suggested IRS publications, form instructions, “Tax Topics,” or other parts of IRS.gov, not to interactive questions and answers.  When a TLC is available on ITA, the Tax Trail link will be removed.

Recommendations 

  1. Change the language on the ITA home page to “Get Answers to Some of the Most Frequently Asked Tax Law Questions.”
  2. Promote ITA as a valuable taxpayer tool.
  3. Mark all answers with an “accurate as of (date)” so that the user knows that the information is accurate and current.
  4. Link all answers to the appropriate section of the most specific IRS publication where the taxpayer can obtain more information. 
  5. Replace all words not in common usage, such as “abode” with the more common word, “home.”
  6. Include “do not know” or “unsure” as an additional choice in addition to “yes” or “no” where appropriate, and provide a link to explanatory information so that the user can answer “yes” or “no.”
  7. Provide the taxpayer with alternatives to finding the answer where ITA cannot determine the correct answer. 
  8. Provide a “back” or previous link on every screen allowing the user to go back to the previous screen.
  9. Provide the ability to print the questions asked and the answers given that were used to determine the final outcome, the printout date and the ability to save as a PDF document.
  10. Introduce the ITA tool with a statement such as, “These questions are the same questions you would be asked if you called an IRS telephone assistor.”
  11. Consider converting the interactive Tax Trails TLCs to the ITA format early in the process, as these topics are already in plain English and have been vetted by IRS subject matter experts.
  12. Review the TLCs currently in the development stage to use the language in the existing Tax Trail TLC for appropriate language.
  13. Make dedicated computer terminals with printers connected to ITA available at Taxpayer Assistance Centers, libraries and, possibly, kiosks in shopping malls.
  14. List Publication 17 as a referral source wherever referral sources are listed.
  15. List information (points) as bullets rather than in a paragraph layout.
  16. Move the dropdown menu with the answer choices to the left side of each screen to line up with the “Continue” – “Review” – “Start Over” links.
  17. Add a “Start New Topic” link at the bottom of each screen.
  18. BOLD the answers on the “Review Answers” page and the printout.
  19. Move the “Print” option to just below the last answer.
  20. Move the Survey questions to just below the “Print” option.
  21. Provide links to all words requiring definitions.
  22. Provide a statement above the print link that if a taxpayer uses ITA and retains a copy of the questions and answers, relief from penalties would be available if the answers accurately reflect the facts of the taxpayer’s situation.

ISSUE FOUR:  AUTOMATED COLLECTION SYSTEMS (ACS) TELEPHONE NAVIGATION

Executive Summary

 The W&I Division of the IRS has asked IRSAC to provide recommendations to improve the efficiency of the Automated Collection Systems (ACS) toll-free telephone service.  Research shows overall high satisfaction, but pockets of dissatisfaction relating to ease of understanding, complexity of the system, and wait time persist.  IRSAC believes the recommendations below may help ameliorate these problems.
Background

The IRS toll-free numbers (1-800-829-1040 and ACS-specific numbers such as 1-800-829-3903, -0115, and others) are the primary entry points for customers to contact the collection function housed in the Automated Collection System (ACS).  The ACS system handles over two million calls annually.  Of these, 82% wind up being routed to a live agent and 14% result in hanging up before completion. Only 4% of the calls result in the caller’s obtaining the requested information electronically and without agent assistance.  The telephone script includes six options: payoff amount, obtain a credit or payment received, obtain balance due, obtain a debit or amount charged, PIN maintenance, and obtain a transcript.  Of these, 64% of calls request the balance due, 16% request a debit review, 12% payoff, 4% transcript, 3% information on credits, and 1% PIN maintenance.

In the Balance Due module, 25% of calls fail because of account restrictions (e.g., manual computations may be necessary) and 10% fail because customers have delinquent returns.  In this module, 90% cannot be or are not completed and are, therefore, routed to a live agent.

ACS customer satisfaction surveys (based on random sampling of these contacts at their conclusion), while showing overall high customer satisfaction, also reveal that customers consistently register high dissatisfaction responses on (1) the ease of understanding the automated self-service menus, (2) complexity of instructions, and (3) the wait time to get through to the IRS.

The W&I Division of IRS expressed the desire to improve service by providing more user-friendly modules to improve its success rate on call completions.  To assist W&I, IRSAC makes the following recommendations.

Recommendations

  1. State the expected wait time at the start of the call, and then state the six available services (modules).
  2. Redirect the caller to a dedicated telephone number (or “touch 1 to transfer”) if the call pertains to Voice Balance inquiry (64% of calls).  State the dedicated number when the switch is made.  Use the same technique for other modules if research reveals this would result in faster service.
  3. Replace the hold music with wait-time information callers will need to improve the efficiency of the call, such as: redirecting callers to IRS.gov, information on offers in compromise, phishing warnings, paying taxes with credit cards or EFTPS, and the basics of financial information for an installment agreement.  
  4. Provide callers with a confirmation number, so that they can speak with the same agent on the next call (if necessary) on the same topic.  Save more of the caller’s information that is provided during the first call so the information can be used if the caller is transferred elsewhere within the IRS telephone response system. 
  5. For “automated installment agreement” calls, save the caller’s input for 5 business days, and provide a confirmation number or tie-in to the social security number for easy access and to ensure the caller who uses this automated installment agreement system achieves the same result as a call to a live agent.  Provide this caller with a choice to “start new” or “resume last session.”
  6. Implement the “My IRS Account” rollout on the web, which would address the 64% of calls that pertain to balances due.
  7. Create a paper tri-fold stuffer (to be mailed with the first collection notice) that is function-specific and includes the ACS applications available to the caller.  Each face of the tri-fold document could feature a different ACS option, emphasizing the electronic options.  Most importantly, stress the user-friendliness of the Forms 433-A “Collection Information Statement for Wage Earners and Self-Employed Individuals,” 433-F “Collection Information Statement,” and 433-B “Collection Information Statement for Business” on IRS.gov, and the time that pre-completion of these forms could save the caller.
Page Last Reviewed or Updated: 06-Jan-2014