IRS Kicks Off Tax Season

The Internal Revenue Service launched the tax-filing season Tuesday, promising better taxpayer and practitioner service, although a labor union official representing IRS employees warned there could still be problems.

After five straight years of budget cuts, Congress increased the IRS’s fiscal year (FY) 2016 budget by $290 million over last year’s level, specifying that the extra funding must be used to improve customer service, crack down on identity theft and increase cybersecurity. But according to IRS Commissioner John Koskinen, the agency had asked for $700 million for those three programs for fiscal year 2016.

During a conference call with reporters last week, Koskinen said the funding boost should help the IRS reduce wait times (see IRS Expects to Improve Taxpayer Service This Tax Season). “The good news is that the additional funding provided by the Congress will allow us to improve service to taxpayers,” he said. “We will be able to hire up to 1,000 additional customer service representatives to answer our toll-free help lines this filing season. With this and other resources we are applying in this area, we expect to improve on our phone service levels from last year. But I do want to caution that, even with these additional resources, we do expect our toll-free taxpayer help lines to be extremely busy again this filing season. There will be wait times before people can get through, since the additional funding is still less than needed.”

A report released last Thursday by the Government Accountability Office found the IRS provided the lowest level of telephone service in fiscal year 2015 compared to prior years. Only 38 percent of callers who wanted to speak with an IRS assistor were able to reach one. The lower level of service occurred despite lower demand from callers seeking live assistance, which has fallen by 6 percent since 2010 to about 51 million callers in 2015. Over the same period, average wait times have almost tripled to over 30 minutes.

Koskinen said he hopes to improve the rate of callers who get through to the IRS this tax season to 60 percent and to reduce wait times to under 20 minutes. He also expects to make the dedicated phone line for tax practitioners more functional. “I’m pretty confident our Practitioner Priority Line will actually work this year,” he said.

The National Treasury Employees Union said the $290 million funding boost for the IRS represents a good first step, but warned that there could still be problems this tax season. “The IRS still has a long way to go to rebuild its workforce so it can provide taxpayers with the level of customer service they need and deserve,” said NTEU National President Tony Reardon. “The IRS was devastated by the loss of 18,000 employees and budget cuts totaling $1.2 billion between 2010 and 2015. While the extra $290 million will help, the truth is the IRS won’t be able to hire as many employees as it needs to do a thorough and efficient job of helping taxpayers understand and comply with the federal tax code.”

In a recent report, National Taxpayer Advocate Nina Olson blamed severe budget cuts for the IRS’s abysmal customer service record during the 2015 filing season (see Taxpayer Advocate Concerned about IRS Plans for 'Pay to Play' Taxpayer Service). Olson characterized the combination of reductions in personal service and the IRS’s plans to direct taxpayers with questions to preparers and other third parties (along with the expansion of user fees) as creating a “pay to play” tax system, where only taxpayers who can afford to pay for tax advice will receive personal service, while others will be left struggling for themselves.

Besides the long wait times on the phone and pervasive “courtesy disconnects,” in which callers were asked to try again later, physical lines also were longer than ever at skeletally staffed Taxpayer Assistance Centers last year.

“Taxpayers can expect some improvement in 2016, but they should still brace themselves for dropped calls, extended hold times and long lines,” said Reardon.

Security Improvements
The IRS has also boosted security this tax season in an effort to combat identity theft, partnering with state tax authorities, tax software vendors and major tax preparation chains. More than 20 shared data elements will help the software industry and the IRS stop fraudulent returns at the door, the IRS said in an email Tuesday.

For example, the IRS will receive information from software providers about the duration of time it took to create the return. This will help identify the computer-generated tax returns that are fraudulent and filed in bulk.

The IRS, states and tax industry will also share details of any fraudulent schemes they see on a frequent basis so everyone will have the same information and adjust accordingly to provide increased protection to taxpayers.

The IRS said the most publicly visible aspect of these partnership efforts will be for those taxpayers who prepare their own tax returns using tax software or online products. There will be new procedures that will help prevent fraudsters from taking over the accounts of taxpayers. These include: 

• New password standards to access tax software will require a minimum of 8 characters with upper case, lower case, alpha, numerical and special characters.

• A new timed lockout feature and limited unsuccessful log-in attempts.

• The addition of three security questions.

There will also be “out-of-band verification” for email addresses, which is sending an email or text to the customer with a PIN—a common practice used throughout the financial sector.