In a rush to achieve political wins, the agency has neglected taxpayers.
In a rush to achieve political wins, the agency has neglected taxpayers.
T he long-awaited national taxpayer advocate’s midyear report on the 2024 tax-filing season, released late last month, sheds light on some positive aspects of the Internal Revenue Service. It also shows how the agency is routinely failing taxpayers. As the decision by the IRS to roll out its Direct File program pilot demonstrates, the agency is underperforming its basic functions in order to roll out costly and unnecessary programs that exceed its scope.
The taxpayer advocate’s report begins by highlighting how the agency has finally returned to pre-pandemic processing times. Staffing and technological constraints due to pandemic-era shocks had previously impeded the agency’s ability to respond to taxpayers. It also notes that the agency’s account-management phone line recorded a remarkably high level of service.
However, as the report illustrates, this notable improvement in performance and service levels was likely the product of the agency’s reallocating resources and personnel. Disfavored in this rearrangement were the fraud, identity-theft, and automated-collection-system lines. The reshuffling was so drastic that IRS representatives on the account-management line spent about 25 percent of their time waiting for calls, while the Taxpayer Protection Program line had a service level — the portion of calls that were picked up by a representative — of 17 percent, an unacceptably low rate for a line dedicated to aid taxpayers fend off refund fraud. The Identity Theft Victim Assistance line is also under significant strain, with average wait times for case resolution as long as 675 days. In other words, victims of identity theft are left waiting for almost two years before they get the refunds they are entitled to.
The IRS’s excessive focus on account-management phone lines is especially egregious considering the other obstacles the agency faces. It has been known for years that IRS information-technology systems are outdated, an issue that resurfaced in the report. As the taxpayer advocate notes, the time spent by representatives waiting for calls on the account-management line was egregiously wasteful. IT limitations, among other factors, prevented these representatives from working on anything else while they waited for calls to come in. Taxpayers therefore paid individuals to spend a quarter of their workdays idling.
Prioritizing the account-management line is not an inherently bad decision. The improved performance ought to be applauded. As the taxpayer advocate insists throughout the report, some rearrangement and triage was necessary. Taking this into account, however, the decision by the IRS to develop and launch the Direct File program is perplexing. Instead of committing up to $249 million annually to a redundant program, the IRS could have updated its obsolete IT systems or hired the additional representatives that it so clearly needed.
If the agency wants to help low-income taxpayers file their taxes for free, it should do a better job of promoting the Free File Alliance program. According to the taxpayer advocate’s report, the program achieved a high satisfaction score among those who used it. A 2023 survey indicated that 98 percent of users intended to use it again. However, with only 2.9 million filers annually, the program remains underused. The agency clearly recognizes the value of the program as it recently decided to extend it until 2029, so it seems that bolstering Free File would be a better use of taxpayer dollars. Building a program like Direct File from scratch likely entails high maintenance and update costs — along with a whole host of unforeseen challenges.
Ultimately, the report highlights the prioritization crisis at the IRS. In a rush to achieve political wins, like the launch of Direct File or a high level of service on the account-management line, the IRS has neglected taxpayers. Those facing fraudulent claims to their refunds, or delayed processing of valuable credits such as the employee-retention credit, are left helpless. The agency should reevaluate its priorities and ensure that it is fulfilling its core responsibilities. There is no need for the IRS to venture any farther from its statutory mission.