WASHINGTON — Doing business with the Internal Revenue Service of the future will feel a lot like doing business with an online retailer or your bank. You'll file your taxes online and be notified through a secure email account that the IRS got them. Questions, payments – even audits – will be communicated to you electronically. No more letters in the mail.
The IRS says its jump to widespread automation sometime in the next five years will be a necessary act of catching up to the modern world. But a new report issued Wednesday by the national advocate for taxpayers alleges that the IRS of the future will more or less wipe out taxpayers' interaction with a human being, either on the phone or in person.
"Based on our internal discussions with IRS officials, [we] have been left with the distinct impression that the IRS's ultimate goal is 'to get out of the business of talking with taxpayers,' " National Taxpayer Advocate Nina Olson wrote in her annual report to Congress.
"The widespread expectation is that traditional taxpayer services – telephone assistance and face-to-face assistance – will be scaled back dramatically."
Olson, who is a congressionally appointed watchdog of the IRS, says the evolving IRS plan has "many positive components" that would speed information to taxpayers and handle many of their interactions with the agency.
But she warned that the push toward relying on technology and tax preparers to answer questions threatens to create a "pay to play" system where the only taxpayers who will get personal service are those who can afford to pay for it.
The report cites the agency's "future state" plan to use online accounts for the 150 million individual taxpayers and 11 million businesses seeking help and information as its number one "most serious problem for taxpayers" this year. Olson calls this a secret plan that IRS officials have not, and should, release to the public. And she says the public should, but has not, been consulted on its development.
Olson says the plan for online accounts will put taxpayers at a huge disadvantage if they are poor and don't have access to the Internet, feel uncomfortable discussing sensitive financial matters online or need to resolve issues that are not "cookie cutter" questions that can be resolved by talking to a person (or computer) on line.
The plan "says little about reductions in core taxpayer services," Olson writes. "Many taxpayers will find it much harder to resolve their problems and will have to pay third parties to assist them." The result, she says, will be "frustration and alienation" that may lead over time to more tax cheats.
More than 9 million filers had delays with their refunds or received IRS notices proposing to adjust tax payments last year, the report said, underscoring the need for taxpayers to talk to employees.
The IRS started large-scale planning for the future 18 months ago, dubbing its effort a "future state" plan for how the agency will do business by 2019. The plan has already cost millions of dollars, Olson writes.
It came largely out of necessity after five years of congressional budget cuts the IRS acknowledges have caused a significant erosion of taxpayer services. (These were the subject of Olson's report to Congress last year).
In the last filing season, for example, taxpayers found themselves on hold for long periods and agents were unable to provide answers to anything but "basic" tax-law questions. After the filing season, they stopped answering tax-law questions at all. And the agency halted its longstanding practice of preparing returns for elderly, disabled and low-income taxpayers.
In an interview, IRS Commissioner John Koskinen called the move to online interactions an obvious effort to "catch up to get into the early 21st century" following the agency's move to electronic filing and other services online.
"Our surveys show that this is what taxpayers want," he said. "Our problem today is that we have a whole lot of people who would rather not see us at all, who want to go online, transact their business and move on."
The more taxpayers who do this, the more staff will be freed up to interact directly with those who need help, he said.
"There's nothing in the 'future state' that says we're not going to have people answer the phones or have someone see an IRS agent in person," he said and claimed that Olson has "misconceived what's happening."
Koskinen said he has spoken broadly about the plan publicly and testified before Congress about the agency's need to do business differently.
Some taxpayers could get online accounts later this year in a pilot program, he said, using some of the 40 million emails the IRS has on file.
But Olson's report says that gradual automation actually has resulted in increased demand for person-to-person service. Taxpayers made 5.6 million visits to IRS walk-in centers in fiscal 2015 and more than 100 million calls to agents.