|Eight ways to improve IRS e-Services
Rather than retire useful features, the IRS should add tools for practitioners.
July 11, 2013
Many tax practitioners were surprised June 7 when the IRS announced that it would retire the disclosure authorization (DA) and electronic account resolution (EAR) tools from its e-Services suite of products. To many practitioners, the announcement appeared out of step with previous IRS communications encouraging practitioners to use e-Services—and even mandating that practitioners e-file their clients’ returns. This growing momentum to implement electronic solutions stands in stark contrast to the IRS’s decision to retire DA and EAR.
In an age of increased automation and decreased budgets, automated customer service tools have become the norm. Financial institutions provide online tools that allow clients to access their accounts and make transactions. E-commerce companies provide service via online chat, web form communication, and email updates that track activity and orders. Electronic tools allow these companies to quantify customer service issues and route only serious matters to more expensive call centers.
IRS cites low utilization
In its statement June 7, the IRS cited low usage of DA and EAR products as the reason for retiring them. However, it is clear that practitioner demand for the functions of these products is high.
For example, in 2010, the Treasury Inspector General for Tax Administration (TIGTA) noted that the IRS sent approximately 200 million notices to taxpayers and their representatives each year (TIGTA Rep’t 2010-40-055, page 1). To understand and address a notice, tax professionals must often file an authorization (such as Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization) to contact the IRS on behalf of their clients. Using e-Services, tax professionals can instantaneously file an authorization via DA and request clarification of the notice via EAR. EAR also allows practitioners to instantly inquire about client refunds, request account changes, establish installment agreements for clients to pay taxes owed, and submit other inquiries—all without long wait times or faxing authorizations during a call to the IRS.
The IRS suggested that, in place of using DA and EAR e-Services tools, tax practitioners call the IRS with account questions and deliver authorizations by mail or fax. Many practitioners are asking why the IRS is taking a step backward to less automation. Several facts, including an almost $1 billion IRS budget reduction and 7,000 fewer employees in the past few years, call into question the IRS’s long-term strategy of cutting back on tools for tax professionals to electronically interact with the IRS (IRS Oversight Board, Annual Report to Congress 2012).
As an alternative to discontinuing these two programs, the IRS should try to improve e-Services to better serve tax professionals and their clients. Here are eight ways the IRS could increase practitioners’ use of e-Services:
1. Provide examples of common practical uses of e-Services on IRS.gov
Education through illustrating practical uses would go a long way in helping tax professionals understand exactly how to use e-Services. The IRS could demonstrate common situations, such as requesting first-time penalty abatement or inquiring about a notice using EAR. By seeing practitioner-focused examples, more tax professionals would be able to visualize how their practices can benefit from the automated tools that e-Services offers.
2. Allow tax practitioners to withdraw disclosure authorization forms
The DA product currently helps practitioners avoid the 10-day delay in registering an authorization with the IRS when faxing or mailing the forms. Withdrawing authorizations, however, is still done manually. Many times, the IRS doesn’t process withdrawal requests, leaving authorizations erroneously in effect. Practitioners and taxpayers often remain unaware of active authorizations on file with the IRS.
Adding to the confusion is practitioners’ inability to obtain information on outstanding authorizations using e-Services. To determine whether the IRS correctly processed withdrawal requests, practitioners must send a Freedom of Information Act request to the IRS to receive information on outstanding authorizations. Automating authorization withdrawal would enable tax professionals to manage their authorizations entirely using IRS e-Services.
Practitioner Bill Kaiser of Mesa, Ariz., strongly supports the suggestion that the IRS improve DA functionality.
“The reality is that the DA process is so limited in scope that it simply does not meet the needs of large percentages of potential users,” Kaiser wrote in an email to me. “You can create a power of attorney online, but you cannot revoke or withdraw online. How does this make sense? Which action puts the taxpayer at the greatest risk?”
Kaiser also thinks the IRS is incorrect in its assumption about low practitioner demand for DA.
“It appears to me that the e-Services DA process is underutilized because it does not address the needs of the tax practitioner community it was intended to serve,” Kaiser wrote. “[T]he IRS should be soliciting comments from the tax professional community with an eye toward improving the online DA system.”
3. Provide the ability to obtain transcripts via Form 8821, especially for nonlicensed firm members
Currently, only Circular 230 practitioners (CPAs, enrolled agents, and attorneys) can use the Transcript Delivery System (TDS) to obtain client account transcripts (see the IRS’s Circular 230 FAQs for e-Services Access). Other tax professionals who want to use Form 8821 to access client information can’t use e-Services to do so, including many nonlicensed professionals who make up about 57% of current preparer tax identification number (PTIN) holders. Providing DA and TDS access to all PTIN holders who are registered and in good standing with the IRS would remove many phone requests to the IRS for client information.
4. Enable representatives to receive copies of client notices in a secure mailbox
Not only would this environmentally friendly option save paper, postage, and mail personnel resources, but it would also provide more timely notification of client issues to tax practitioners—which is especially important in responding when deadlines are tight.
5. Provide a client status dashboard
Currently, when there is an issue with a return or a client account, tax professionals can use EAR to ask specific questions or to inquire about the status of a client account. However, to quickly obtain information about a client’s status or assignment to an IRS business unit, practitioners often must call the IRS. Many times, calls are routed around to several IRS representatives before reaching the unit assigned to the client account.
Similar to online commercial package tracking, adding an e-Services taxpayer status dashboard would expedite the process for practitioners to determine taxpayer status and quickly contact the correct IRS function to address a client’s issue.
6. Provide the ability for practitioners to obtain business information statement transcripts
As the IRS expands its underreporter program to matching business information statements, businesses are finding it increasingly useful to match their returns against information statements on file with the IRS. Currently, the IRS provides income information statement transcripts (called wage and income transcripts) via e-Services only for individual taxpayer accounts.
If the IRS permitted access to business information statement transcripts via e-Services, practitioners would have another effective due-diligence tool to file more accurate returns.
7. Provide the ability to electronically submit CP 2000, Automated Underreporter Notices, and mail audit responses
In 2012, the IRS conducted almost 6 million CP 2000 inquiries and mail audits, often involving extensive documentation and correspondence by mail or fax (2012 IRS Databook, Tables 9a, 14). The IRS should allow tax professionals to upload responses and documentation to e-Services. The efficiencies would be tremendous for the IRS and tax professionals. The IRS could avoid imaging and routing responses to the appropriate personnel, and tax professionals could avoid compiling and faxing or mailing extensive documentation.
According to the Government Accountability Office, in 2012, the IRS received 21 million pieces of mail, 40% of which was not processed on time. This innovation could save back office services, increase efficiency in processing, and provide practitioners with the comfort of an online receipt confirming their timely response.
8. Add penalty abatement requests, including reasonable cause requests, as an EAR inquiry
With 38 million IRS penalties issued in 2012, tax professionals should be able to electronically request penalty abatement from the IRS. Currently, practitioners send abatement letters and hope the IRS processes the letters. Practitioners do not know whether the IRS has received and reviewed the request letter.
Taxpayer representatives can use e-Services to inquire about the status of the abatement request and ask for first-time abatement only when their client’s case is not in a compliance function, such as IRS Collection. Practitioners cannot electronically request reasonable-cause penalty abatement. Adding electronic penalty abatement requests to e-Services could streamline this often indefinite and manual process.
With 60% of taxpayers relying on a tax professional to file returns, the IRS should not take a step backward by retiring electronic tools. It should look at innovative ways to enable tax professionals to effectively interact with the IRS and better serve taxpayers.
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