The Commission held three field hearings outside Washington, D.C. in the following cities:
· Cincinnati: March 21, 1997
· Omaha: April 4, 1997
· Des Moines: May 12, 1997
The turnout at the field hearings was high. Although held during the workday, over 100 people of all ages and backgrounds attended each hearing to listen or participate. (A list of speakers and their affiliations is attached.) The speakers included ordinary taxpayers, accountants, enrolled agents, current and former IRS employees, and tax return preparers. Although focusing on different issues, most expressed unhappiness with either the current tax system or the way it is being administered. Many of the same concerns were raised at all of the field hearings.
Tax complexity. There was virtually unanimous agreement that the tax code is too complex and needs to be simplified. There was broad agreement that many of the things that the IRS is blamed for can be laid at the feet of Congress. Not a great deal of thought is given to the administration of provisions that are being considered by Congress or its interplay with other provisions of the tax code. The assumption is that once a provision is enacted, it can be made to work by the IRS, and that any failings in this area are the fault or problem of the IRS.
Administration of the tax system. There was widespread sentiment that the quality of interactions with the IRS has deteriorated. Although many blame the recent IRS budget cuts, it is unclear that funding is the sole answer.
Many taxpayers and practitioners complained that notices are either indecipherable or not very helpful in explaining the issue being raised.
The mechanism for taxpayers to respond to IRS notices is not working. Many taxpayers have difficulty contacting the IRS—either by telephone or through face to face contacts. When contact occurs, the results are often unsatisfactory. Many times the IRS cannot adequately explain the problem. This is a result of an inability to access relevant data through IRS computers or a lack of understanding of the issue. Often, it is difficult to reach the right IRS person. Depending on the nature of the action, the taxpayer must either deal with a service center, a district office, or some other location. There is no centralized or one-stop service point.
When taxpayers are required to make multiple contacts, the process often starts all over again. It is nearly impossible to reach the same IRS person twice. Often, the second person is unaware of the problem raised and has no indication what action, if any, has been taken to deal with the problem. This is very frustrating for taxpayers. Often, practitioners advise that if small dollar amounts are at stake, the taxpayer should just pay the money demanded even if the IRS is wrong. This does not encourage respect for the IRS or the tax system.
Even when the taxpayer responds timely to an IRS notice—through a letter or a telephone contact—there is no certainty that the IRS is aware of the contact. Often, a second notice or other action is taken by the IRS independent of the taxpayer action. Unlike the private sector and other government agencies, there is no one caseworker assigned to most IRS notices. When names and telephone numbers of IRS personnel are given, the person often cannot be reached. This further frustrates and angers taxpayers.
Many taxpayers resent the serious penalties for failing to respond to an IRS notice promptly and correctly while the IRS often takes its time in responding to taxpayers. Usually, there is no certainty that the IRS has received and acted on a taxpayer communication.
Taxpayer service. Taxpayers testified that the quality of service being provided by the IRS has been decreasing noticeably over the past few years. As discussed above, taxpayers using the telephone often have trouble getting through. The number of IRS offices and the available hours are decreasing. As part of its plan to reorganize operations, the IRS has been closing or reducing the functions of many local offices. In places like Omaha and Des Moines this means either no access or a long drive to the nearest IRS office.
A taxpayer who needs an IRS form or publication often has to resort to the IRS toll-free number to order such items. Even if a taxpayer gets through, the response time is slow. A number of practitioners and taxpayers complain that it takes four to six weeks to get the forms.
Training and quality. There is almost universal agreement that the IRS has cut back significantly on training. This has continued to increase the knowledge gap between practitioners and IRS employees. In addition to providing incomplete or incorrect information to taxpayers, many practitioners resent having to provide training to an auditor who is examining their client’s return. It is also unclear that the IRS is providing its examiners with the tools needed to research tax questions and keep up with changes.
IRS personnel. Although many witnesses complemented IRS personnel on doing a difficult job, a significant number were concerned that the IRS does not properly oversee its personnel. Some witnesses testified that they had encountered rude, abusive, or unhelpful IRS personnel, but had no sense that management was willing to do anything about it. Some IRS employees noted that supervisors are unwilling to take corrective action because of the difficulty of firing poor performers. Overall, taxpayers believe there is no striving for excellence. Trust and respect of the IRS is decreasing. Although many view the IRS as doing a difficult job, a number of individuals were concerned that the IRS retaliates against those who criticize it.
Electronic filing. Although the IRS is encouraging practitioners to file electronically, it has not done enough to increase its appeal. The two most common complaints include the need to file paper signature documents (Form 8453), and that some forms cannot be filed electronically—such as the AMT and fuels credit tax forms.
Earned income tax credit. From an administration standpoint, everybody who mentioned the earned income tax credit (EITC) raised concerns, including: 1) it is a social welfare program that the IRS is not equipped to administer; 2) the large number of persons with questionable eligibility applying for it; 3) the frustration of practitioners that certain individuals are improperly taking it; 4) the difficulty in applying it; and 5) resentment that practitioners are being asked to police the credit. The Commission did not hear from any recipients of EITC, however.
Cycle time. The time it takes to interact with the IRS to resolve a problem is taking longer and longer, according to practitioners. Some of this is due to the reorganization and some to the slowness of the IRS. The bottom line is that it costs more to deal with the IRS. Although the IRS speaks of doing a quality job, there is no sense that this is taken seriously.
IRS management. Although the IRS describes itself as a financial services organization, the feedback from the hearing indicates the IRS does not have much appreciation for modern business management practices, customer service, or financial services. One former executive noted that the IRS sometimes takes actions to solve a problem before it has the facts on what the problem actually is and what the solution should be. Moreover, some IRS employees believe that their input is routinely ignored by Washington. Seeking input is a formality. Practitioners also fault the IRS for ignoring their input.
Cincinnati Hearing, March 21, 1997
Richard E. Ayres Accountant
Peter Beck CPA
Mark Berliant Attorney
Marlene Bunten IRS Problem Resolution
Felicia Calvert Private Citizen
Jeff Dickstein Lawyer
Michael Enriquez Tax Consultant
Linda Gill CPA
Steve Herrington IRS Union Representative
Martin Horwitz Attorney
Roger Hoyer Private Citizen
Mary Malotke Small Business Owner
George Quirk Retired
Patricia Stone Former IRS Employee
Diana Thompson Enrolled Agent
Marianne Wilson Small Business Owner
Omaha Hearing, April 4, 1997
Elayne Goldstein IRS Problem Resolution
Edward Jacksha Retired Businessman
Dean Jungers CPA
Howard Kaplan Attorney
Janice Mumm CPA
Gary Radil Attorney
Charlotte Roscoe IRS Union Representative
Ray Scholl Tax Practitioner
Joan Shuminski Enrolled Agent
Todd Timm IRS Employee
Samuel Walker College Professor
Bob Wolfson Businessman
Des Moines Hearing, May 12, 1997
Diana Baberol IRS Problem Resolution
Bill Brown Lawyer
Judy DeSantis Drug Enforcement Agent
Curtis Jenkins Retired IRS District Director
Burns Mossman Attorney
Rick Oelerich Enrolled Agent
Merle Richardson Retired Farmer
Richard A. Rue Businessman
Randy Schabacker National Treasury Employees Union
Jeffery Strawhacker CPA
Judy Vande Zandschulp Enrolled Agent
Cliff Wilson Small Business Owner