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IRS Reform---Rossotti's in the Right Direction

by Norrisa Tworkowski, Internal Revenue Agent

Reacting to widespread criticism of the Internal Revenue Service as being too heavy-handed, the new IRS Commissioner Charles O. Rossotti pledged to the Senate that he would improve the agency's service to taxpayers. The IRS Restructuring and Reform Act of 1998 (RRA '98), signed by the President on July 22nd of the same year, puts into law the Commissioner's Concept for Modernizing the IRS. The Act also affects a wide range of IRS activities. According to Commissioner Rossotti, the Concept for Modernizing the Internal Revenue Service is much more than changing the organization structure; it is a complete change in how the IRS does business. He stated to Congress that, "We must shift our focus from our own internal operations and think about our job from the taxpayer's point of view." Now, almost one year since taking office, both taxpayers and employees welcome Rossotti's Cambrian explosion of new changes toward modernization.

Taxpayer Changes
For most taxpayers, the biggest changes to date are the expansion of IRS telephone hours and office hours to answer taxpayers' inquiries or to accept orders for forms and publications. Many taxpayers also found it easier to file taxes over the telephone or by computer. District offices offered problem-solving days, usually on Saturdays, in which taxpayers worked face-to-face with IRS employees. As part of the Modernizing Concept, "service" to taxpayers is Rossotti's main goal.

For the first time this year, IRS help lines were open for the full 24 hours preceding the final filing deadline, April 15th. In 1999, they plan to be open 24 hours a day, seven days a week, all year long! This year, 40 million more callers heard a human voice (not a busy signal) when they called an IRS help line. Nearly 25 million taxpayers took advantage of new high-tech filing options---that's a 25 percent increase from the previous year. The IRS web page had nearly half a billion hits this year. All this meant quicker refunds, less paperwork, and fewer hassles for American taxpayers.

Employee Changes
For employees, the major changes so far have been open communication and organizational changes at the executive level. Some of the chains in the bureaucratic line have been broken---a refreshing change. Rossotti frequently filters down messages to employees via telephone voice-mail, and he even welcomes questions and concerns. Employees also have access to Rossotti through various means of communication, including e-mail and facsimile---and yes, he responds!

Penalties For Misconduct

One section of RRA '98 establishes offenses for which IRS employees can be terminated upon determination by an administrative or judicial review. Commissioner Rossotti stated that the offenses established in the Act are serious offenses, but they are not different from actions currently defined as misconduct. The IRS now has, and will continue to have, processes that allow employees accused of misconduct to participate in any proceeding; whether it is administrative or judicial, this proceeding can determine whether an offense was committed and what the facts of the situation are. While RRA '98 does not create new offenses, it does create serious penalties for people who are found to have committed these offenses. The IRS is developing procedures for administering this section of the Act.

Covered offenses include assault, harassment, and other forms of mistreatment of taxpayers or other IRS employees--- plus ethics violations such as making false statements under oath, destroying documents to conceal errors, and failure by employees to meet certain federal tax obligations.
Taxpayer Protection

RRA '98 also expands taxpayer rights in several areas.

  • The burden of proof will shift to IRS in certain court proceedings.
  • In certain cases, taxpayers may be awarded damages and fees, and get liens released.
  • Penalties will be eased when the IRS exceeds specified time limits between when a return is filed and when the taxpayer is notified of a tax liability.
  • Interest will be eliminated in certain cases involving federally declared disaster areas.
  • There are new rules for collection actions by levy.
  • Innocent spouse relief provisions have been strengthened.
  • In certain situations, taxpayer-requested installment agreements must be accepted.
  • Taxpayers will get annual status reports of their installment agreements.

Concept For Modernizing The IRS
Some major issues under the modernizing concept include:
1. A New Mission---based on helping people comply with tax laws and ensuring fairness of compliance. Already two versions of the new Mission Statement have been drafted. Taxpayers were given the opportunity to submit comments to the Commissioner. The final version is still pending.
2. Goals---Service to each taxpayer.
Service to all taxpayers.
Productivity through a quality work

Taxpayers have reaped the benefits of the two principal hallmarks of this year's very successful tax filing season: increases in electronic activity and improvements in customer service.
Electronic filing of tax returns, by computer and by telephone, surpassed IRS projections, increasing by more than 28 percent to 24.2 million returns as of April 17th. The IRS web site had more than 340 million hits from taxpayers seeking information, forms, or publications (almost triple last year's filing season activity). IRS TaxFax sent more than 750,000 faxes, an increase of more than 30 percent. The IRS opened its telephone help lines 96 hours a week, resulting in 17 million fewer busy signals. More than 150 local IRS offices offered walk-in assistance on six Saturdays. Shortly after the filing season, April 17th, the IRS received more than 100 million tax returns and processed more than $84 billion in refunds, with nearly $32 billion of that amount deposited directly to taxpayers' bank accounts.

Citizen Advocacy Panels
One way the IRS is focusing its thinking on the needs of taxpayers is by forming Citizen Advocacy Panels (CAPs). The newly formed CAP in the South Florida District and the future CAPs in the Brooklyn, Midwest, and Pacific-Northwest Districts will identify problems, make recommendations for improving IRS systems and procedures, monitor progress towards improvement, and refer taxpayers to the appropriate IRS office for assistance in resolving their problems. These activities will help look at issues from the taxpayer's perspective.

Future Changes
In creating the new IRS, Commissioner Rossotti compared the effort to rebuilding a well-built yet old house, while still living there with a large family. He stated that the first concern in rebuilding a house is to be sure that it has a solid foundation. The foundation for the new IRS will be the three goals: service to each taxpayer, service to all taxpayers, and productivity through a quality work environment. The second concern in rebuilding a house is to decide on the right floor plan to accommodate new family needs. The new organization structure is like the floor plan for the new house. This new house will be organized into four operating divisions. Each will be charged with end-to-end responsibility for serving a particular group of taxpayers with similar needs:

  • Wage & Investment Operating Division (W&I)
  • Small Business/Self-Employed/Supplemental Income Operating Division (SB/SE/SI)
  • Middle Market/Large Corporate Operating Division (MM/LC)
  • Tax Exempt Operating Division

According to Rossotti, the new IRS organization will be created in three phases. In Phase I, we identified the major components of the new organization. In Phase II, we are starting to develop detailed blueprints of our new structure. In Phase III, we will implement the new organization.

Commissioner Rossotti is a seasoned, private-sector CEO who plans to reshape the IRS. Under his leadership, accounting students may want to consider possible future employment with an agency whose efforts promises to live up to its last name---Service.

Norrisa Tworkowski is an internal revenue agent with the Internal Revenue Service, South Florida District. She is also a doctoral candidate at Nova Southeastern University in Ft. Lauderdale, Florida.

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