In the not-too-distant future, contacting the Internal Revenue Service may feel more like calling the customer service people at a bank or credit-card company than calling an intimidating bureaucracy.
Taxpayers could expect to: get through on the telephone; talk to an IRS representative who can answer questions correctly; get account information and resolve many problems on the phone instead of submitting to the nerve-wracking ritual of writing responses to computergenerated letters.
These are among the main goals of reformers pushing legislation through Congress to restructure the IRS. For taxpayers, the changes would mean new rights, more information, greater ease of electronic filing, and above all, a promise to change the IRS mind-set.
The idea is to remake a secretive law-enforcement culture that tends to view every taxpayer as a potential cheat into a problem-solving, customer-oriented enterprise. That’s a tall order - and it won’t happen overnight.
Revamping the IRS should not be confused with tax reform. It won’t change the underlying complexity of the federal tax code, which President Clinton and the GOP Congress have added to.
Finally, there always will be limits to how friendly tax collectors can get.
“It won’t be the same as calling Nordstrom’s to find out where your order is,” said Annette Nellen, a business professor at San Jose State University in California, and a former IRS revenue agent. “The IRS is a law-enforcement agency. But it can become a more user-friendly organization.”
Recent Senate hearings into IRS abuses portrayed a culture of disdain and hostility toward taxpayers. But a yearlong investigation by a different congressional group concluded that the main problem is mismanagement. That group - the National Commission on Restructuring the IRS - provided a bipartisan blueprint for the current reform bill.
“Abuse of taxpayers is not a widespread problem, but incompetence is,” said Rep. Rob Portman, R-Ohio, co-chairman chairman of the commission. “Every one of those cases (presented in the hearings) began with an administrative foul-up and an inability to resolve the problem.”
A change in attitude already is in the air. Charles Rossotti, Clinton’s nominee to be the new IRS commissioner, is a computer consultant, not a tax lawyer.
“I could hardly have imagined that I would be the nominee for this office because I am a businessman, not a tax specialist,” Rossotti told the Senate Finance Committee at his confirmation hearing Thursday. “Achieving the goal of first-rate service is going to require a truly major shift in focus at the IRS.”
Portman said taxpayers should begin to notice some changes soon after the legislation is passed. These include new rights and greater responsiveness from IRS officials.
The House could vote on the reform plan before Thanksgiving. The Senate will likely wait until next year to act.
Other changes could take five years or more. For the IRS to be able to resolve problems over the phone, it will have to modernize its extensive computer systems.
Key proposals include:
Taxpayer rights. The House bill would create 28 new taxpayer “rights.” Some are extremely technical, understandable only to tax experts. Broadly, they translate into greater leniency and more disclosure for taxpayers,
For example, spouses unaware of or not responsible for errors on joint returns would find it easier to avoid IRS collection actions. This would help many divorced women being pursued for errors their ex-husbands made.
Also, mentally disabled people would have more time to correct errors that could increase their tax refunds. And people who have money deducted from their paychecks for back taxes will find it easier to request a suspension of these IRS levies in times of financial hardship.
When the IRS is seeking back taxes in civil court, the burden of proving the accuracy of financial information would shift from the taxpayer to the agency. Some tax lawyers believe this provision could backfire and result in a more intrusive IRS. To preserve its ability to pursue cases, the agency could require individuals and businesses to report their finances in greater detail. However, congressional officials say that’s unlikely.
As for disclosure, the legislation would require the IRS to publish a general description of its auditing guidelines. Only a small proportion of tax returns - 1.4 percent - are audited.
Responsiveness. IRS employees would be rated on how well they respond to taxpayers. A taxpayer advocate’s office within IRS would gain more authority and independence to act as a troubleshooter. The IRS would be overseen by a board of directors dominated by people from business, universities and other institutions outside government.
Gary Schatsky, a New York City lawyer and financial planner who represents people with tax problems, said he’s already begun to notice a change in how IRS employees handle taxpayer requests for leniency.
“When I asked, ‘Why are you being so helpful?’ they said, ‘Well, this is the new, friendly IRS,” recounted Schatsky.
Nancy Anderson, a training director for H & R Block in Kansas City, Mo., said she believes IRS employees can and will provide better service if their bosses are serious about it. “If from the top down, and each step along the way, client service became the goal, you would probably get a lot of improvement,” she said.
Electronic filing. Tax returns filed by computer cost far less to process and reduce the chance of errors. Yet only about 10 percent of returns are filed electronically. The goal is to raise that to 80 percent in 10 years.
Big obstacles would have to be removed. The IRS may have to waive a requirement for filing signatures, or find a way to electronically receive signatures.
It may also take some doing to convince more people to file by computer. Taxpayers harbor a lingering fear that filing by computer increases chances of being audited.
Computer modernization. The IRS has bungled a costly upgrade of its computer system, which has various networks that can’t easily communicate with each other. And like other government agencies, it faces a major challenge with the approach of the year 2000. Currently, the computers only recognize two-digit numbers for years and can’t tell the difference between 2001 and 1901.
Portman said the goal is to have a computer system that would allow an IRS representative to call up a taxpayer’s file and promptly resolve routine questions about payments, notices and other matters.