IRS looking at a more digital future

By Bankrate

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

IRS, taxes

The Internal Revenue Service is looking to move its services solidly into the 21st century.

But an IRS executive says that the agency’s modernization aims, dubbed IRS Future State, will not overlook those taxpayers who aren’t comfortable with the idea of a totally digital tax system.

Donna Hansberry, deputy commissioner of the IRS’ Tax Exempt and Government Entities Division, gave a gathering of tax professionals at the agency’s tax forum just outside of Washington, D.C., an overview Aug. 23 of the IRS Future State plans.

Expanding IRS interaction options

During a seminar on the agency’s future service plans, Hansberry said that the goal is to make taxpayer service and compliance interactions timely, easier and more accurate.

Does that mean a computer will be required of every taxpayer? Not necessarily, she says.

“Our goal is not to contract options, but rather expand them,” says Hansberry. “Digital options are meant to supplement, not substitute for existing services.”

During her keynote address later to the hundreds of tax preparers at the 3-day continuing education event, Hansberry reiterated that the IRS is seeking feedback from many sources to help shape how the agency will do its job, including dealing with taxpayers, in the coming years.

Future State plans, she says, mean the IRS will enhance and expand services for all taxpayers no matter what their circumstances.

Some want to interact digitally, as they do in other parts of their lives such as banking and shopping. But some taxpayers will always want some personal contact with the IRS, she says.

And the preferences aren’t strictly generational, she says. “The point is there are many different needs and ways to interact.”

Hansberry did acknowledge, however, that there will be digital shifts, part of a natural outgrowth of IRS modernization already underway. She cited the agency’s online refund tracking system, as well as its mobile app IRS2Go. “They are indicative of what can be achieved,” she says.

Concerns about digital emphasis

Not everyone, however, is as enthusiastic about such changes. Some fear proposed online enhancements are a move by the IRS to do away with most of its personal services and staff.

This summer, National Taxpayer Advocate Nina E. Olson is holding her own public meetings across the United States. At those events, as well as in correspondence with Olson’s office, some have expressed concerns that a transfer to more digital services will cause problems for some taxpayers.

Olson herself expressed similar worries in her 2015 report to Congress, saying that an IRS Future State plan that reduces personal service could “leave taxpayer needs unmet and force millions of taxpayers to pay for help, and generate additional taxpayer frustration with the IRS.”

Hansberry acknowledged the concerns, but assured the tax preparers that is not the agency’s goal.

There is no secret plan for the IRS to do away with staff, Hansberry says, adding that her division is working with the Taxpayer Advocate to formulate a well-rounded future IRS.

“Even with more web services, taxpayers will still be able to call 1-800-829-1040. That’s not going away,” says Hansberry.

Digital IRS should improve compliance

But a more modern system and a more robust online experience will help improve tax compliance, says Hansberry.

Increased electronic transmission of information between taxpayers, their representatives and the IRS should help resolve time-consuming and burdensome interactions by phone and mail. That means the agency can find issues with tax returns when they are filed and work with taxpayers to correct them sooner, not years later, after penalties and interest have accrued.

“Wouldn’t it be better to have the IRS into the 21st century so you can get to resolution quicker?” Hansberry asks.

Do you agree with Hansberry? Do you think the IRS’ Future State should be one of increased digital interaction with taxpayers? Or do you prefer a more hands-on, personal tax system?

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

IRS urged to go more digital

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!



The technical glitches at the New York Stock Exchange and United Airlines, not to mention the recent hacking of the Internal Revenue Service’s “Get Transcript” online service, might tend to make people back off of technological solutions.

One tax advisory panel, however, thinks more online IRS access is just what taxpayers need.

Taxpayers increasingly prefer digital self-service to phone and paper methods, according to the Electronic Tax Administration Advisory Committee, or ETAAC. This all-volunteer group serves as the focal point for, as its name indicates, electronic tax administration issues.

“The IRS needs to transform its taxpayer service and compliance capabilities for efficiency through digital tools,” ETAAC members said in their 2015 annual report to Congress. “While the IRS is making progress to plan for the development of digital tools, the IRS needs to accelerate its strategy to overcome service shortfalls.”

Comprehensive and easy-to-use IRS digital service tools, says ETAAC, will reduce the taxpayer burden, increase compliance and improve taxpayer service.

TIGTA agrees, with caveats

Meanwhile, the Treasury Inspector General for Tax Administration, or TIGTA, agrees that technology improvements are crucial to future tax collection success and taxpayer satisfaction. The IRS watchdog office warns, however, that any expanded online options must be contingent on key technology and security upgrades.

“As taxpayers continue to be provided with the electronic products and services they desire to interact and communicate with the IRS, the risk associated with unauthorized access to tax accounts will continue to grow,” said TIGTA’s J. Russell George in a statement accompanying his office’s recent look into IRS electronic services.

“As such, completion of those technology projects that improve online service while mitigating the risks must be a priority,” George noted.

Continuing IRS money troubles

The recommendations of the two panels are no surprise to the IRS. The agency has increasingly turned to digital and online services in recent years, primarily to fill gaps in personal customer service that the agency says are the result of insufficient funding. The revenue shortage also affects digital solutions.

“Any proposed strategy must consider our limited funding and finite resources for high-priority information technology projects and other investments across the agency,” the IRS said in a statement in response to the TIGTA report.

Both TIGTA and ETAAC agree that money is a problem.

“The IRS also needs to closely collaborate with Congress to assess its investment decisions and allocate its resources appropriately,” notes the ETAAC report. “This will ensure that Congress invests in key areas necessary for long-term improvements to taxpayer service and compliance.”

Similarly, TIGTA’s audit found that additional IRS funding needs to be committed to fully complete the agency’s key information technology projects.

Congressional intransigence

But getting the dollars from Capitol Hill is easier said than done, especially since the IRS has remained in congressional crosshairs for the past few years. The Republican-led House and Senate have slashed the IRS’ budget as punishment for the agency’s handling of the Tea Party 501(c)(4) nonprofit status controversy.

Will Congress eventually loosen the purse strings so that the IRS can keep pace with the digital tax solutions that taxpayers demand? Under normal (as far as that word can be used in connection with Congress) circumstances, I’d say yes.

But with the IRS an easy target and the 2016 election year on the horizon, look for federal lawmakers to continue to punish the IRS financially in order to make political points.

Unless we taxpayers can persuade our representatives and senators to change their minds, we’ll just have to hope the IRS can cobble together the safe and useful digital solutions we want and need.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.