Unintended consequences: Pushing low-end taxpayer-clients to tax professionals.
By Rick Telberg
Online accounts at the IRS are a good idea, but maybe not as good as the IRS would like to think – certainly not as good as a qualified tax preparer.
The Taxpayer Advocacy Service has long called for online accounts. In 2016 they became a reality. Unfortunately, for many, it has been a painful reality.
MORE TAX SEASON: Underfunded IRS Swamped with Problems | 2018 Tax Filing Season Begins Jan. 29 | 2018 Tax Season: The Race to Be Ready | The IRS Tip 10 List for Choosing a Tax Pro | New eBook: Maximizing Sec. 199A Deductions | Bowman Webinar: Inside the IRS Financial Analysis Handbook | Average Fees Set for 7% Increases
Browse more at CPA Trendlines’ taxtrendlines.com
The migration toward online assistance – ideally automated online assistance – is a product of the severe budget cuts the IRS has suffered. The Service can’t afford personnel to man the phones or keep Taxpayer Assistance Centers open.
But the budget cuts did not mandate a cut in the Taxpayer Bill of Rights. Taxpayers still have a legal right to quality service, confidentiality and a fair, just tax system.
The online accounts are helpful for
- retrieving details about balances and past payments,
- frequently asked questions about balances and how to dispute them,
- messages about impending filing and payment dates,
- snapshots of tax record data for the current year, and
- transcripts of past returns, income and other records.
But the accounts are useful only if taxpayers
- know about the accounts,
- have access to the internet,
- bother to open an account,
- can figure how to open and use an account,
- trust the online system,
- can find answers to their questions and
- have an alternative if any of these conditions are not met.
So far, the TAS says, the online account system has failed to ensure those and other rights in several ways.
- The prioritization of online services over other service channels (such as phones) is based on budgetary limits, not on taxpayer preferences or impact on compliance.
- The Secure Access e-Authorization system, while absolutely necessary, manages to authorize only 30 percent of bona fide applicants.
- Judging by low participation in the Taxpayer Digital Communication pilot project, taxpayers just aren’t interested working online.
Taxpayers in the Dark
The prioritization of online accounts tends to leave a lot of taxpayers in the dark. Fourteen million taxpayers have no home access to the internet, and 41 million don’t have broadband access. Of those with no access, 35.5 percent are poor, 41.7 percent are seniors and 31.2 percent are disabled. In other words, the nation’s most vulnerable populations are being even further hampered in their attempts to pay their taxes.
Fun fact: If you laid out 14 million taxpayers head-to-foot, they would reach from the North Pole to the South Pole, and you’d still have a quarter million prone taxpayers left over, enough to line the Washington D.C. beltway four times.
The TAS points out that the failure of the e-Authorization system does not mean the IRS should loosen security. Rather, the Service needs to consider how it will work with the 70 percent of applicants who fail to get authorization. If they can’t open an online account, what are they supposed to do?
Still, while defense against digital fraud has never been more necessary or more difficult, sometimes, the TAS suggests, e-Authorization may be overkill. When taxpayers are sending in certain kinds of documents – audit requests, for example – maybe the rigors of e-Authorization aren’t necessary.
Nice Try, IRS
The Taxpayer Digital Communication project was a dismal failure. The IRS invited 700 people with Earned Income Tax Credit or levy cases to participate. Fewer than 10 managed to open accounts. Some didn’t receive or understand the invitation. Some failed the e-Authorization. Some didn’t trust the system. Some didn’t understand why they should participate. Some found that it was easier to just fax the information or scan it and send it by email.
If those results are any indication, Americans just aren’t ready for an online relationship with their favorite tax collection agency.
Which is another thing. Yes, there is only one federal tax collection agency, but that doesn’t mean taxpayers don’t have an alternative. Noncompliance is always an option. Maybe it’s less than legal, but for millions of people who can’t or won’t use online accounts and can’t get through on the phone and don’t live near a Taxpayer Assistance Center, noncompliance, caused by nothing more than confusion, may be the only option.
Actually, there is one other option, one the IRS wants more people to use: a professional tax preparer – assuming, of course, they can get one to answer the phone in, say, the early days of April.