Efforts to reform IRS still on track

Posted: Sunday, February 04, 2001

WASHINGTON -- The federal agency Americans love to hate, the Internal Revenue Service, continues to struggle with legal reforms aimed at giving taxpayers more rights and a huge reorganization intended to improve efficiency and service.

The chief taxman, IRS Commissioner Charles Rossotti, says things are on track but remain far from perfect.

''We are making progress,'' Rossotti said.

Take phone service. A few years ago, only about 20 percent of taxpayer calls were answered and people frequently didn't get accurate answers to tax questions. The 29 call-in centers were all managed separately and phones weren't manned 24 hours a day even during filing season.

Under Rossotti, phone service has been centralized under a single Atlanta-based regime and operates 24 hours, seven days a week. Money has been invested in technology and training, and calls are routed to people with expertise in given tax topics instead of having all employees answer all questions.

Still, last year the answer rate was a bit better than 50 percent, showing the IRS has a long way to go.

''We expect to be better this year -- noticeably better,'' Rossotti said. ''Over the next two or three years, we hope to get it up to a commercial level, which would be 85 to 90 percent. We are getting there.''

This year's tax filing season will also be the first under the new IRS, now divided into four separate units focusing on specific types of taxpayers: wage and investment for most individuals, large businesses, small businesses and the self-employed, and tax-exempt and government entities. Before, the agency had more layers of bureaucracy, with 33 districts and 10 service centers.

''This will not solve problems overnight, but it will lead to the IRS becoming a better, more responsive organization focused on the needs of taxpayers,'' Rossotti said.

A first order of business is to stop the downward slide in audits and other enforcement actions, which have dropped amid staff cutbacks as employees tried to implement a law passed by Congress in 1998 to give taxpayers more rights. IRS liens, property seizures and levies on bank accounts are all down, leading to fears that more taxpayers might be encouraged to cheat.

''I think in 2000 we'll hit bottom,'' Rossotti said, referring to enforcement statistics which will come out this month. ''We will, I think, improve in those areas in 2001. Instead of going down it will be leveled off and slightly go up.''

That reform law made some changes that have produced major backlogs at the IRS.

For instance, in 1999 rules were liberalized for the ''offer in compromise'' program for people who have no chance of paying a large tax bill. The number of offers jumped from almost 56,000 in 1998 to over 74,000 in 1999, overwhelming the system and leading to delays.

''We have a bigger backlog than we should,'' Rossotti said.

Having stabilized IRS staff and put the agency reorganization into place, Rossotti says this year he will ask Congress for significant increases in money for technology -- particularly for a long-term project to replace the Kennedy-era computer system that still stores taxpayer data on old-fashioned, sluggish tapes.

''This new technology will be the springboard for us to improve taxpayer service,'' Rossotti said.

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