TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
Management Advisory Report: Risks Should Be Weighed When Using Electronic Services as Incentives
Reference No. 2001-40-049
The United States Congress, in its Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98), established a long-range goal that 80 percent of all Federal tax and information returns should be filed electronically by 2007. As a result, the IRSí Electronic Tax Administration (ETA) developed a strategic plan, A Strategy for Growth, describing the various ETA initiatives being planned to help accomplish this goal.
These ETA initiatives included a program concept that will recognize, support, and motivate tax practitioners as ETA product and service distributors. The Program is called the Platinum-Gold-Silver-Bronze Practitioner Program. This Program is an innovative approach intended to encourage tax practitioners to further increase the current volume of electronically filed tax returns. Under this Program, electronic return originators (EROs) will ascend from Bronze to Platinum levels as they electronically file more of the electronic tax returns they prepare. Graduation to each progressive level will entitle the ERO to various electronic service incentives currently being considered to help foster the continued growth of electronic filing.
The overall objective of this review was to determine whether the IRS is timely implementing its Platinum-Gold-Silver-Bronze Practitioner Program and whether providing different levels of customer service to EROs will impact taxpayers.
The IRS has not implemented the Platinum-Gold-Silver-Bronze Practitioner Program or developed a specific approach or timetable for implementation beyond the broad descriptions presented in its 1999 ETA strategic plan. Additionally, the IRS has not determined the range of electronic service incentives that will be provided to EROs at each Program level or evaluated the potential impact to taxpayers of providing EROs with different levels of electronic services (e-services).
Without the aid of a detailed plan, the IRS has developed certain aspects of the Platinum-Gold-Silver-Bronze Practitioner Program concept, including recognition of outstanding EROs and the development of criteria that rank the performance of EROs.
The Platinum-Gold-Silver-Bronze Practitioner Program Has Not Been Implemented
The IRS has not implemented its Platinum-Gold-Silver-Bronze Practitioner Program or developed any detailed implementation plans to provide structure and guidance for the development of the Program.
The Electronic Tax Administration Advisory Committee in its June 2000 report recommended that the IRS develop the operational plans corresponding to the electronic tax administration projects. Without a detailed implementation plan that include critical milestones and timelines, the IRS cannot easily determine the status of the Program.
Risks Should Be Weighed When Using Electronic Services as Incentives
Highlighted in the ETA strategic plan as the Platinum-Gold-Silver-Bronze Practitioner Programís primary incentive is a suite of e-services EROs will receive, depending on their Program level. The plan provides that the Platinum-level EROs will have access to all services. The Gold-level EROs will have a subset of the e-services received by the Platinum-level EROs, and each level below will receive progressively fewer e-services.
The IRS has not made specific decisions on the range of e-services that will be provided at each Program level or evaluated the potential impact to taxpayers of providing EROs with different levels of e-services. However, the ETA strategic plan, while general, could be interpreted as a decision on the part of the IRS to provide some EROs with an unfair advantage. This gap in e-services could affect taxpayers solely by their choice of ERO and actually restrict service to taxpayers through the restriction of access to e-services.
Summary of Recommendations
To ensure the success of the Platinum-Gold-Silver-Bronze Practitioner Program, the IRS should develop a detailed plan with critical milestones and timelines. The IRS should also weigh the risks of impact on taxpayers and EROs associated with providing EROs with different levels of e-services.
Managementís Response: IRS agreed with our recommendations. Once decisions are finalized on the specific type and range of incentives, the IRS will develop a detailed plan with critical milestones and timelines. In addition, the IRS has established high level oversight, time limits, and system flexibility into the incentives program to minimize adverse impact on taxpayers while advancing towards electronic filing objectives.