Improvement Is Needed in E-Mail Responses to Complex Tax Questions Submitted Through Toll-Free Telephone Help Lines

 

December 2003

 

Reference Number:  2004-40-029

 

 

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.

 

December 16, 2003

 

 

MEMORANDUM FOR COMMISSIONER, WAGE AND INVESTMENT DIVISION

 

FROM:     Gordon C. Milbourn III /s/ Gordon C. Milbourn III

                  Acting Deputy Inspector General for Audit

 

SUBJECT:     Final Audit Report – Improvement Is Needed in E-Mail Responses to Complex Tax Questions Submitted Through Toll-Free Telephone Help Lines (Audit # 200340042)

 

This report presents the results of our review of the Referral Mail (R-Mail) Program.  The overall objective of this review was to provide an indication of the quality of the Internal Revenue Service’s (IRS) toll-free telephone assistance for R-Mail Program questions during the 2003 Filing Season.  We limited our review of the R-Mail Program to only e-mail responses.  This audit was part of the Treasury Inspector General for Tax Administration’s Fiscal Year 2003 Annual Audit Plan.

The IRS implemented the R-Mail Program to provide customer assistance relating to complex tax laws affecting taxpayers each year.  The R-Mail database for the 2003 Filing Season shows the majority of questions were resolved by telephone contacts (73 percent) as compared to e-mail (19 percent).  However, these current statistics also show that the number of customers receiving e-mail responses increased 55 percent over those receiving e-mails in the 2002 Filing Season.  As more and more taxpayers become accustomed to electronic communication, it is to be expected that requests for e-mail responses will continue to grow annually.

Our judgmental sample of 70 test calls determined the following:

·        R-Mail Screeners were professional on 66 (94 percent) of the calls. Five calls were not recorded because the Screener provided an immediate answer; however, the Screeners were incorrect for three of the five answers given.  The Screeners accurately recorded 47 (72 percent) of the remaining 65 calls in the R-Mail database.

·        R-Mail Assistors e-mailed correct and complete responses for 35 (74 percent) of the 47 accurately recorded questions.  The answers provided for the remaining 18 questions were either incorrect or incomplete.

When the results of both the Screeners and Assistors are combined, the potential impact on taxpayers showed that only 37 (53 percent) of our test questions actually received a complete and correct response.  For the Program to be most effective, Screeners must accurately record taxpayer questions and contact numbers to ensure Assistors adequately consider all relevant information and are able to contact taxpayers for additional clarification if necessary.

We recommended the Commissioner, Wage and Investment Division, initiate a review of R-Mail Program guidelines and coordinate with the Commissioners of both the Small Business/Self-Employed and Large and Mid-Size Business Divisions to ensure that R-Mail Screeners accurately record complex questions and that R-Mail Assistors completely and correctly answer taxpayer questions.  In addition, Centralized Quality Review Site management should perform periodic quality review checks and develop a method to provide an overall assessment of its e-mail process with respect to the taxpayer’s expectation of receiving a correct, complete, and timely response.

Management’s Response:  IRS management agreed with our recommendations and has already begun corrective actions.  Completed actions include the addition of a procedure to ensure that the Screeners record taxpayer questions accurately and ask the customer for a telephone number.  In addition, the 2004 Assistor Guide instructs Assistors to call the taxpayer if they are unable to answer the question based on the information secured by the Screener. 

The IRS will also secure the appropriate security clearance needed to reinstitute the quality review of responses to R-Mail questions.  Reviews for the 2004 Filing Season will address the accuracy of information secured by Screeners and the accuracy of Assistors’ responses.  The IRS will assess quality from initial taxpayer contact with the Screener through the response provided by the R-Mail Assistor.

Management’s complete response to the draft report is included as Appendix VI.

Copies of this report are also being sent to the IRS managers who are affected by the report recommendations.  Please contact me at (202) 622-6510 if you have questions or Michael R. Phillips, Assistant Inspector General for Audit (Wage and Investment Income Programs), at (202) 927-0597.

 

Table of Contents

Background

The Screeners Provided Professional Service in 94 Percent of Test Calls

The Screeners Accurately Recorded Information in the Referral Mail Database in 72 Percent of Test Calls

The Assisters Provided Correct Responses in 74 Percent of Test Calls

Recommendations 1 and 2:

Quality Review Procedures Do Not Include Combining Accuracy Rates for Screeners and Assistors to Effectively Determine the Overall Impact on Taxpayers

Recommendations 3 and 4:

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Outcome Measures

Appendix V – Tax Law Categories for the 2003 Filing Season Referral Mail Program

Appendix VI – Management’s Response to the Draft Report

 

Background

The Internal Revenue Service’s (IRS) mission is to provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.  Each year, millions of taxpayers seek assistance by calling the IRS’ toll-free telephone system to obtain answers to tax law and procedural type questions.

During the 2003 Filing Season, over 14 million toll-free calls were answered.  Customer Service Representatives (CSR) answer most of the questions from these calls while the taxpayers remain on the line.  However, some questions are more complex and require the CSRs to transfer the taxpayers to the IRS’ Referral Mail (R-Mail) Program.   

The R-Mail Program is designed to provide additional customer service by answering complex tax questions within 3 workdays of a taxpayer’s call.  The Program uses a software system where taxpayer questions are classified and entered into a database by the Screener for control purposes and then routed to an employee having the proper training and expertise, known as the Assistor, to address the tax issues involved.  This automated database also provides management information and reduces the amount of clerical time that a manual paper-based system would require.

During the 2003 Filing Season, IRS telephone reports show that CSRs transferred 592,687 taxpayer calls to the R-Mail Program for screening.  Of these, 232,455 calls were forwarded to other IRS programs, and the R-Mail database received 280,176 of the calls.  Of the 280,176 questions received by the R-Mail database, 279,558 questions were answered or closed from the database as follows: 

·        73 percent (204,042) by a telephone response.

·        19 percent (53,980) by an e-mail response.

·        3 percent (8,434) by correspondence. 

·        5 percent (13,102) closed as no contact because the IRS was not able to reach the taxpayer by telephone after 2 attempts on 2 different days.

Although the R-Mail Program was originally intended to provide only telephone responses, the IRS recognized that adding the option to offer e-mail or written responses could also benefit many taxpayers.  The foresight of this decision is clearly supported by the increase in e-mail responses to taxpayers; the 53,980 e-mails sent in the 2003 Filing Season represent a 55 percent increase over the 34,719 e-mails sent in the 2002 Filing Season.

In a prior Treasury Inspector General for Tax Administration review, we reported that the R-Mail Program needed to implement or strengthen necessary controls to ensure risks to taxpayers are minimized and customer service goals are achieved.  As part of its corrective action, the IRS completed the following: 

·        Developed a guidebook to help ensure that the overall R-Mail Program is effectively managed and developed a coordinated plan with the Small Business/Self-Employed (SB/SE) Division and Large and Mid-Size Business (LMSB) Division to assign complex questions to Assistors in a manner that maximizes their technical expertise.

·        Established an R-Mail Coordinator to review Centralized Quality Review Site (CQRS) results and changed the time period for conducting trend analyses to a weekly basis to timely provide accuracy and error information for IRS field offices during the filing season. 

This review was performed at the Wage and Investment (W&I) Division offices in Chamblee, Georgia; Dallas, Texas; and Pittsburgh, Pennsylvania, between November 2002 and June 2003.  We also conducted telephone interviews with IRS staff from the W&I and SB/SE Divisions.  The audit was conducted in accordance with Government Auditing Standards.  Detailed information on our audit objective, scope, and methodology is presented in Appendix I.  Major contributors to the report are listed in Appendix II.

The Screeners Provided Professional Service in 94 Percent of Test Calls

To assess the quality of the R-Mail Program’s e-mail service to taxpayers, we placed 70 test calls to the IRS’ toll-free help lines.  These calls involved complex tax questions that were proportionately based on the IRS’ projected volume of calls to be received by specific tax law categories during the 2003 Filing Season (see Appendix V).

The IRS realizes that some complex tax questions received by CSRs may require additional research due to their legal complexities.  If so, the CSR is instructed to transfer the call to the IRS’ R-Mail Program.  For example, we submitted the following complex tax test question:

This past year, I sold one rental property and bought another.  Do I need to pay capital gains on the property I sold? And if not, is there a special form/procedure to identify that I invested in another rental property?

A regulatory guideline requires Screeners to provide taxpayers with both their name and unique identifying number for later reference if needed.  A procedural guideline requires Screeners to inform callers that their question will be recorded and a response sent within 3 business days to allow the IRS sufficient time to adequately research the question asked.

In 66 (94 percent) of our 70 test calls, the Screeners followed the above stated regulatory and procedural guidelines and were determined to be professional during our initial contact.  The four test calls in which the above requirements were not met included:

·        One where the Screener did not provide his or her name and identification number.

·        Three where Screeners did not convey that questions would be answered within 3 business days.

The Screeners Accurately Recorded Information in the Referral Mail Database in 72 Percent of Test Calls

Each year, the R-Mail Program identifies specific tax law categories.  If a taxpayer’s question concerns one of these complex tax law categories, the call is transferred from the CSR to an R-Mail Screener.  After identifying themselves and explaining the process, Screeners are responsible for recording the taxpayer’s question in the R-Mail database and also reading the question back to the taxpayer to ensure the question is accurately transcribed.

In our 70 test calls, Screeners provided an immediate response to 5 questions (7 percent), of which 3 were incorrect.  Of the remaining 65 questions, the Screeners accurately recorded 47 (72 percent) in the R-Mail database, while the remaining 18 (28 percent) showed either an incorrect e-mail address or an incomplete or inaccurate question.  Existing procedures do not clearly address how Screeners should respond to taxpayers that may call back indicating no response e-mail was ever received.

Current R-Mail guidelines do not prohibit Screeners from immediately answering taxpayer questions. As stated previously, in our review of 70 test calls, this occurred 5 times.  IRS personnel advised us that these questions were probably not entered into the R-Mail database if a reference number was not provided, and research capabilities were not available to locate the questions in the database. When questions are not recorded, it causes an understatement in the total number of responses.  This will cause management information to be incorrect unless guidelines are modified to either prohibit the Screeners from answering questions or require Screeners to capture these questions when they occur.

Additionally, management statistics may be distorted by unanswered calls resulting from taxpayers hanging up or unintentional system disconnects.  For example, in the 2003 Filing Season, the difference between the 592,687 calls transferred to the R-Mail Program and the 280,176 questions actually recorded in the database includes 80,056 calls that current guidelines do not address.  These calls include not only immediate Screener responses, but also those instances in which the call may have been terminated for various reasons beyond the IRS’ control.

The Assistors Provided Correct Responses in 74 Percent of Test Calls

Once a taxpayer’s question has been accurately recorded in the R-Mail database, it is the responsibility of the Assistors to research and provide taxpayers with a correct response.

After Screeners accurately recorded 47 of 65 test questions in the R-Mail database, the Assistors correctly answered 35 (74 percent) of the 65 questions within the 3-day response period. For the remaining 12 questions, Assistors either provided incorrect answers or omitted information necessary to make an answer correct.  For example, the following shows the incorrect response provided for the test question shown on page 3:

When you sold the rental property, did you receive the proceeds?  If so, then you report the sale on Schedule E of Form 1040 and if there is a gain you may owe capital gains tax.  It does not matter that you took the proceeds and purchased another property. There is a provision in the Internal Revenue Code 1031(k) whereby you may sell and repurchase a like-kind property through a third person, called a qualified intermediary.  At no time can you have access to or the right to access the proceeds.  There are many rules and restrictions.  The information I have given you is found in IRS Publication 544, Sales and Other Dispositions of Assets. 

The answer is incorrect since the sale should be reported on Sale of Business Property (Form 4979), and possibly on Capital Gains and Losses (Schedule D, Form 1040).

Incorrect or incomplete answers may be caused in part by taxpayers that choose not to provide a telephone contact number during the screening process.  Without a contact number, the Assistor is not able to contact the taxpayer for additional or clarifying information, which could lead to an inadequate or incomplete response.  If taxpayers do not receive a response that is both timely and accurate, taxpayer burden is increased by placing at risk their ability to properly meet their responsibility to prepare and file an accurate tax return when due.

Overall, IRS management did not ensure that Screeners and Assistors accurately recorded and answered questions for 33 of our 70 test calls.  During the record phase, Screeners incorrectly answered 3 of the 5 test questions that received an immediate response, and incompletely or inaccurately recorded 18 of the remaining 65 questions or related e-mail addresses in the R-Mail database.  Subsequently, in the answer phase, Assistors incompletely or incorrectly answered 12 of the 47 accurately recorded questions. 

Recommendations

The Commissioner, W&I Division, should initiate a review of R-Mail Program guidelines and coordinate with both the SB/SE and LMSB Division Commissioners to ensure that:

1.      The Screeners accurately record complex questions by emphasizing the importance to repeat and confirm questions with taxpayers and the need for taxpayers to provide a telephone contact number.

Management’s Response:  A procedure to ensure that the Screeners record taxpayer questions accurately has been added to the 2004 Screener Guide.  The Guide also instructs Screeners to ask the customer for a telephone number.

2.      The Assistors completely and correctly answer taxpayer questions by emphasizing the importance of contacting taxpayers for clarification or additional information, if necessary, to address an issue.

Management’s Response:  The 2004 Assistor Guide instructs Assistors to call the taxpayer if they are unable to answer the question based on the information secured by the Screener.

Quality Review Procedures Do Not Include Combining Accuracy Rates for Screeners and Assistors to Effectively Determine the Overall Impact on Taxpayers

A method to help improve a program’s objectives is to ensure its results are subjected to periodic quality review procedures.  Ensuring high-quality results from the R-Mail Program is a direct responsibility of the CQRS.  However, for 2003, the CQRS did not perform any quality review checks of e-mail responses because of Internet restrictions encountered and the time required to gain access compared to the time the reviews were to begin.  CQRS management decided to concentrate its quality review on responses made by the Assistors over the telephone and to separately conduct a review of the Screeners.  During the period January through mid-April, the CQRS’ statistically sampled reviews identified a Screener accuracy rate of 78.1 percent and an Assistor accuracy rate of 71.5 percent.

Although these types of reviews will help the R-Mail Program identify and correct problems, they will not suffice to provide an overall or combined assessment of whether e-mail responses are actually received or if the responses provided are both correct and complete. 

When all the above tests are viewed individually, they provide an informative internal perspective for IRS managers, but they do not adequately reflect the overall effectiveness of the R-Mail Program from the customer’s point of view.  To determine that viewpoint, we must combine the results from both recording and answering taxpayer questions to determine the true impact on customers.   

Our combined results show that 47 percent (33 of 70) of our test calls did not receive the quality service expected, leaving only 53 percent (37 of 70) that did, based upon whether a complete and correct response was ultimately received.  The results of our judgmental sample of 70 test calls suggest that many of the 53,980 customers that received an e-mail response during the 2003 Filing Season may have never received an actual response or received one that was incorrect or incomplete.

The R-Mail Program was implemented to effectively provide customer assistance relating to complex tax laws.  It is most effective when taxpayer questions are accurately recorded and a taxpayer contact number is secured to ensure all facts can be determined if needed.  As more and more taxpayers become accustomed to electronic communication, it is to be expected that requests for e-mail responses will continue to grow annually.

Recommendations

The Commissioner, W&I Division, should ensure that:

3.      CQRS management performs periodic quality review checks to determine the accuracy of the Screeners’ recorded e-mail addresses and of the Assistors’ e-mail responses to taxpayers.

Management’s Response:  The IRS will secure the appropriate security clearance needed to reinstitute the quality review of responses to R-Mail questions.  Reviews for the 2004 Filing Season will address the accuracy of information secured by Screeners and the accuracy of Assistors’ responses.

4.      CQRS management develops a method to combine its quality review of Screeners and Assistors into an overall assessment of its e-mail process from the viewpoint of the taxpayer’s expectation of receiving a correct, complete, and timely response.

Management’s Response:  The IRS’ review of e-mail responses on R-Mail inquiries for the 2004 Filing Season will assess quality from initial taxpayer contact with the Screener through the response provided by the R-Mail Assistor.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this review was to provide an indication of the quality of the Internal Revenue Service’s (IRS) toll-free telephone assistance for Referral Mail (R-Mail) Program questions during the 2003 Filing Season.  We limited our review of the R-Mail Program to only e-mail responses.  To accomplish our objective, we:

I.                    Obtained the Fiscal Year 2003 Projected R-Mail Program call volume by topic and determined the percentage of calls by tax law topic. 

II.                 Obtained the Fiscal Year 2001 R-Mail Database and selected questions/records from the database by topic and updated questions based on new law.  We judgmentally developed a sample of 70 test questions because available time and audit resources made it impractical to development a statistically valid number of questions and calls for all R-Mail topics.

III.               Called the toll-free telephone lines – 1-800-829-1040 (Individual Income Tax Services) and 1-800-829-4933 (Business & Specialty Tax Services) – during the period February 18 to April 14, 2003, with our 70 R-Mail Topic Test Questions and evaluated the overall experience we, as the customer, received.  This consisted of an evaluation of whether we received professional service and an accurate, complete, and timely response.

IV.              Determined whether the Screeners provided professional service during the 70 test calls by evaluating the following:

A.                Did the Screener provide his or her name and identification number (regulatory guideline)?

B.                 Did the Screener provide the time period in which to expect a response (procedural guideline)?

C.                Did the Screener provide a reference number for the call (procedural guideline)?

V.                 Determined whether the Screeners documented the question and e-mail address completely and correctly by accessing the R-Mail database based on the reference number provided and comparing the developed questions and e-mail addresses provided to the Screeners to the 65 questions and e-mail addresses documented in the R-Mail database. We also evaluated the Screeners’ five immediate live responses for accuracy and completeness.

VI.              Determined whether the Assistor provided timely, accurate, and complete responses by performing our own research for the complete and correct response, calculating the days from the call to the e-mailed response received date, and performing some follow-up calls when no e-mail response was received.

VII.            Shared our results with IRS personnel and discussed our exception cases.

 

Appendix II

 

Major Contributors to This Report

 

Michael R. Phillips, Assistant Inspector General for Audit (Wage and Investment Income Programs)

Scott Macfarlane, Director

Patricia Lee, Audit Manager

Gary L. Young, Audit Manager

Anthony Anneski, Jr., Acting Audit Manager

Lynn Faulkner, Senior Auditor

Sharon Shepherd, Senior Auditor

Jerry Douglas, Auditor

Stephanie McFadden, Auditor

Geraldine Vaughn, Auditor

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

Deputy Commissioner for Services and Enforcement SE

Commissioner, Large and Mid-Size Business Division SE:LM

Commissioner, Small Business/Self-Employed Division SE:S

Director, Communication & Liaison, Small Business/Self-Employed Division SE:S:MS:CL
Director, Customer Account Services, Wage and Investment Division  SE:W:CAS

Director, Strategy and Finance  SE:W:S

Chief Counsel  CC

National Taxpayer Advocate  TA

Director, Office of Legislative Affairs  CL:LA

Director, Office of Program Evaluation and Risk Analysis RAS:O

Office of Management Controls  OS:CFO:AR:M

Audit Liaisons:

            Commissioner, Large and Mid-Size Business Division  SE:LM

            Chief, Customer Liaison, Small Business/Self-Employed Division SE:S:COM

            GAO/TIGTA Liaison, Wage and Investment Division  SE:W:S:PA

           

 

Appendix IV

 

Outcome Measures

 

This appendix presents detailed information on the measurable impact that our recommended corrective actions will have on tax administration.  This benefit will be incorporated into our Semiannual Report to the Congress.

Type and Value of Outcome Measure: 

·        Taxpayer Burden – Actual; 33 e-mailed responses in 2003 Filing Season (see page 7).

Methodology Used to Measure the Reported Benefit:

During the 2003 Filing Season, the Treasury Inspector General for Tax Administration placed a judgmental sample of 70 telephone calls to the Internal Revenue Service’s (IRS) toll-free help lines.  The calls consisted of complex tax law questions that were transferred to the Referral Mail Program.  We did not receive the quality service expected in 33 (47 percent) responses. 

We believe many of the 53,980 customers that requested an e-mail response during the 2003 Filing Season may have never received an actual response or received one that was incorrect or incomplete.  However, our judgmental sample was not intended to be statistically valid, and the actual error rate for these customers could be higher or lower than the 47 percent error rate calculated from our sample results.

 

Appendix V

 

Tax Law Categories for the 2003 Filing Season Referral Mail Program

 

Tax Law Category/Topic

Total
R-Mail Database Responses

TIGTA Test Call Volume

Test Call Exception Category

Percentage of Error

Capital Gains and
Alternative Minimum Tax

136,277

30

13

43%

Alien and International

33,889

10

4

40%

Partnerships and Corporations

32,469

9

4

44%

Sale of Business Property
and Depreciation

22,961

6

4

67%

Trusts and Fiduciaries

18,281

5

4

80%

Rental Property

24,375

7

3

43%

Estate and Gift Taxes

11,306

3

1

33%

 

 

 

 

 

Total

279,558

70

33

47%

 

Appendix VI

 

Management’s Response to the Draft Report

 

The response was removed due to its size.  To see the response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.