TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
EXPANDING THE ELECTRONIC TAX LAW ASSISTANCE PROGRAM
Reference No. 2000-30-120
The Internal Revenue Serviceís (IRS) toll-free telephone system is the cornerstone of its customer service operations. For Fiscal Year (FY) 2000 (as of April 22), taxpayers attempted over 62 million calls to the IRSí 3 main toll-free telephone lines to get answers to their questions. In addition, the IRS uses the Electronic Tax Law Assistance (ETLA) program to answer tax law and procedural questions submitted by taxpayers on the IRSí Internet web site known as the Digital Daily.
The ETLA program offers an alternative to the telephone for taxpayers needing tax law assistance, while at the same time increasing accessibility and convenience. This program supports the IRSí initiative to increase electronic correspondence with taxpayers. Although the IRS does not advertise the program, the number of questions answered has doubled each year since the programís inception in 1994. In FY 1999, the IRS answered over 264,000 tax law questions, with nearly 350,000 expected for FY 2000.
Providing top quality service to each taxpayer is one of the IRSí strategic goals. Customer satisfaction surveys show that over 90 percent of the taxpayers who used the ETLA program were satisfied with the timeliness of responses and would use the ETLA service in the future. This audit was conducted to determine the effectiveness and efficiency of the IRSí efforts to leverage technology to improve service to taxpayers through the ETLA program.
For the past six years, the ETLA program has remained a research project and has not progressed beyond the original system design. Although the initial concept and design in 1994 were innovative, the rapid growth of the Internet and technology has directly affected the program. The current system design will not significantly help achieve the IRSí goals of: 1) making electronic communication so simple, inexpensive, and trusted that taxpayers will prefer it to calling and mailing; and 2) substantially increasing taxpayer access to electronic communication products and services.
The goal of the Electronic Tax Administration is to revolutionize how taxpayers transact and communicate with the IRS. However, the ETLA program design is reliant on a labor-intensive process for interacting with taxpayers. The ETLA design is basically a manual correspondence system with the Internet used only to transmit the questions and answers. The IRS has not advertised, nor do they have any immediate plans to promote, the availability of the program because of the significant amount of labor resources needed to manually answer taxpayer questions.
Technology Can Be Used to Improve Electronic Customer Service
The IRSí ability to provide effective and efficient electronic tax law assistance is adversely affected by the current system design that requires a labor-intensive effort to respond to taxpayer questions. When a question is received, the Customer Service Representative (CSR) must research the subject matter and prepare a response that is electronically sent to the taxpayer.
In the private sector, Internet transactions are supported by electronic commerce software and self-service software, both of which offer reduced costs because the systems are completely automated. For every customer who successfully completes a transaction on the Internet, the organization saves the cost of more expensive methods of communication such as face-to-face and the telephone. Unfortunately, the current ETLA program introduces employees back into the transaction, thus negating the economic benefit of automation.
The IRSí Risk Management Group recognized the benefits of self-service software and planned to establish an Internet web-enabled probe and response guide to eliminate CSRs from the process. However, this proposal has not progressed beyond the planning phase.
Organizational Commitment Is Necessary to Improve Electronic Communications with Taxpayers
The IRS has not fully committed to the ETLA program by converting it from a long-term research project to a fully supported independent function with a state-of-the-art system design. Without this commitment, the IRS is hindered in meeting its Electronic Tax Administration goals.
The ETLA program has not been expanded to additional telephone call sites due to concerns associated with the current infrastructure and technical support. However, the continuing growth of the ETLA program, without any marketing or advertising, has demonstrated that it has progressed beyond the feasibility stage envisioned at its inception. Each year the increased number of questions forces the IRS to commit more labor resources to support the program rather than using probe and response technology to provide a self-help alternative for taxpayers.
Without an organizational commitment and dedicated technological resources, the demand for growth cannot be effectively managed. The absence of this organizational commitment has left the program without an infrastructure that includes goals, objectives, critical success factors, and performance measures.
Marketing of the Electronic Tax Law Assistance Program Should Be Delayed, but the Program Should Be Expanded to Additional Call Sites
The ETLA program was not designed to be a high-volume production system and would need a major labor resource commitment in order to process the significant increase in the number of taxpayer inquiries that advertising would generate. The IRS Commissioner wanted the ETLA program expanded for the 2000 Filing Season. IRS management considered placing a message on the U.S. Individual Income Tax Return (Form 1040) telephone script suggesting that taxpayers consider submitting their questions via the Digital Daily; however, management decided not to do so due to their concerns about the potential volume of questions that would be received.
The IRS has no immediate plans to advertise the availability of the ETLA program. The principal motivation for making government services and information more available on-line should be to improve the efficiency and quality of these services. However, if the IRS markets the current ETLA program, but does not improve its ability to meet the expected demand, it will only create costly problems while undermining taxpayer confidence.
The ETLA program is currently operational at 10 of the IRSí 30 telephone call sites. Until there are technological changes and an organizational commitment to the ETLA program, the IRS should expand the program to additional call sites to better process the ever-increasing taxpayer demand. Expansion could reduce the need to use more expensive Compliance function personnel. During FY 1999, Compliance employees answered 75 percent of all ETLA questions. Based on the FY 2000 plan, the estimated salaries for Compliance personnel assigned to answer ETLA questions are almost $1.5 million. These resources could be used on Compliance activities resulting in the collection of an estimated $21.9 million in taxes.
Summary of Recommendations
The IRS needs to leverage technology that will provide enhanced access to tax information, maximize efficiency, and improve electronic customer service.
To meet its goals, the IRS needs to fully commit to the ETLA program by converting it from a long-term research project to a fully supported independent function. A state-of-the-art system design is needed to provide a valuable service to taxpayers at minimal cost.
Until there are technological changes and an organizational commitment, the IRS needs to delay the marketing of the ETLA program. In the interim, the IRS should expand the ETLA program to additional call sites to better process the ever-increasing taxpayer demand for this electronic service while reducing the need to use more expensive Compliance function personnel.
Managementís Response: Managementís response was due on July 31, 2000. As of August 14, 2000, management had not responded to this draft report.