Monday, March 11, 2013

IRS needs the resources to communicate better

For years, I have been concerned about this, and now with the Form 8863 debacle, the chickens are clearly coming home to roost.  As Forbes TaxGirl Kelly Erb and her commenters have noted, there is mass confusion and uncertainty for many taxpayers right now.  (Update:  Don't Mess with Taxes blogger Kay Bell is also covering it.)

When you order something from an on-line vendor (e.g., buy an airplane ticket or purchase an item from Amazon), you generally get an immediate on-line confirmation either on-screen and/or via email that tells you *exactly* what information your vendor thinks you sent, spelling out all the details of the order you placed (e.g., item numbers and descriptions, sizes, colors, quantities, type of delivery, etc.)  That way--if somehow the transmission got garbled or misinterpreted--you know right away and can take immediate steps to make sure that the correct information is sent.

However, Americans get no detailed confirmation whatsoever from the Internal Revenue Service, even though for many taxpayers, filing their tax return amounts to by far their biggest on-line transaction of the year.

How do we know that the information we *think* we sent (because we can see it on our end on our software screens and hardcopy printouts) is what the IRS actually received?

The answer is that we don't actually know what the IRS received.  For years, the IRS has begged Americans to efile, using approved third party "middleman" software suppliers that it regulates, but it does not provide any routine detailed confirmation echoing back the information it actually received via those middleman software providers.  All it routinely confirms is the SSN, the filing status, and the amount of refund requested or balance due reported.  No additional details confirming the information the IRS actually received are routinely and immediately available.

Things are different at the state level, at least in some states.  Some states (e.g., New Jersey) provide their own efile site, which makes it possible for the taxpayer and the tax agency to have access to exactly the same information.   Other states (e.g., New York) do not provide their own efile site, but do provide a way for the taxpayer to view the efiled return that the state agency received.  This means that it is easily and routinely possible for taxpayers in New Jersey and New York (and other states) to view the actual information that their state tax departments received.  (I have pasted part of a sample screenshot of their menu below.)

But *nobody* has an easy way to see what information the IRS received.  Paid tax preparers and VITA sites and do-it-yourself efilers can all see the information we sent (on our screens and our hard copy printouts), but we have no idea how much of the information might have been lost or garbled in the process of transmission, or how the IRS might have interpreted the information it received.

This needs to change.  If the state tax agencies can do it, then the federal government should be able to do it.  The United States government requires us to file annual returns signed under penalty of perjury, so the least they could do is to provide a prompt and immediately accessible copy of the information they believe they received.

H&R Block has finally informed users of its software that some information on Forms 8863 got lost or misinterpreted in unexpected ways in the process of transmission.  I have heard mixed reports from preparers using TaxWise software (the software used at most AARP and VITA sites, including ours, as well as at many paid tax prep shops.)    A number of TaxWise preparers are reporting similar problems with Form 8863, but not all of them.   To make matters more confusing, there are several different implementations of TaxWise, including an online product (TaxWise Online or TWO, which we use and which automatically updates to the most recent available version at all times) and a desktop products (which other customers use, and which needs to be manually updated via regular downloads.)

Where do our own VITA site taxpayers stand?  The answer is--I don't honestly know and I have no way to find out.  All I can tell them is what we sent--the information that appears on our screens is the same information that appears on the paper hardcopy printouts we review with our taxpayers prior to efiling and give each taxpayer to take home at the time we prepare their returns.

What the IRS received is another matter entirely.  The only way they can find out what the IRS received is to call the IRS and ask.  And their lines are (understandably) very busy right now.

What Congress needs to do is to appropriate the funds for the IRS to provide the same kind of transparent confirmation that states like New York and New Jersey already do.  Then taxpayers could see on their screens exactly what information the IRS received.

I don't blame the IRS for this.  I blame Congress.  It has asked the IRS to do more and more with less and less funding, and this year Congress has added further insult to injury by epically procrastinating, making the IRS folks run harder and harder just to stay in one place.  Providing proper taxpayer service ought to be a priority for the federal government.

The United States has an enviable record of taxpayer compliance (not perfect, but still the envy of most nations around the world) and poor taxpayer service undermines that goal.


  1. In the history of the universe there has never been a government agency that testified before Congress and said "We're fine. We don't need more money." Lack of funds is the go to reason for the incompetency of all government agencies and always will be.

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