The sheer scale of IRS’s operations during the filing season makes customer service one of the key challenges the agency faces on an annual basis, Jessica Lucas-Judy, acting director of strategic services at the Government Accountability Office (GAO), told the House Ways and Means Oversight Subcommittee on April 19. (GAO-16-578T) As described by Lucas-Judy, customer service encompasses several key elements – telephone assistance, correspondence, and online support. IRS improved phone service to taxpayers during the 2016 filing season when compared to last year, she said. From Jan. 1 – Mar. 26, the agency received some 38.2 million calls to its automated and live assistor telephone lines, a slight decrease compared to 2015. Of the 14.7 million calls seeking live assistance, IRS was able to answer 9.9 million calls. This was a 72% increase over the calls answered during the same period last year. The average wait time fell from 24 minutes to 10 minutes. However, the level of telephone service for the entire fiscal year 2016 is expected to be 47%, Lucas-Judy said. Regarding correspondence, the percentage of cases in the IRS inventory that is classified “overage” – meaning not processed within 45 days of receipt – has hovered around 50% since FY 2013. “Minimizing overaged correspondence is important because delayed responses may prompt taxpayers to write again, call, or visit a walk-in site,” Lucas-Judy said. According to Lucas-Judy, last fall, Treasury Department and IRS officials said they had no plans to develop a comprehensive customer service strategy. “However, we continue to believe that, without such a strategy, Treasury and IRS can neither measure nor effectively communicate to Congress the types and levels of customer service taxpayers should expect and the resources needed to reach those levels,” Lucas-Judy said. Her prepared testimony is available at gao.gov/assets/680/676675.pdf
In a case which has its origins in 2002, two former Sprint Corp. senior executives on April 22 filed suit against the U.S. government in U.S. District Court for the Southern District of New York alleging that IRS concealed its probe of Ernst & Young LLP (EY)’s promotion of tax shelters sold to them, which eventually resulted in their resignations from their positions. According to the complaint filed by William Esrey, Sprint’s former chief executive officer, and Ronald LeMay, the former chief operating officer, both IRS and the U.S. Attorney for the Southern District of New York launched criminal investigations of EY’s activities related to tax shelters. During the same time frame, IRS began audits of the plaintiffs. EY allegedly knew that its conduct was under investigation and “these investigations created a conflict of interest between EY and the Plaintiffs,” the suit said. The plaintiffs alleged that EY withheld material information from them about the civil and criminal probes and therefore breached its fiduciary duties to them. Consequently, the plaintiffs conveyed EY’s representations to Sprint, the suit said. “The IRS knew of EY’s fiduciary duties to Plaintiffs, and of EY’s conflict of interest, but nonetheless helped EY to hide information from Plaintiffs knowing that such information would have been critical to Plaintiffs’ evaluation of whether to trust EY and whether to continue to tell Sprint that EY was trustworthy and devoted to helping Plaintiffs resolve their tax audits with the IRS,” plaintiffs alleged. “As a result of EY’s breach of fiduciary duty and of the IRS’s active concealment of the criminal investigation and the truth about the tax shelter promoter audit, Esrey and LeMay could not defend themselves against allegations by Sprint and Sprint shareholders regarding their participation in the EY-promoted transactions,” the complaint stated. Ultimately, “the blame for the tax shelters fell” on the plaintiffs, leading to their forced resignation from Sprint in 2003, the suit claimed. The case is Esrey v. U.S.A., 1:16-cv-03019, U.S. District Court, Southern District of New York.
The Washington, D.C.-based Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, recently published a report titled “Revisiting the State and Local Tax Deduction.” Tax policies and tax administration at different levels of government “interact in significant ways,” they said. According to the report, federal tax reform proposals often eliminate the state and local tax (SALT) deduction. Proponents of such reform measures often cite deficit reduction as the rationale for doing so, while others support eliminating the SALT deduction based on economic efficiency, equity and improved federal fiscal policy. “Eliminating the deduction, however, could affect the mix of revenue sources used by state and local governments and could lead to reductions in spending for programs and services,” the report said. The report looked at arguments for and against maintaining the deduction, examined those who claim it by state and income level, and estimated the revenue and distributional effects of options for changing the deduction. The report can be accessed at taxpolicycenter.org/