Personal service from IRS suffers as tax season nears

• The IRS continues to encourage electronic filing and interaction, but this frustrates some taxpayers
• A new report calls eroding service the biggest potential problem facing individual taxpayers
• Despite widespread filing of federal income-tax returns, telephone calls to the IRS have jumped

You can do plenty of banking online or through mobile devices, but there's probably a branch nearby to visit, if you need in-person assistance.

Similarly, you can find plenty of investment advisers, insurance agents and other financial professionals ready to meet face to face, if you don't want to handle all your business online or over the phone.

But if you need to reach out to the Internal Revenue Service, and many state-tax agencies, it's getting harder to receive that personal touch. Already, you should plan on lengthy waits when placing telephone calls to the IRS, and the agency gradually is closing walk-in offices and withdrawing services it once provided, like helping taxpayers fill out their returns in person. Long-term service issues could get worse as the IRS continues to drive more tax business through the Internet.

Last filing season was particularly frustrating for many taxpayers and professional return preparers, characterized by lengthy phone waits and dropped calls. This year could be a bit better. IRS Commissioner John Koskinen in a Jan. 14 media call said IRS service will improve this filing season compared to last year, though it still won’t be at the level it should be.  He credited an increase in funding from Congress of $290 million, the first increase in six years, which will allow the agency to hire up to 1,000 additional customer-service representatives.

The long-term trend toward increasingly electronic interactions isn't entirely negative or unwarranted. Filing returns electronically is faster and much less cumbersome than crunching the numbers on paper and mailing in your return. Plus, it can be a lot easier and quicker to find what you need — forms, answers to tax questions  or whatever — through sites such as irs.gov.

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Besides, the public has become exponentially more comfortable handling all sorts of money matters using desktops, tablets and smart phones — about 85 percent of individual tax returns are submitted in this manner. But the electronic age doesn't work well for everyone or in all situations, including for the estimated 16 percent of adults who don't have Internet access, according to a Pew Research study.

Still, a forward-looking five-year plan compiled by the IRS envisions taxpayers conducting more business through secure online accounts rather than in person or over the phone. These accounts might become places to submit payments, receive status updates, supply missing paperwork, correct mistakes, verify tax-return changes made by the IRS and so on. A lot of these activities also could be performed on behalf of taxpayers by professional return preparers and other authorized third parties, using clients' online accounts.

In an early January report to Congress, the Taxpayer Advocate Service, a watchdog group within the IRS, said it supported the creation  of online accounts but cautioned that service problems could worsen, making  it tough on many taxpayers, including less sophisticated and elderly individuals. The watchdog division, headed by National Taxpayer Advocate Nina Olson, listed future service, or the lack thereof, as the most serious problem facing taxpayers.

One concern is that the IRS might scale back telephone and face-to-face interactions even more. Another is that taxpayers needing help might have to pay more for it. The IRS already levies a few user fees, such as the $120 individuals now pay to set up installment agreements. Also, more frustrated taxpayers might decide they need to hire professionals to deal with an increasingly impersonal agency.

"Online accounts are unlikely to reduce taxpayer phone calls and visits significantly for several reasons," said the report from Olson's office. That's because millions of taxpayers still don't have Internet access or don't feel comfortable trying to resolve tax problems through this channel. Also, many tax problems are unusual enough that in-person meetings or telephone chats could be more suitable.

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The IRS audit rate of just under 1 percent implies that about 1.5 million taxpayers have direct contact with the IRS each year. But the actual number is closer to 9 million, estimates the Taxpayer Advocate Service.

Even with the overwhelming adoption of electronic filing and the enhanced ability of taxpayers to find forms and tax answers online, the public hasn't stopped trying to contact the IRS in traditional ways: In fact, phone calls to the IRS increased to 102 million last year, up 59 percent from 2006.

"If the IRS substantially reduces the opportunity for taxpayers to talk with IRS employees, many taxpayers will find it much harder to resolve their problems and will have to pay third parties to assist them," the report stated.

This could generate more taxpayer frustration and erode public confidence in the system. This is a concern, said the Taxpayer Advocate Service, because 98 percent of U.S. tax revenue collected from individuals is essentially paid voluntary, with only 2 percent resulting from direct enforcement actions. In many other nations, taxpayer compliance is substantially lower.

The Taxpayer Advocate Service also is concerned that taxpayers could be hurt by incompetence or misconduct on the part of return preparers utilizing client online accounts. The report urges the IRS to clearly define the scope of preparers' access to online accounts and implement procedures to ensure that third parties don't exceed their authority. Already, some tax fraud has been linked to unsavory preparers who used the personal information of clients to file fake returns and divert refunds.

Access to secure online accounts, if and when the IRS makes them available, should be restricted to attorneys, certified public accountants, enrolled agents and other tax professionals who have earned credentials or have met other requirements, according to the report.

Olson's office predicts the advent of online accounts and other IRS initiatives might fundamentally transform the way the federal government treats and interacts with taxpayers, in a negative way. It wants to see some personal-service avenues retained.

"The IRS should not drastically reduce face-to-face and telephone services as it focuses on the online-account program," said the watchdog group. "Studies shown that taxpayers prefer different service channels depending on the type of transaction they are conducting."

Reach the reporter at russ.wiles@arizonarepublic.com or 602-444-8616.