National taxpayer advocate: A paperless IRS is possible

The words "IRS" and "paperless" do not typically go together, so it was not surprising when the national taxpayer advocate was greeted with laughter when she coupled the two words during AICPA & CIMA ENGAGE 2023 in Las Vegas. And not just that, she said the IRS version of paperless is a goal in the not-so-distant future.

"Everyone, keep a straight face here: The IRS will be paperless by 2025," Erin Collins said Tuesday, to much laughter.

"You all have the same reaction that I did when I was sitting there, actually it was a deputy secretary of Treasury who said, 'How fast can we be paperless?' And the IRS employees in the room were looking at each other like, 'Who's going to say it out loud?'"

The IRS will not tell taxpayers that they cannot use paper, she said, but a paperless IRS would convert all paper files to digital before processing them: "[A]t its point of entry, it is to be scanned and go through its system electronically. That is our goal."

The main obstacles are the 60 or so legacy technology systems, which need to be collapsed into one system. Still, the goal is that after a document is uploaded, it gets routed electronically to its next destination, she said.

"That is the vision of the future," Collins said. "And if we can pull it off, I think we're all going to be happy campers in five years."

A timeline in the Strategic Operating Plan that the IRS released in April — based on the $80 billion that the agency originally was to receive from the Inflation Reduction Act, now reduced by about $20 billion — said high-priority forms, returns, and certifications would be available for electronic filing and digitalization in FY 2024–2025. For fiscal year 2025, the timeline called for the implementation of additional high-priority, end-to-end digital processes.

Working with practitioners

Collins opened her presentation at ENGAGE by emphasizing that the Taxpayer Advocate Service (TAS) does work with tax practitioners, saying that many are under the misconception that the office does not.

"We will work with practitioners to help your taxpayers," she said. "I actually like working with practitioners because I'm going to make you guys do some of the work.

"I look at it as, you want us to help you fix it fast? Treat it like a protest. When you come in, what are the facts? What are the laws? Here's my documents. Now go fix it. The biggest challenge our folks have in the field is developing those facts because they don't know them. But you guys hopefully do when you're working with your clients. So the more you can give us sort of a package with a bow on it, the faster we can get it fixed."

Collins reviewed IRS backlog numbers as well as the effect on her office. The Service has 3.7 million amended returns awaiting processing; 6.8 million returns that are in suspense, meaning something is missing such as a form or signature; and 5.3 million pieces of correspondence, she said.

As a result, TAS has its own delays. Typically, TAS case advocates would have 60 to 80 open cases at a time. At the height of the COVID-19 pandemic, they had over 250 cases at once. That number has dropped to about 125, which is still too high, Collins said. And the high numbers have caused problems for her and her staff, who have no authority to make fixes for taxpayers.

"We advocate for taxpayers, but we don't implement the change," she said. "And I think, historically, people never focused on that because the turnaround for getting cases fixed was relatively quick — 30 days, 60 days, 90 days. Unfortunately, now it's closer to six to 12 months. And so they're looking at us like, 'Hurry up and do your job.'"

Modernized processes

One change that Collins hopes to implement soon is to assign email addresses for each of the 78 TAS local offices throughout the country.

Meanwhile, the IRS remains vehemently opposed to using email in some contexts, she said. For example, with powers of attorney (POAs), "[u]se of emails in their mind is just 100% risk. There's just no good that will come of use of emails," she said. "These are things I think, as a business, they need to start thinking about, how do we do things differently? …

"There are some risks involved, but to me, if I faxed in a piece of paper with a signature, how do you know it is my original signature anyway? So aren't they assuming risk now?

For tax professionals, she dreams of the day when they will be able to view the tax information of all their clients in one online portal.

"I am a strong believer that if practitioners had one portal that you could go to and see every one of your clients, anyone [for whom] you have a POA, in one spot, that would be a game-changer," she said. "I keep saying, 'I can never leave that job until I get that part done.' That is to me incredibly important for you all. … Again, sitting in your chair. I would've loved to have that. No disrespect to my colleagues, but I don't want to call the IRS. I don't want to talk to them. Just give me the data. Let me do what I need to do, because that's how I can get the job done."