Taxpayers Are Left on the Hook for the IRS’ Serious Prioritization Problem

The long-awaited National Taxpayer Advocate’s mid-year report on the 2024 tax filing season was released late last month. While it sheds light on some positive aspects of the Internal Revenue Service (IRS), it also shows how the agency is routinely failing taxpayers because of misguided priorities.

In what is clearly a case of resource-constraints, the decision by the IRS to roll out its Direct File program pilot shows how the agency is failing to prioritize its basic functions in order to rollout costly and unnecessary programs that go beyond the agency’s scope.

The Taxpayer Advocate’s report starts off in a largely positive note, highlighting how the agency has finally returned to pre-pandemic processing times. Staffing and technological constraints due to pandemic-era shocks had previously impacted the agency’s ability to respond to taxpayers. It also notes that the agency’s account management phone line presented a remarkably high level of service.

However, as the report illustrates, this notable improvement in performance and service levels was likely product of reshuffling resources and personnel away from other lines. Victims of the rearrangement included areas such as the automatic collection system, fraud, and identity theft lines. The reshuffling was so drastic that IRS representatives on the account management line spent about 25 percent of their assigned time waiting for calls, while the Taxpayer Protection Program line had a service level—the number of calls that were picked up by a representative—of 17 percent, an unacceptably low number for a line dedicated to aid taxpayers fend off refund fraud. The Identity Theft Victim Assistance program line is also under significant strain, with average wait times for case resolution increasing to 675 days. In other words, victims of identity theft are being left to wait for almost two years to get the refunds they are entitled to.

The IRS’s excessive focus on account management phone lines is especially egregious considering the other obstacles the agency faces. It has been known for years that IRS information technology (IT) systems are outdated, an issue that again resurfaced in the report. As the Taxpayer Advocate notes, those down times where representatives were waiting for calls on the account management line were egregiously wasteful. IT limitations, among other factors, prevented these representatives from working on anything else while waiting for a call to come in. In other words, taxpayers paid for the salary of individuals who spent a quarter of their workday sitting, waiting for a call to come in. 

Prioritizing the account management line is not an inherently bad decision in and of itself. The improved performance ought to be applauded. As the Taxpayer Advocate insists throughout the report that this rearrangement and triage had to be done because of resource constraints. Taking this context into account, however, the decision by the IRS to develop and launch the Direct File program is perplexing. Instead of committing up to $249 million annually into a redundant program, the IRS could have used that money to update its obsolete IT systems or hire the additional representatives that it so clearly needed in other areas.

If the agency wants to help low-income taxpayers to file taxes for free, it should do a better job of promoting the Free File Alliance program. According to the Taxpayer Advocate’s report, the program achieved a high satisfaction score amongst those who used it, with a 2023 survey indicating that 98 percent of program users claiming they intended to use the program again. However, the program remains underutilized, with only 2.9 million filers annually. The agency clearly recognizes the value in the program, as it recently decided to extend it until 2029. With a widely untapped potential userbase and existing infrastructure, it seems that bolstering the Free File program would be a better use of taxpayer dollars. Building a program like Direct File from scratch will likely bring maintenance and update costs alongside it – along with a whole host of unforeseen challenges.

Ultimately, the report highlights the prioritization crisis at the IRS. In a rush to achieve political wins, like the launch of Direct File, or a high level of service on the account management line, the IRS has neglected taxpayers. Those facing fraudulent claims to their refunds or delayed processing of valuable credits like the Employee Retention Credit are left helpless by the IRS. The agency should re-evaluate its priorities and ensure that it is first fulfilling its core responsibilities. There is no need for them to venture any further than their statutory mission.

This op-ed was originally published in National Review.