CALLING THE IRS...SORRY, WRONG ANSWER SEEK IRS HELP AT YOUR OWN RISK. YOU WON'T GET THROUGH ON THE PHONE AROUND A THIRD OF THE TIME. AND YOU'LL RECEIVE BAD ADVICE IN PERSON NEARLY HALF THE TIME.
(MONEY Magazine) – Cathy Young, a hospital worker from Marrero, La., had the kind of routine problem with her bill that any ordinary department store chain handles every day over the phone. Only Young wasn't doing business with a retailer; she was dealing with the Internal Revenue Service. The IRS wrote saying it would need 30 days to review her request to adjust her tax bill, because her files were in another office. If she had any questions, she should phone agent Mark Dorfman any day before 4:30 p.m.
She phoned--but Dorfman didn't answer. Over the next eight working days, the determined 52-year-old grandmother called 11 times, often letting the phone ring more than 40 times before she was disconnected. Finally, at 4:20 on the eighth day, a man answered. Sorry, he said, Dorfman leaves at 4 and, besides, this was his last day. When she asked to speak to someone else, the man refused and hung up but not before scolding her: "We don't have to listen to all that!"
Maybe that agent didn't have to listen to Cathy Young, but his higher-ups at the IRS ought to listen to this. MONEY magazine recently tested how well the agency responds to taxpayers seeking help. The performance was dreadful--so bad, in fact, that it could well fuel the grass-roots revolt that threatens the agency's very existence. When we described our findings to Rep. Bill Archer (R-Texas), the head of the House's powerful Ways and Means Committee, he said: "I'm surprised the results are that good." He added that our data supports his long-held conclusion that our income tax code has become too complicated to administer. His solution, which millions of people applaud, is this: "Abolish the income tax. Tear it out by its roots, and replace it with a tax on spending, so no individual [ever again] has to deal with the IRS."
MONEY set out to measure whether the agency's service is as poor as many taxpayers, including Archer, have often claimed. Our reporters, posing as ordinary citizens, phoned the IRS help line (800-829-1040) and asked 10 common questions people face when filling out their tax returns. The reporters also went to 10 different IRS district offices around the country to get answers. The test results: In short, the IRS flunked.
--First off, it took an extraordinary effort to get a staffer on the line. A full 30% of the time no one who could answer questions picked up the phone; most of the time we either got busy signals or recorded messages, or were disconnected. Furthermore, well over half the callers who got through (60%) waited five minutes or more, including one in four who had to hold for more than 20 minutes. When you consider that the IRS phone hours are 7:30 a.m. to 5:30 p.m. workdays, it's difficult to imagine who other than retirees, shut-ins and Money stringers have the time to hang on the line that long.
--And when we finally got through, we did not receive the right answer one out of every five times. The IRS workers answered only 78% of our questions accurately, got 12% wrong and promised to call back with the correct answer but then failed to do so 10% of the time. Moreover, the results suggest that agency service is deteriorating. The last time we conducted a similar phone survey, back in 1991, agency staffers got a respectable 91% of our questions right.
In sharp contrast, private industry aims to answer 80% of its calls within 20 seconds, according to Hobart Harris of Pittsburgh, a corporate technology expert with Ernst & Young.
--Worse yet, the IRS workers we saw face to face offered wrong answers about 40% of the time--and were far more likely to come across as bored, perfunctory and downright rude. (Agents seem generally aware of the problems in the district offices; several staffers we reached by phone warned our reporters not to bother coming down in person.)
Our reporters' experiences ranged from laughable to lamentable. Our Phoenix reporter waited with the phone ringing in her ear for 21 minutes before reaching an agent. And he couldn't answer her simple question about a charitable donation, so he transferred her to "someone who knew the tax law." Not so fast, though. She waited another 23 minutes for that staffer to answer--and after all that, he got it only half right.
And if anything, venturing into a district office was downright dangerous in more ways than one. Just finding the right office was like tracking down bureaucrats in Soviet Moscow, where there were no phone books. Our stringers in Bridgeport, Conn., Denver and a western suburb of Chicago swear that their district consumer-service offices are not listed in the local phone books. Denver reporter Stephen Marsh found a number only for an IRS personnel office, and when he called for the customer-service address, he got "an endless loop of recorded messages." In desperation, he trekked 15 miles from his home to the personnel office--and finally caught a break; customer service was at the same address.
Time and again, however, finding the office was far from a guarantee of actually receiving help. Take our Barbara Hannan. She got three wrong answers in nine minutes at the Bridgeport, Conn. office. For instance, when she explained that she was divorced in 1996, a staffer said: "You want to file jointly for the year. Take advantage of it." In fact, the law requires her to file as a single person. Reporter Janet Plume had an even more unpleasant time in New Orleans. The agent kept Plume waiting 10 minutes while she gossiped with a young woman about a birthday party, then she grunted out monosyllabic answers to three questions and managed to get one wrong. As Plume was standing in line to get forms, an elderly man came in; his thumb was bleeding profusely. He told two staffers at the front desk that he just caught his thumb in the office door and asked for help. Instead of offering a Band-Aid or any other assistance, the workers started cracking jokes about how the IRS would be happy to take more of his blood. The old man wrapped his thumb in his own handkerchief and left.
As horrible as these anecdotes and test results are, what's perhaps more shocking is that none of them seem particularly surprising to people familiar with today's IRS.
Lynda Willis, the Government Accounting Office's (GAO) director of tax policy and administrative issues, told MONEY's Washington, D.C. correspondent Ann Reilly Dowd: "Right now, the IRS' level of accessibility is unsatisfactory." Likewise, Rep. Rob Portman (R-Ohio), co-chairman of a bipartisan commission studying agency reforms, calls the current situation "totally unacceptable." And even Robert Tobias, president of the National Treasury Employees Union, which represents more than 97,000 of the IRS' 102,000 workers, concedes: "If you're a compliant taxpayer with a legitimate question who can't get a response, you're angry, and legitimately so." (For advice on when to go to the IRS for help and when to turn to other sources, see the box below.)
What's behind this mess? Numerous experts we interviewed stressed two main causes. The overarching problem, they contend, is that the Internal Revenue Service has never focused enough on providing service. In addition, this basic breakdown in communication with taxpayers has only worsened the past couple of years as the increasingly conservative U.S. Congress began squeezing the agency's $7.4 billion budget. For example, it's no real wonder that only 40% of our callers got through in less than five minutes; the agency has budgeted itself to answer only around 52% of the calls it gets. (What's more, if you call five times before getting through, the agency applies Alice-in-Wonderland logic and counts you as making one successful call.)
"It comes down to a question of resources," says IRS press officer Frank Keith. He notes, for example, that phone service must compete with enforcement efforts, among other things, for a share of the agency's dollars. This year, fiscal '97, the agency has $473 million budgeted for taxpayer services, including its phone banks, down from $482 million in fiscal '96.
The ultimate answer, Keith says, lies in three areas: reducing taxpayer calls by improving agency correspondence; expanding alternative information sources, such as the IRS' first-rate Website; and overhauling the agency's antiquated computer system, which sometimes requires a staffer to punch into as many as nine separate terminals to pull up one complete taxpayer file.
Problem is, the big item on his list--the computer fix--would require around an $8 billion effort over at least six years. In essence, agency critics say: Get real. Instead of praying for some computer miracle, the IRS should be doing far more with what it has today. The GAO's Willis says: "There are a lot of things the IRS should do to improve accessibility and service that would not cost more." Here are some of the ideas being discussed in Washington:
--Privatize the IRS tax-help phone lines. The bipartisan National Commission on Restructuring the IRS estimates that about 20% of callers ask routine questions that any professional tax preparer should be able to answer. So conceivably the agency could enhance its service and save money by subcontracting routine phone work that doesn't involve confidential personal information to a financial services corporation.
--Do much more to reduce the demand on the phone bank staff. As the box at left suggests, the IRS should spread the word that taxpayers can turn to its excellent 16-month-old Internet site (www.irs.ustreas.gov) to download forms and get answers to common questions. Also, those who prefer the phone can dial TeleTax at 800-829-4477. This 13-year-old, toll-free automated service offers recorded information on 148 tax topics, plus an update on the status of the caller's refund check. According to some estimates, encouraging people to use TeleTax could reduce calls to the general IRS help line by 30%. Perhaps best of all, you get through in minutes, if not seconds.
--Also, expand electronic tax filing. Currently, electronic filing is no bargain for most taxpayers; they must pay fees as high as $45 to get refunds an average of three weeks faster. Partly as a consequence, only about 13% of U.S. tax returns are filed electronically, compared with 30% in Canada and 70% in Australia. But Congress could help cut those fees by streamlining the electronic filing process. For example, Congress could try to find alternatives to requiring tax preparers to file separate W-2 and taxpayer signature forms with each electronic return to combat fraud.
Efficient and inexpensive electronic filing would cut overall IRS tax processing costs and boost taxpayer service. Officially, the agency estimates that it costs $2.65 to process a paper return, vs. $1.15 for an electronic one. But top staffers at the restructuring commission insist the real cost of handling a paper 1040, including overhead, runs at least $12, while reforms might drive down the corresponding electronic costs to pennies. Moreover, the computer software that creates most electronic returns virtually eliminates arithmetic errors; by contrast, 22% of paper returns are riddled with mistakes--half caused by taxpayers and half by agency staffers who keypunch 40% of a return's data into IRS computers. Although serious questions must still be resolved about taxpayer confidentiality on one hand and taxpayer fraud on the other, Congress should work with the agency to pass legislation to expand electronic filing as swiftly as possible.
--And finally, appoint an experienced executive to run the IRS. Traditionally, the agency has been run by tax attorneys with few management credentials. But with the current tax lawyer, Margaret "The Commish" Richardson, leaving after this tax season, the Clinton Administration could turn to a proven executive from a major service corporation, such as Ed Miller, the recently retired senior vice chairman of Chase Manhattan Bank, or perhaps Richard Braddock, the former president of Citibank. A champion of this idea, Joseph Robels of the United Services Automobile Association, argues persuasively for such a fundamental change by emphasizing that the agency must start "viewing taxpayers as customers as opposed to the enemy."
MONEY's test results underscore the need for such a radical cultural change. Millions of taxpayers have exhausted their patience with the agency. The IRS' 102,000 workers must either shape up quickly or face the risk that powerful forces will rip them out by the roots and discard them once and for all.