The IRS: Investing in a Digital Customer Experience

With contributions by Sarah Cunningham

On February 14, 2024, the Government Accountability Office released a report highlighting key recommendations for the Internal Revenue Service (IRS) to improve in its cost estimation policies and practices after receiving a significant investment from COVID-19 relief funding and the Inflation Reduction Act. In tandem, these key recommendations align with the vision of IRS Commissioner Danny Werfel, which he refers to in his 1-year anniversary speech where he states the IRS needs to grow, modernize, and adapt to better engage in a transformative digital world.

The IRS received an initial investment of $80 billion, which was then reduced to $60 billion; however, even with the cut, this investment can be pivotal in transforming the IRS to be able to modernize its systems to better engage with the public, expand accountability in the system, and maintain a system that promotes trust and fairness.

The IRS Transformation: What Does It Mean and What Can We Learn?

Prior to this large investment, the IRS was being pressured to improve the taxpayer experience and keep up with the fast pace of technology. At the same time, its funding was being cut and the agency was unable to maintain current services. Total appropriations for the IRS had declined about 15% from FY 2012 to FY 2019.  This decline was reversed with the Inflation Reduction Act and COVID-relief measures providing the the agency with $60 billion. With such a large and sudden investment into the IRS, the agency now has an opportunity to make strategic investments that allow it to participate and engage with taxpayers in the digital age. In April 2019, the IRS published its IRS Integrated Modernization Business Plan, which focuses on four main pillars: (1) taxpayer experience, (2) core taxpayer services and enforcement, (3) modernized IRS operations, and (4) cybersecurity and data protection. Within these four pillars are three reoccurring themes:

• Technology: The IRS plans to leverage its technological systems both internally and externally. Externally, the IRS looks to expand its engagement with the taxpayer through creating web-based applications for the taxpayer to directly engage with the IRS—especially through mobile platforms, as 68% of visits to the IRS webpage in February 2018 came from a mobile device. Accessibility is key! Internally, the IRS looks to enhance its cybersecurity systems through continuous diagnostics to anticipate and neutralize threats. The IRS is trusted to protect taxpayers’ important data while also working in partnership with other agencies across the federal government. Making sure that staff and systems are utilizing the most up-to-date technology is essential for a successful modernization effort.
• People: A system is nothing without people to run it. Customer experience is improved with staff that cultivate it. Not only is the investment into technology important to the IRS’s modernization efforts, so is the investment into hiring, training, and maintaining staff. While artificial intelligence can be leveraged to help data processes, the people who work at the IRS are as essential as ever to manage and implement the vision of the agency. Aligning staff with the direction that Commissioner Werfel has for the IRS is key in successfully modernizing the agency and helping to build out new strategic operating plans, implement new systems, and build trust in communities through engagement. In addition to the staff, senior IRS leadership must move in unison toward the agency's modernization efforts. Alignment on vision is essential to be successful in this modernization effort.
• Culture: Finally, the third common investment is in culture. The IRS can unify people, vision, and technology under culture. Redefining the IRS culture where the people, the processes, and the systems are all pointed in the same direction is key for lasting impacts to this $60 billion investment. In his speech, Commissioner Werfel described an agency that is working on paper in a digital age, but through this modernization it can establish a culture of trust and fairness for the taxpayer. Moving to a paperless system requires a strong culture committed to these values and that’s why culture is a pivotal area for investment through the four pillars of IRS business modernization. 
  

Lessons Learned from Other Agencies

There are many lessons learned from other agencies’ efforts to modernize. From firsthand experience, Summit Consulting has seen how important it is for technology, people, and culture to come together to pull a federal agency into the digital age. Summit’s work with Federal Student Aid (FSA) at the U.S. Department of Education is a lesson learned that investments must be strategic, especially with limited resources. With support from Summit, FSA has been working toward creating new agency-wide systems, including 1075-compliant systems that directly interact with the IRS, to bring the Free Application for Federal Student Aid, or FAFSA, experience into the digital age. Unfortunately, FSA was not given additional funds alongside the increased expectations, which limited the capacity of the agency to conduct its work. The IRS has been given a wonderful opportunity to leverage this $60 billion to build engagement, trust, and accountability with the taxpayer.

Photo by Kelly Sikkema on Unsplash