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Lessons From the VSCPA's IRS Liaison Day

Customer service remains a major concern for the U.S. Internal Revenue Service (IRS), according to the experts at the VSCPA’s IRS Liaison Day on Nov. 6.

Sherry Stadler, the IRS’s Taxpayer Advocate for Virginia, gave an update on the agency’s customer service efforts. The numbers were…not encouraging.

“Courtesy disconnects” – essentially, when the IRS hangs up on a customer because the system is at capacity – rose from 544,000 in 2014 to 8.8 million in 2015. From April 1 – April 16, account assistance received approximately 50 million calls, of which 30 million were routed to automated service. Only 24.1 million of the total were rated as “answered.”

One major focus in the customer service area was dealing with suspected fraud and helping victims of identity theft. The IRS stopped 1.6 million returns for suspicion of fraud, with one-third proving to be false positives. Despite the increased attention, the IRS only answered 17 percent of calls to a line dedicated to the issue, with callers spending an average of 28 minutes on hold.

One IRS success despite reduced funding was a pilot program in 44 walk-in offices nationwide that allowed taxpayers to make appointments ahead of time.

“The assisters did like that,” Stadler said. “They were able to discuss it with them, explore their issue and discover what they needed to bring to the office to have a successful contact once they got there. It drove down wait times.”

National Taxpayer Advocate Nina Olson issued her annual Objectives Report to Congress in July, offering an overview of the 2015 filing season and calling out areas of focus for the upcoming tax season. Those included:

  • Providing victims of identity theft with a single point of contact

  • Ironing out glitches related to IRS administration of the Affordable Care Act (ACA), specifically the Premium Tax Credit and the Individual Shared Responsibility Payment

  • Dealing with unnecessary burdens related to IRS implementation of the Foreign Accounts Tax Compliance Act (FATCA)

  • Identifying and solving compliance issues faced by low-income and other vulnerable taxpayer populations, particularly as they relate to the increased use of self-service tools and online services

  • Increasing scrutiny of applications for tax-exempt status

Kyle Roberts, the IRS’s governmental liaison, echoed Stadler’s concerns. He said that nine times out of 10, government inquiries from his office deal with the courtesy disconnect, and that he personally deals with at least five inquiries a day.

Data security is another major priority for his office, and finding the proper protocols is like hitting a moving target.

“Five or six years ago, cloud computing wasn’t even a term we used,” Roberts said. “Data warehousing was a new term. Technology changes, and the IRS has to change its standards as well.”

Collections and Appeals

For the IRS’s Field Collections department, technology is more of an opportunity than anything. The department is piloting the Federal Tax Deposit (FTD) Alert X Coded program, which tests the proper timing for alerts and identifies which taxpayers benefit most. The program is scheduled to be implemented in full in 2017.

Another main goal of field collections is to reduce delays in collections, often caused by inaccurate financial statements. Verification and education are the key to those efforts, and the process can even help aid business owners in becoming profitable.

“In order to work out any solution with a taxpayer, we have to discuss compliance,” said Teresa Richardson, territory manager for the department. “The key here is to try to assist the taxpayer into be in a position to make a tax deposit, stay in compliance and stay in business.”

The IRS’s Office of Appeals, meanwhile, strives to follow what it calls a “Quasi-Judicial Approach” to its work in order to preserve the taxpayer’s appeal rights and illuminate the separation between it and Field Collections.

“We’re not going to be doing compliance work,” said Irene Trimback-Horsch, revenue officer in the Office of Appeals. “We’re not going to continue the investigation. We’re not first finders of facts.”

That was the motivation behind some of the office’s policy changes, a collaboration with the IRS’s Operating Divisions, Taxpayer Advocate Service and Office of Chief Counsel. Appeals officers are not to take investigative actions or assists Compliance with case development — the office’s consideration is strictly limited to whether or not a proposed or taken action was appropriate.

Thus, Appeals decisions are limited to supporting Collections actions or directing Collections to change course. And the office will no longer make determinations on whether or not liens will be filed.

Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) is a major focus in compliance for the U.S. Department of Labor (DOL). More than 130 million workers nationwide are covered under FLSA in one of two ways:

  • If an enterprise (workplace) is covered, all its employees are protected by FLSA
  • If an enterprise is not covered, individual employees may still be covered

Individual coverage is granted to employees who are engaged in:

  • Interstate commerce
  • Production of goods for commerce
  • Closely-related process or occupation directly essential to production of goods for commerce
  • Domestic service

Taking that to its logical conclusion, almost every employee in the United States is protected by FLSA (except for employees of small construction companies and independently owned retail or service businesses).

The next logical question is this: What differentiates an employee from a contractor? The DOL has some relatively simple ways to determine this.

“If the employer’s directing them to do anything and they’re not benefiting from it profit-wise, they’re going to be an employee, not an independent contractor,” said Timothy Trivett of the DOL’s Wage and Hour Division.

Trivett took care to point out what the FLSA does NOT require:

  • Vacation, holiday, severance or sick pay
     
  • Meal or rest periods, holiday pay or vacations
     
  • Extra pay for weekend or holiday work
     
  • A discharge notice, reason for discharge or immediate payment of final wages for terminated employees
     
  • A limit on the number of hours worked in a day or days worked in a week (for employees 16 and older)
     
  • Pay raises or fringe benefits

Another key point: Violations of FLSA standards are not nullified just because an employee agreed to them.

“Employees cannot agree to violate the law,” Trivett said. “Overtime’s a big one for this.”

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