By Brenna Isman, Director of Academy Studies
The current administration is taking a very different approach to supporting the mission of the IRS, compared to years past. This is shining more intense light on the IRS. There are opportunities to modernize operations, and use technology to support greater customer service and more efficient use of funds. Now is the perfect time to build on lessons learned and inform decisions about how to improve performance and strengthen IRS operations.
NPR recently reported, “IRS cuts over 6,000 jobs in the middle of tax season,” the article explored the anticipated impact of cuts to the federal agency. As the deadline for federal tax returns looms, there is a focus on the Internal Revenue Service (IRS) and its role, today and in the future.
The IRS plays a crucial role in the administration of the United States tax system and, like many federal agencies, has faced significant challenges related to operational efficiency and effectiveness. Since its inception in 1862, it has been organized to carry out the responsibilities of the Secretary of the Treasury and has undergone many changes, responding to diverse perspectives regarding its role and strategies to meet its statutory mission to provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and to enforce the law with integrity and fairness to all.
In recent years, there has been more focus on increasing efforts related to customer experience, and the previous administration saw the value in providing more resources to support elevated levels of customer service and enhance tax enforcement with funding provided in the Inflation Reduction Act.
The Trump administration has taken a very different approach to streamlining the agency and reducing costs, while making previous tax cuts permanent and eliminating other taxes on sources of income. Many are watching the activity of the Department of Government Efficiency (DOGE), and tracking closely the outcomes of efficiency. Perspectives vary but there are areas of agreement as it relates to innovative ways to achieve greater efficiency. Many are aligned as it relates to the value and efficacy of technology to assist the IRS with key functions and to do so in a way that provides quick and accurate results.
Artificial Intelligence (AI) tools can assist with identifying underpayments and evasion, can strengthen fraud detection by analyzing large data sets and can detect patterns in a manner far more efficient than many current labor-intensive capabilities. Additionally, there are information technology modernization efforts that can further support faster response times and enable expanded self-service options. These uses of technology can allow taxpayers to answer more questions independently and to process their returns with a decreased need for resource-intensive engagement.
Many experts have explored the opportunities within the IT landscape. The Government Accountability Office (GAO) identified the potential for AI to dramatically reduce the “tax gap” or the difference between what is owed and what is paid by taxpayers. GAO estimated the number in 2021 at $688 billion. The IBM Center for the Business of Government has provided guidance for ensuring that tax agencies mitigate their AI risk to improve tax administration. The report highlights actions tax agencies should take to protect taxpayers and ensure efficiency goals are not at the expense of quality or fairness to taxpayers.
The National Academy of Public Administration has worked to identify best practices for both tax administration across the federal and state sectors as well as larger change management and IT modernization initiatives. Maximizing technology to achieve greater efficiencies within the IRS requires strategic resource allocation and deliberate planning. This will allow the IRS not only to respond to its calendar-driven requirements but to also support the agency in reviewing its governance and technology architecture, make informed decisions for buying or building technology and other inherently non-government functions, and to conduct thoughtful workforce analysis that includes training and transition planning to ensure uninterrupted delivery of mission functions.
The Academy’s more than one thousand Fellows have decades of experience leading organizations through change and informing effective paths forward to increase cost savings and efficiencies for the American public. These efforts are complex and require thoughtful application of innovative tools and ideas for performance improvement. As the former Commissioner of the IRS and Academy Fellow John Koskinen has pointed out, “moving too fast on change can create challenges in effectively realigning resources and applying effective solutions for increased effectiveness and efficiency.”
With around 95 percent of revenue coming to the government as a result of IRS collection, acting deliberately to make changes is essential. There is a tremendous opportunity to use past experiences to inform future endeavors - and maximize the impact of the federal government - while maintaining a laser focus on reducing waste and delivering results for the American public.
