The Taxman Cometh
Towards a kinder, gentler, and more efficient IRS.
By Bill Steinberg
FEBRUARY 7, 2000: If you mention the IRS to most folks, you are likely to conjure up images of the ultimate black box. The dark unknown. Something to fear and avoid at all costs.
Everyone has heard horror stories about taxpayers allegedly abused by the IRS. So it is little wonder that when Americans hear about the reforms at the Internal Revenue Service there is plenty of cynicism to go around.
In response to Congress' 1998 taxpayer-protection law, Charles Rossotti, the new commissioner of the IRS, has instituted higher standards of customer service, emulating the lead of successful private corporations, including their debt-collection practices.
The IRS now accepts more compromise offers from delinquent taxpayers who can prove an inability to pay. During the last fiscal year it accepted $311 million to settle $2.4 billion in tax debt a mere 13 cents on the dollar. More than one third of all compromise offers, however, were rejected by the IRS.
Jerry Heschel is director of the Memphis IRS Submission Processing Center, one of only 10 such centers in the U.S. Before coming to Memphis in 1997, Heschel held IRS management posts in Seattle, Fresno, Boise, and San Francisco.
The Memphis IRS Center is a modern 900,000-square-foot facility. At peak staffing periods, the operation houses nearly 6,000 workers, including a round-the-clock computer division.
Has the IRS really become kinder and gentler?
"One thing we've found over the years is that people would rather not have [direct] contact with us," Heschel says. "They want to file their tax returns and get their refund, and then they want to go on about their business."
Kinder and gentler is a term picked up by the media, Heschel explains.
"The big change with the IRS is that instead of us deciding how we're going to implement a regulation, we're trying to find out what the taxpayer the customer thinks about the difficulty they have with different issues with IRS," he says. "'Outside-in' thinking versus 'inside-out' kind of thinking is probably our biggest theme. What do you need as a taxpayer to make it easier for you? We still have the body of law that we are responsible for administrating."
In the area of increased taxpayer convenience, Heschel touts the efficiency and reliability of electronic filing and direct deposit programs for tax payments and refunds. Additionally, the IRS now accepts major credit cards for taxes owed. (Financial planning professionals would view this as an ill-advised option.)
To ease your tax-related anxiety, the agency has also rolled out a seven day a week, 24-hour phone service, making contact with an IRS representative a virtual certainty.
The official Web site of the IRS, "The Digital Daily" (www.irs.gov), now offers a broad range of information about the service in a palatable format. Downloadable tax forms are easily accessible from the site.
Heschel clarifies that a third-party consulting firm was hired to implement the new emphasis on customer service. Structural changes to the agency came as a result of their recommendations.
"We have realigned, generically speaking, into four business operating divisions: small business/self-employed, wage and investments, large and mid-size corporations, and tax-exempt/government entities," Heschel explains.
"Memphis, and four other centers, are intended to become small business centers," he continues. "At least that's the plan right now. By focusing on a narrow category of taxpayers, we'll be better in tune with their needs."
Originally, when Heschel arrived in Memphis, he was responsible for overseeing the entire range of services for the IRS center's operations. But his focus has been narrowed by the recent organizational changes.
"We have realigned the center, and I'm in charge of the submission processing division, some 3,000 employees. Pete Stipek, the other director who's been here since August, has taken control of the customer service division. They handle telephone calls, correction of tax accounts, correspondence, collection/liens, correspondence audits, and examinations."
Heschel's biggest problem in this tight Memphis labor market is finding enough seasonal employees to open and process tax returns. He is currently looking for about 1,200 individuals.
"Everybody's hurting for employees," Heschel laments. "The submission processing could conceivably be shipped out to other centers if the hiring goals are not met."
Heschel's selling points for prospective employees include the opportunity for "permanent career-conditional, competitive employment."
Starting salaries range from $7.65 to $9.37 per hour plus bonuses and incentive pay. Not too surprising, Heschel reveals that a significant number of the daytime seasonal workers at the IRS come from the FedEx Hub, after their night shift ends.
To avoid paying interest on refunds the IRS has to get the return processed within 45 days of the date the return was filed. "Our objective is to pay as little interest as possible," he says.
Heschel is proud of the fact that at the Memphis IRS Center, 93 percent of all tax refunds are issued within less than 40 days, as compared to an 83 percent national average.
Despite the new customer-friendly approach by the IRS, the dreaded audit still exists. Heschel confirms that all tax returns are scored for aggressive accounting. Certain scores earned on a tax return may lead to either a correspondence audit, administered by the IRS center on Getwell, or in-person audit.
The classic, face-to-face IRS audits, according to Heschel, are handled by a separate division of the IRS, the Kentucky-Tennessee District, whose headquarters is in Nashville. Locally, that division maintains offices in the Falls Building downtown.
The IRS also maintains a confidential program, centrally administered outside of Memphis, where citizens can report suspected tax cheaters by phone. In exchange whistle-blowers may earn a bounty based upon the amount of evaded taxes. Strict confidentiality rules prevent the IRS from disclosing information about the disposition of the case to the informant. Each lead has to be evaluated, and not all reports result in an audit or criminal prosecution. Defending the program in a matter-of-fact manner, Heschel says law-enforcement agencies have historically relied on third-party informants to accomplish their missions.
Shifting his focus back to the consumer-friendly focus, Heschel relates that another improvement that is not well understood by the public is the Taxpayer Advocate Program. Taxpayers having problems can have someone in that office who functions as an advocate for the individual, trying to resolve their problem with the IRS.
"A classic case [would be if we were about] to seize a bank account," Heschel explains. "If that would create an undue hardship on a taxpayer, by contacting the taxpayer advocate office, that could be delayed or stopped until it's resolved with monthly payments, or some recourse."
In reality, it doesn't always work out that way. "But, for true hardship kind of situations, [the advocates] have the authority to stop the action and work with the taxpayer and other divisions of the IRS to resolve the account," he says.
The final advancement Heschel covers is the new Innocent Spouse Program. It provides potential tax relief for divorced or separated spouses. These individuals were formerly held responsible by the IRS for the aggressive tax accounting of a former spouse who currently has no assets to pay taxes or could not be located.
With all these changes afoot, it is apparent that the IRS has successfully lobbed a wrench or two into the machinery of the popular, old "black box" analogy.
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