How the Internal Revenue Service is thinking about taxpayer-centric digital services

The Internal Revenue Service (IRS) is responsible for processing hundreds of millions of federal tax returns each year - and similar numbers of US citizens interact with the government organization on an annual basis to receive taxpayer support. The thinking at the IRS about how it serves citizens for their taxation needs is rapidly changing, somewhat fuelled by the COVID-19 pandemic, where the focus is digital-centric services. 

Eric Hylton, Commissioner of Small Business/Self-Employed Division at the Internal Revenue Service (IRS), was speaking at this year's SAS Global Forum, where he explained how the federal division is shifting towards servicing ‘customers' via a variety of digital channels and is deploying data tools and skills to help aid with non-compliance activities. Hylton said: 

COVID-19 has amplified thinking about how we transform the IRS, transform how we interact with taxpayers. We're thinking about the taxpayer-centric digital mindset, and that's really where we're trying to get to for taxpayers. 

Since 2019 the IRS has processed over 253 million federal tax returns and has assisted 67 million individuals via correspondence, telephone or online. Over this period, IRS online support saw 651 million taxpayers visit IRS.gov, with 360 million of those individuals using the website to use the ‘Where's My Refund?' resources. The IRS also has a mobile app - IRS To Go - that has almost 10 million individual users. Hylton said: 

So you can recognize the various touch points that the IRS has with regards to thinking about where we need to go for digital transformation.

The pandemic impact

Hylton explained that whilst the COVID-19 pandemic has accelerated the IRS's plans, the service was thinking about digital tax before it hit early last year. For example, in 2019 Congress asked the IRS to think about how it could improve customer service and in January it was able to provide the Taxpayer First Act in response, which lays out its plans. Hylton said: 

I think as we move forward, where I think the organisation needs to kind of move towards, is an app that is ‘My365', in which a tax return is prepared for individuals - it connects to their bank account, connects to all of the different aspects of that individual, so that it becomes somewhat seamless. 

However, during the pandemic, the IRS has been able to make some changes more quickly which Hylton argued will stand it in good stead moving forward. He said: 

One of the things that we are working on right now and we have changed our mindset on, is the fact that we have taxpayer digital communication, in which we are having secure messaging between the taxpayer and the auditor or Revenue Officer. And so therefore, now we can have secure email coming back and forth from the taxpayer. 

In addition to that, with COVID, we now use various video platforms - Zoom, Microsoft Teams - and we're looking to actually use that as a way of communicating with taxpayers versus actually taxpayers coming in, or us going to their office. That will allow us to kind of change the game and really address some areas geographically that we haven't done in the past.

The shift to remote work has also quickly adapted the organization's ability to think about how it can work digitally, which in turn is aiding its digital taxpayer services plans. Hylton explained: 

Before COVID, at least within small business and self employed, about 50% of our workforce was portable. Now we're at approximately 90%. That allows us to think differently, because now the work has to be portable. So, in addition to that you're digitizing some of that information. And so the IRS just recently appointed a new Chief Taxpayer Experience Officer, who is going to really push that forward in terms of how we really think about that taxpayer experience holistically.

Data skills and services

In addition to the above, Hylton explained that the IRS is thinking comprehensively about how it can make better use of its data, deploy more data skills and make use of data technologies, such as robotic process automation (RPA) and AI. For example, on the RPA front, the IRS is identifying simple repeated processes in the organization to help free up resources from tasks that can be carried out by machines. Hylton said: 

Right now we have a pilot with our Offer and Compromise Office. So when an individual comes in and they're trying to set up an agreement with the service to pay a certain amount - what happens is they present an offer to us and we have to monitor that on a regular basis. And so we're using RPA as it relates to that monitoring, because you're really just checking a couple of systems, which the computer can do.

On the AI side, the IRS is mostly thinking about how it can make use of natural language processing tools to support servicing taxpayers. Hylton said: 

All of us have received IRS notices before. And when you do, you think, okay, what is it I have to do here? So we're changing IRS notices to include QR codes and if you have a balance due it takes you right to the IRS website where you can make a payment, or set up an instalment agreement, different things of that nature. That's one way of reducing the traffic coming in with phone calls. 

But another way in which we're doing this is by using artificial intelligence, by having a chatbot, as well as voicebot, to be able to answer various questions for taxpayers as they come in. And then add on to that we have automated callbacks, different things of that nature, so we're trying to find a continuum of activities that will help taxpayers and reduce some of the demand. 

However, central to all this work at SBSE (the division Hylton is responsible for) is the hiring of data scientists to match them with tax experts to figure out what use cases could be useful for the IRS - particularly around non-compliance. He explained: 

This year SBSE should hire almost 3,700 individuals across the board - revenue agents, revenue officers, tax compliance officers,as well as data scientists. And that is a great opportunity because we're also looking at behavioural scientists as well, which are not your typical IRS positions.

But this is the sweet spot for the service, as we try to really address a lot of the non compliance issues, where we match a data scientist with a subject matter expert, whether it be a Revenue Officer or a Revenue Agent, they're very familiar and can really identify issues of non compliance. And then the data scientists will take those algorithms and develop a model in which we could actually say okay, bring this all together, and these are the areas we want to address from a non compliance standpoint. And that has worked.