National Taxpayer Advocate Erin Collins said today in her 2024 Annual Report to Congress that the taxpayer experience “has noticeably improved” over that past year while also stressing the need for adequate funding for technology modernization at the IRS.
The 277-page report outlines technological improvements the IRS already has achieved with the benefit of multiyear funding from Congress.
“For the first time since I became the National Taxpayer Advocate in 2020, I can begin this report with good news: The taxpayer experience has noticeably improved,” Collins writes. “After receiving multiyear funding, the IRS has made major strides toward improving its taxpayer services and information technology (IT) systems.”
Congress provided the IRS with about $79 billion in additional funding over a 10-year period in the 2022 Inflation Reduction Act (IRA) to help with modernization efforts. However, Congress rescinded $20 billion of that funding in 2023, and it recently repealed another $20 billion when it approved the latest continuing resolution funding bill in December.
Collins notes that much of the IRA funding – such as the funding allocated for enforcement – has generated controversy, but that some of the multiyear funding – like the money for technology modernization – has received strong bipartisan support.
“I want to highlight this distinction so that if Congress decides to cut IRA funding, it does not inadvertently throw the baby out with the bathwater,” Collins says in the report.
According to the report, the IRS receives its funding in four accounts: Taxpayer Services, Enforcement, Operations Support, and Business Systems Modernization (BSM) – which essentially equates to technology modernization.
Of the $78.9 billion in 10-year funding originally provided for the IRS, 58 percent was allocated for Enforcement, and 32 percent was allocated for Operations Support. Just 4 percent was allocated for Taxpayer Services, and only 6 percent was allocated for technology modernization.
Collins criticized this “extreme imbalance in funding priorities” and recommended that the new Congress either provide more funding for the Taxpayer Services and BSM accounts or reallocate some of the Enforcement funding to those accounts.
According to the report, the IRS estimates that it will need about $3 billion in additional BSM funds over the 10-year window to achieve its IT modernization objectives.
“BSM funding is used to automate tasks so that either a taxpayer can address their issues without the involvement of an IRS employee, or an employee can provide more timely and accurate assistance,” Collins says.
“My expectation is that if Congress provides adequate funding to upgrade technology systems, many more taxpayers will be able to transact business with the IRS without the need for employee involvement, which ultimately will produce cost savings and reduce taxpayer burden,” she adds.
While the IRS still operates the two oldest technology systems in the Federal government, the agency has used its BSM funding to make notable improvements to its technology systems – and, in turn, taxpayer service.
Collins shared some of these improvements, including that the agency is increasingly scanning and processing paper-filed tax returns electronically. More than 10 million taxpayers still submit paper returns, but the IRS made progress this year in automating the processing of these documents.
Additionally, secure messaging is now available for some taxpayers, and its use is expanding. The report notes that this service allows taxpayers to send messages to an assigned employee at a time of their choosing “without waiting on hold or playing telephone tag with the employee.”
Another tech win for the IRS is its expanded chatbot functionality on IRS.gov. During the 2024 filing season, more than 800,000 taxpayers used the IRS’s virtual assistant chatbot to get answers to their questions.
Similarly, new voicebot technology helped about two million taxpayers who called the IRS’s toll-free 1040 line get answers to their questions.
Finally, Collins highlighted that taxpayers now can submit more than 30 forms to the IRS directly from their mobile devices. This is a game-changer for the estimated 15 percent of Americans who rely solely on mobile phones for their internet access.
“These technology options – most of which have been standard for years in the private sector – represent a leap forward into the 21st century for the IRS and therefore for taxpayers. But most are still works in progress, and their full deployment remains dependent on the availability of funding,” Collins concludes.
