Over 60 percent of callers to the Internal Revenue Service (IRS) last tax season could not get through to speak with a representative. The 40 percent that got through had to wait 30 minutes or more before speaking with someone. Technology has drastically changed the way communication is relayed, with most opting for the fastest and least resistant route to achieve the desired result. To this day, the IRS does not allow taxpayers or their representatives to access client data via the IRS website. However, there are plans where this could change. The future vision of the IRS includes giving taxpayers and their authorized representatives access to tax accounts electronically to see if there is a balance due, check tax history, make online payments, receive status updates, verify changes made by the IRS and update or amend returns. Furthermore, instead of waiting on the phone, text messaging and e-mail would be the norm. Taxpayers could send documents to the IRS securely via electronic mail. The IRS would not eliminate phone or face-to-face meetings; however, this approach would be severely cut back.
As the budget constraints tighten and less staff is available to assist the public, the IRS is forced to come up with creative ways to enforce tax compliance.
These approaches would increase efficiency when dealing with the IRS, but the downfall could be devastating. The potential for sensitive data falling into the wrong hands would increase, especially after last year’s cyber-attack on the government agency’s Get Transcript web tool. The IRS is currently testing the identity protection pin (IP Pin) program for residents of Florida, Georgia and the District of Columbia to combat some of the risk. An IP Pin helps the IRS verify a taxpayer’s identity and accept their e-filed tax returns since the pin is required for taxpayers who have one. It prevents someone else from filing a tax return with your Social Security number. If the program is successful, it will make it more difficult for perpetrators to file false tax returns and receive a refund. Furthermore, the IRS has assigned more than 3,000 employees to work on identity theft-related issues. That is approximately 3 percent of the entire IRS workforce. As a result of these efforts, from 2011 to November 2013, the IRS has stopped 14.6 million suspicious returns and prevented more than $50 billion in fraudulent refunds. These trends will only get worse as the IRS budget constraints tighten, coupled with the increased use of technology when dealing with the IRS.
Although the IRS of the future is adapting to technology trends and is becoming more user-friendly and efficient, it is also opening up the opportunity for fraud and other risks that you need to be aware of. It is imperative that the procedures and security checks are enough to combat future cyber-attacks and protect taxpayer data. Cyber attackers will strike the weakest point in the chain; as a result, this could put many small accounting firms out of business that cannot afford to safely maintain their clients’ data.
Craig M. Anderson, CPA, MT, is a senior tax manager at Siegfried Advisory LLC, an affiliate of The Siegfried Group LLP. Jeffrey W. Mitchell Jr., CPA, MT, is the senior vice president of Siegfried Advisory LLC. Siegfried Advisory LLC provides leadership, financial and tax advisory services to entrepreneurial organizations and high net-worth families.
