A lot of the tax headlines this week have focused on the hiring freeze and layoffs that are coming to the IRS. These cuts could not be coming at a worse time, given that the IRS is about to head into tax filing season and is understaffed even at current employment levels. While the IRS has likely gotten somewhat used to the personnel impacts of being understaffed and underfunded, it still struggles to mitigate the impacts of personnel shortages with improved technological systems and operational efficiency. Indeed, the IRS’ technological infrastructure is notoriously outdated, which creates significant processing inefficiencies and communication barriers that are further compounded by the lack of clarity that exists with some commonly received notices. As a result, the taxpayer experience of interacting with the IRS has been less than satisfactory for quite some time.
While technological interface modernization and improved notice clarity cannot be a full replacement for a fully staffed IRS, these types of reforms are nevertheless badly needed. Accordingly, potential technological reforms and notice clarity improvements aimed at modernizing IRS operations and improving taxpayer service lie front and center in Title I of the proposed Taxpayer Assistance and Service Act.
While Title I of the Act does not solely address improvements to the IRS’ service function (indeed, in my next post, I will focus exclusively on the significance of a specific proposal in Title I that centers on low-income taxpayer clinics), several provisions do take on the topic of IRS modernization directly. Section 101 of Title I focuses on the scanning and digitization of tax returns and correspondence, a proposal that addresses one of the primary issues behind IRS backlogs and delays. Tax returns prepared electronically but filed on paper contribute to processing delays, as manual data entry remains a significant bottleneck. The Act’s proposal to require a scannable code for electronically prepared but paper-filed returns aims to reduce the reliance on manual data entry, which has historically been slow and prone to errors, in an effort to facilitate the IRS's digitization process.
This provision is particularly timely given the increasing reliance on digital technologies across various sectors. Many businesses and government agencies have made similar transitions to digital data processing, and the IRS must follow suit. The proposed reform lays the groundwork for a more streamlined system that can handle a higher volume of returns and correspondence with greater accuracy and efficiency.
Another key provision under Title I is Section 102, which proposes the establishment of a real-time dashboard on the IRS website that informs taxpayers about backlogs and wait times. The inability to track the progress of returns or the status of refund requests leads to unnecessary calls to the IRS, clogging phone lines and exacerbating delays. By offering up-to-date information about wait times and backlogs, the dashboard allows taxpayers to manage their expectations and make more informed decisions. No longer will taxpayers need to reflexively call the IRS, hoping to speak with an agent. Instead, they can see for themselves the status of their return or refund and adjust their plans accordingly. The introduction of this dashboard will help reduce frustration, avoid duplicate calls, and increase taxpayer satisfaction by providing immediate access to information. In addition, it hopefully will have the impact of freeing up existing IRS personnel to handle more complex inquiries.
Section 103 proposes an expansion of electronic access to information about refunds, building upon the “Where’s My Refund?” tool, which has become a cornerstone for taxpayer communication. This provision goes further by offering more detailed, individualized information about the status of tax returns, refunds, and additional requests from the IRS. With personalized updates about why a return has been delayed, what additional information is required, or why a refund is suspended, taxpayers will have more control over their experience. Inefficient IRS communication often leaves taxpayers in the dark. By upgrading the “Where’s My Refund?” tool, the IRS not only improves customer service but also reduces the volume of unnecessary correspondence, both electronic and physical. This transparency will lead to fewer calls to the IRS, which will also help streamline the process and prevent the overwhelming backlog that plagues the agency.
As we move into an era of greater digitalization, Section 104 of Title I proposes the deployment of callback technology and enhanced online accounts for taxpayer service. For years, taxpayers have experienced long hold times and unhelpful interactions with IRS agents. The implementation of callback technology, which allows taxpayers to receive a return call when their turn is up, will help alleviate the frustration of waiting on hold. In addition, allowing taxpayers to view images of tax returns and notices sent or received by the IRS through their online accounts will offer a higher level of service, especially for those working with tax professionals.
The proposal also enables taxpayers to authorize tax practitioners to access the same information within the online system, further reducing administrative burden and enhancing the convenience of professional support. This upgrade would provide easier access to the necessary information, improving collaboration between taxpayers and their practitioners.
Section 105 addresses one of the most common pain points for taxpayers—math error notices. These notices, which inform taxpayers that the IRS has adjusted their return based on perceived mathematical or clerical errors, often lack the clarity needed for taxpayers to understand what changes have been made and why. Issues of notice clarity are, of course, not unique to math error notices. Other critical notices—such as statutory notices of deficiency and collection due process letters—are also often difficult to interpret, leading to taxpayer confusion and lost rights. The provision proposes that the IRS issue more detailed math error notices that specify the nature of the error, the relevant code sections, and the specific line of the return that is being adjusted. By providing specific details about the error, the IRS not only facilitates quicker resolutions but also reduces the overall strain on the agency's resources. This is a welcome and a much needed proposal, although my hope is that it represents only the beginning of a larger effort to improve notice clarity across the board so that all IRS notices include clear deadlines, actionable steps, and explanations in plain language.
These proposals present a forward-looking vision for a more efficient IRS, but their success will depend on careful implementation that aligns with taxpayer rights. Modernization efforts aimed at improving efficiency should not be pursued at the expense fairness and due process. Accordingly, even if Congress adopts these reforms, there will still be a need for the IRS to be able to pursue a balanced, omnichannel approach to taxpayer service that maintains accessibility, transparency, and legal protections.
Millions of Americans still lack internet access or reliable broadband. Title I’s reliance on digital platforms assumes a level of technological accessibility that does not exist for all taxpayers. Without alternative channels—such as in-person assistance or paper-based communications—over reliance on digitization and online processes may inadvertently marginalize vulnerable populations, including low-income taxpayers and elderly individuals. Title I’s provisions for callback technology and improved online tools are positive developments, but if adopted, they should complement, rather than replace, existing telephone and in-person services. For example, while it might be possible to use these technological interfaces to reduce the need for live representatives to respond to certain routine inquiries, taxpayers should still have access to live representatives who can assist with complex cases that cannot be resolved through automated processes or who can offer assistance to taxpayers who do not have sufficient online access. In the alternative, the IRS could invest in community outreach programs and partnerships with nonprofits and libraries to provide access to digital tax tools for taxpayers without reliable internet, thus mitigating the impacts of the digital divide and allowing increased online services to be more widely utilized.
The Act is proposing some badly needed steps to streamline operations and to enhance taxpayer interactions with the IRS. However, these proposals carry risks to taxpayer rights if not properly implemented. A truly effective IRS modernization strategy must embrace both technological progress and equitable access to service, ensuring that all taxpayers—regardless of their means—receive the support and clarity they need to navigate the tax system.