How Will Government Adapt?: Positioning the IRS for the Next Decade

Internal Revenue Service Commissioner John Koskinen shared his insights on his experiences to date in the closing session of the annual meeting of the National Academy of Public Administration in mid-November. Koskinen was confirmed as IRS Commissioner in December 2013. The position had been vacant for over a year, and during that interim, allegations of improprieties led to the dismissal of an interim commissioner along with other staff. Extensive congressional hearings ensued, and a number of reforms were launched by a new interim commissioner, pending Koskinen’s selection and confirmation. Koskinen has a career of successful turnarounds in both the private and public sectors. His leadership in the Y2K computer software changeover and 2008 financial crisis recovery efforts were seen as exemplary. This is the seventh and last blog post in a series that sums up highlights of selected sessions held as part of the annual meeting. Highlights “I’ve always believed that the people who know the most about an organization are the frontline employees and their managers,” says John Koskinen. So shortly after he was confirmed, he went out into IRS field offices and talk. So far, he has visited 35 of the largest IRS offices and talked with more than 12,000 (of its 90,000) employees. He says it is amazing “to see the level of enthusiasm and energy that our employees continue to have.” He says the biggest concern they expressed to him was not morale but that they lack the resources to “provide the level of taxpayer service that our employees want to offer and feel taxpayers deserve.” He’s gotten more than 400 improvement suggestions in person and another 500 via email. Where is IRS Today? The IRS typically processes 150 million tax returns each filing season. However, this year things will be different for several reasons. First, the IRS is facing its most complicated filing season ever, with the implementation of the new healthcare reform law’s requirements to show proof of insurance. This will affect about 20 percent of taxpayers. In addition, over 100,000 foreign accounts are being reported for the first time, under recent legislative changes. Second, the IRS is under severe budget constraints. Its FY2014 budget was $11.3 billion, nearly $1 billion less than in 2010 (even though there are 7 million more taxpayers and 13,000 fewer IRS employees). The Commissioner has publicly warned that, because of the increased tax complexities, there will be more phone calls and fewer people to answer them than in normal tax seasons, so a large number of taxpayers may not be able to have their questions answered. In addition, the budget constraints could lead to furloughs, if not resolved. Koskinen says this is problematic because the IRS loses about $30 billion in revenues for every 1 percent decline in compliance rates. Mr. Koskinen recognizes the importance of information technology in today’s society but notes” we have some applications that were running when John F. Kennedy was President.” He says that it is imperative that the IRS adapt to meet these IT-related needs and that the “Model-T” information technology infrastructure that the IRS depends on is insufficient. Thus, Mr. Koskinen noted that the IRS has some catching-up to do. Mr. Koskinen offered that the IRS has taken some positive steps when it comes to addressing present and future technology challenges, but that Congress has provided no funding in its current budget for IT infrastructure needs. What Is the IRS of the Future? What should the tax filing experience look like in the future? Koskinen says that in the next decade: There will be more web-based interaction, and less person-to-person contact. 85 percent of tax returns are now filed electronically. It is now the norm, and no longer an innovation. Taxpayers viewed IRS.gov web pages more than one billion times last year. He wants taxpayers to see their experience as fast, secure, and transparent – just like it is when they deal with their financial institutions. He wants to expand communication via social media and mobile – that’s what Millennials expect. He sees the need to deal with the generation gap among IRS employees (e.g., provide telework opportunities). And finally, since the IRS can’t predict how things will be ten years down the road, the agency’s leadership realizes they need to be able to develop an agency that can adapt to the technological, economic, and policy changes that can’t be predicted today. “The bottom line is that technology is changing so quickly,” he noted, “there is no way to guarantee or even know what the world will look like in 2025. . . Organizations can, however, still develop effective approaches for continuing to identify and make needed changes. In that way, they can effectively and appropriately respond and adapt when technology changes, when economies change, and when expectations change. And that, I believe, is how an organization can remain viable in 2025 and beyond.” NOTE: Commissioner Koskinen’s observations were delivered in the context of his delivery of the Academy’s annual James E. Webb Lecture. This lecture program honors James E. Webb, whose career, capped by his exemplary contributions as director of the Bureau of the Budget and Administrator of the National Aeronautics and Space Administration, serves as a standard for those who want to improve and strengthen the capacities and performance of government. The Lecture Program is sponsored by the Academy’s Fund for Excellence in Public Administration, through a generous grant from the Kerr Foundation. This blog post concludes the series launched several weeks ago as a way of sharing highlights from various sessions held at the Academy’s annual meeting. The IBM Center for The Business of Government is pleased to have been a sponsor of this set of summaries. Dan Blair, President, National Academy of Public Administration Dan Chenok, Executive Director, IBM Center for The Business of Government (prepared by John Kamensky NAPA Fellow, and Eric Christiansen, NAPA staff) Visit the landing page of this initiative where you can learn of future blog post topics and follow previous conversations.