Refund? What Refund? Why the IRS is Screwing Up

...Returns were lost, purposely misplaced, even destroyed...

...Officials there don't attribute the mishaps and delays to bad management...

...Then again, to a president whose main enemy is Washington, and who seems to resent paying any taxes at all, that may not sound like such a bad combination...

...This isn't a sin, it's a duty...

...If it's more than 'where's my refund,' " one worker from the Philadelphia center says of the taxpayer assistance staff, "most times they don't have an answer...

...It's not seen as a stable area, where you'll have your job next year," says Tobias...

...Over in the taxpayer assistance division, George O'Hanlon, the national "taxpayer ombudsman," speaks with pride about the hundreds of thousands of problems resolved in 1985...

...No, Goldberg insists, the figures are accurate...

...An undetermined number simply disappeared, and an estimated 100 returns were found hidden in a women's restroom...

...But he points out that many of the programming flaws should be eliminated in coming years, and Congress may appropriate additional funds for more hardware in the fiscal year 1986 budget...

...As a great tax reformer once said, cheating a system that is itself a cheat isn't a sin, it's a duty...

...The official didn't say how many taxpayers he thought slammed down the telephone in disgust and decided to fudge a little on their returns to get even...

...There was restraint on IRS, as on every other agency," says Edwin Dale, spokesman for the OMB...

...We still have the actual paper documents, but they would be too time-consuming to find, so we ask for the duplicates ." These people seem to forget that they work for the public, not the other way around...

...Five million additional returns are expected in 1986...

...The proof of the pudding," he adds, "is in the eating—did we get the job done...

...A variety of other bugs turned up across the country...

...After all, . . .what's immoral about cheating a system that is itself a cheat...

...Consistency" makes no sense in the case of the IRS, because unlike most other agencies, it produces far more money than it consumes...

...There was consistency—that was the goal!' Even if tax collection were strictly a financial matter, the administration's thinking would be cockeyed...

...Peter Schmeisser assisted with research for this article...

...Productivity improvements'—now that can be put in quotation marks," says Donald Alexander, IRS commissioner from 1973 to 1977...

...Pickle, chairman of the House IRS oversight subcommittee...

...the line was busy 189 times...

...The real question is whether running computers solve all of the problems," he says...

...Another 20,000 such letters were destroyed at the Austin, Texas center, while documents also disappeared in Andover, Massachusetts...

...Overwhelming workloads have led to large-scale foul-ups for the last three to four years—well before the arrival of the new computer, says one union official, adding, "The difference is, this year, it's in the newspapers ." That's not what you hear at IRS headquarters in Washington...

...At the time the study was conducted, IRS work quotas were considerably less demanding than they are today...

...Employees say they have had to move paper more rapidly, without concern for accuracy...

...Cynicism sets in, and noncompliance becomes easier to justify...

...in the national office, more than $40,000...

...Without justification, liens were placed on property and bank accounts were frozen...

...Depending where you put it, a dollar invested in the IRS will return between $5 and $20 in tax revenue...

...or applaud when someone else does...

...We expected problems from the conversion, and we experienced somewhat more problems than we anticipated," IRS Commissioner Roscoe Egger said with considerable understatement during one in a series of uncomfortable appearances this spring before congressional committees...

...Moreover, every time Congress changes the tax code, the IRS must retool with new computer programs and personnel training...

...Ideally, how many more people would he like to have for taxpayer assistance...

...Obviously, chasing down liars and crooks is important...

...Reagan has always believed that in the long run the only way to scale down federal activities is to limit the money available to Congress for appropriations...

...They set the minimum number of documents that an employee must process within a specified time period...

...One diligent Philadelphia taxpayer, who filed in January, spent the better part of February, March, and April calling the IRS to find out why she hadn't gotten a refund...

...Increased funding for Internal Revenue is a potential multi-billion dollar deficit reduction plan that has been completely ignored by the White House and the OMB...

...Someone like me makes the decision...

...No other agency has such a direct impact on their lives...

...It would seem elementary that managers who use output quotas need to know whether they are creating impossible burdens for their workers and whether corners are being cut to meet the standards...

...Starving the IRS, however, results in more than lost revenue...

...the rest hit busy signals or languished on permanent hold...

...Campaigning for tax reform this spring, Reagan sounded as if he were endorsing popular defiance of the IRS's mission...

...It is, of course, laudable that the IRS would seek productivity savings and perfectly plausible that better machines and management would improve efficiency...

...The bad news out of Philadelphia transcended mere carelessness with individual returns...

...Difficulties also arose when employees attempted to transfer information in the regional centers to magnetic tape for shipment to a central information repository in Martinsburg, West Virginia...

...Similar comparisons are being done with other deductions, and the administration has proposed the addition of 7,500 more auditors beginning in fiscal year 1987...

...The result: worse service for loyal customers and widespread ill will toward government in general...

...But its victims are ordinary, honest people who deserve to be treated decently by their government...

...You can do that by lowering taxes, and you can also do it by failing to support the agency that collects the taxes...

...Under the new system, bonuses and promotions may be awarded for beating the quotas...

...Not surprisingly, the workload of the IRS grows each year...

...Since 1980, there have been major revisions each year...

...Judging from this year's performance, beefed up enforcement will yield more taxpayer inquiries to the service centers, more incorrect delinquency notices, more innocents snared in IRS nets because of human and computer processing errors...

...Pickle...

...The culprit, they say, is their new $103 million computer system, which replaced older equipment at all ten regional centers...

...Upon the subcommittee's recommendation, the House rejected the administration's budget for the IRS and approved increases in funding and staffing...

...And they did...

...Similarly, if IRS telephone advisers cannot tell an honest taxpayer how to fill out his return correctly or why his refund is months late, who can...

...IRS officials discovered that the new software program adopted for the computer was inefficient and slowed the processing of returns...

...Morale is terrible," says Michelle Cummings, a local union leader who works in the Ogden, Utah facility...

...The deficit is growing, tax compliance is getting less, we've got snafus all over the country, and you're telling me you need less people...

...We don't always get what we ask for," concedes Stanley Goldberg, assistant commissioner for returns and processing...

...While fewer people process more returns with less accuracy, an equally overmatched taxpayer assistance staff tries to man the telephones and walk-in advice offices...

...But it is not a scientific certainty, as this year's mechanical snafus and mismanagement have demonstrated...

...Explaining the agency's reasoning in this kind of situation, one IRS spokesman says, "There are some cases where the data [is] erased accidentally...

...Goldberg says they are manageable, although a review is under way in the wake of the past tax filing season...

...If the agency fails to perform competently, millions of willing taxpayers may be hurt...

...But if enforcement is augmented at the expense of returns processing and taxpayer assistance, the IRS will find itself pursuing a lot of the wrong people...

...By February it became clear that 27,000 corporate taxpayers had been mistakenly threatened because the IRS had lost track of $300 million in payments for taxes withheld from employees' paychecks in 1984...

...Threats to attach property followed, and at least five businesses had their assets impounded...

...For most people, dealing with the IRS is their main personal contact with the federal government...

...There's too much to do for this number of people!' In a report completed in April, the General Accounting Office concluded that "inadequate staffing (in terms of numbers and/or skill) was one of the factors that contributed" to record backlogs in Philadelphia this year...

...Assigned to an "adjustments" unit, Cummings attempts to untangle the most complicated mistakes and inconsistencies in returns...

...In January, businesses in several mid-Atlantic states served by the Philadelphia office began complaining about mysterious delinquency notices dispatched by the IRS computer...

...Take the work quotas, for example...

...Commissioner Roscoe Egger went back to Congress this spring, asking for cuts in his budget and less personnel for processing and taxpayer assistance...

...Take my staff, please Major failings such as these should prompt immediate action by the person in charge...

...Confused callers are getting less helpful advice because the administration's attempts to eliminate taxpayer assistance have driven away many competent employees, says Robert Tobias, president of the Treasury employees union...

...And while the returns piled up higher and higher, the number of people in the two key areas serving the law-abiding taxpayer has fallen dramatically...

...Prominent in the Reagan pantheon of bureaucratic villains is the Internal Revenue Service...

...Who will be there to rescue them...

...In any case, the IRS is gradually phasing out this kind of one-on-one personal assistance in favor of a computer answering service that plays pre-recorded answers for a limited number of possible questions...

...Yet over the same five-year period, the total number of people working for the agency has remained essentially the same, approximately 87,500...

...Congressional staff members responsible for analyzing the IRS confirm that legislative oversight often isn't all that it's cracked up to be...

...One House aide, after six months in IRS oversight, describes the experience: "Some administration spokesman comes before the committee and says 'X number of employees will do X job because of X productivity savings...

...The General Accounting Office three years ago confirmed such anecdotal evidence with a nationwide study showing that haste caused IRS workers to make nearly twice as many arithmetic mistakes in processing tax returns as taxpayers do in filling them out...

...Some of them are real, and some of them are imaginary!' Congress, Alexander explains, will usually accept the administration's estimates for lack of any better information...

...The compliant taxpayer who has been burned by the IRS probably would not be soothed very much if told that the administration has shifted resources to enforcement and added new traps for the dishonest...

...I'm sitting here"—in a cramped, and noisy office in the Longworth building—"what do I know about how many processing people versus enforcement people are needed in Philadelphia...

...People who looked at taxpayer assistance as a career, who looked to develop some expertise in dealing with the public, have simply abandoned it . . . . Now, the people who go into that area are either temporaries or are looking to get out to some other job as fast as possible...

...In the following months, thousands of people victimized by the Philadelphia center, which serves taxpayers in Washington, D.C., Maryland, Delaware, and Pennsylvania, came forward with their own tales of woe...

...If this kind of bureaucratic behavior were directed toward criminal tax evaders, it might be understandable...

...When fewer documents emerge at the end of the processing line than went in, shouldn't that be a signal that something is amiss...

...The people who process tax returns hold lowlevel civil service rankings, in the GS-4 range, and earn an average of $14,000 a year...

...When the quotas become too demanding, says the former official, the difficult cases are the most likely candidates for calculated misplacement or destruction...

...You have compliant taxpayers out there who have confidence that you will get the job done...

...Her quota is four cases per hour, which she says is "pretty difficult to do with easy ones" and sometimes "just impossible...

...The president has fumed over the IRS's "demeaning practices" and accused it of treating people's earnings as its "personal property...

...This guidance has become more essential in recent years as the tax laws have reached the complexity level of quantum mechanics...

...Those [IRS] people don't see it from the taxpayer's point of view," says Rep...

...Realizing that the requirement is often not feasible, supervisors instruct the adjustments staff to resolve "the immediate issue raised by the taxpayer and ignore any other problems" with the account, says Cummings...

...In other words, Washington approves the numbers, apparently without the foggiest idea how many returns Jane Smith in Austin can keypunch in an hour and how many errors she's likely to make at a given speed...

...Apparently, the IRS now expects taxpayers to correct the government's mistakes and foot the bill as well...

...Trust lost is not easily regained...

...Previously, service center employees were evaluated primarily by means of a "peer group average," which measured the output of an entire unit rather than that of individual workers...

...Egger, no doubt, was relieved by this outcome...

...Clearly it is wise to encourage workers to meet reasonable output standards...

...For more than 20 years, the IRS had been patching up a system designed in the late fifties...

...An IRS official told The Washington Post in March— apparently with a straight face—that it was "acceptable" if taxpayers had to make ten calls to get through on busy days and six on normal days...

...It's almost as if some of the Reaganites are more than willing to see the IRS go hungry as one tactic in their holy war against government...

...Just since 1980, the amount of delinquent taxes owed the government has increased by $25 billion to $87 billion...

...Overall, IRS salaries average more than $22,000 a year...

...Don't call us, we'll call you The first signals that 1985 would be the IRS's worst year ever came from Philadelphia, home to one of the agency's ten regional service centers...

...To this, IRS officials seem oblivious...

...The division that helps taxpayers find their way through the complexities of the tax laws has gone from 5,591 to 4,370, a 22 percent decline...

...A taxpayer in quest of her refund might intuitively sense this when she has to make 203 telephone calls to find out that the IRS has lost her return...

...A General Accounting Office inquiry revealed that 150,000 taxpayers had received incorrect delinquency notices from Philadelphia alone...

...There was some debate, however, as to whether the new system should have been rushed into operation just before the 1985 filing season and after only minimal testing...

...Admitting that he needs more people in processing, Assistant Commissioner Goldberg, for example, must be conceding that IRS productivity claims are exaggerated—that the agency is shorthanded...

...But far more important than any mechanical breakdown is the shift of attitudes and priorities that has taken place inside the Reagan IRS...

...Work quota problems exist in most of the service centers, according to union officials...

...Under Reagan, the staff that processes returns has shrunk by a fifth, from 28,744 to 23,111...

...Set by supervisors in the field, the standards must be approved by the national office...

...The administration's explanation for cuts in processing and taxpayer assistance is a simple one: "productivity savings ." Every year, automation is expected to increase, and managers look for new ways to use the same number of employees to do more work, the IRS has told Congress...

...That he even asks the question suggests that he is something less than Johnny-on-the-spot regarding the troubled service centers...

...As a result, most members of the assistance staff do not have the experience or skills to solve anything more than the simplest questions...

...In the case of correspondence from taxpayers—for example, letters protesting incorrect delinquency notices— employees can meet their quotas simply by shredding the letters and reporting the cases resolved...

...Finally, she got an answer: the IRS had no record of her return, so she would have to refile...

...While the agency's workload has grown tremendously, the administration has cut by more than 20 percent the staff that processes returns, answers taxpayers' questions, and gets refunds out on time...

...This is an agency with a lot of troubles ." Cooking up those numbers The story behind the headlines about IRS computers running amok begins with some basic numbers...

...They've become sufficient unto themselves, handling things the way they want to...

...And the answer is they don't . . . .This is more than just Philadelphia...

...The pressure begins with the IRS's stringent "performance expectations ." Imposed in 1980 in response to new civil service regulations, these standards are, in effect, work quotas...

...Pat Wilson, a union official and 20-year veteran at the Philadelphia center, says that filing seasons are always hectic, but only in the past three or four years have workers "started to crack and break...

...Although the commissioner was unavailable for comment, other agency officials privately acknowledge the obvious—that they need more rather than fewer workers...

...People count on refunds to make this month's payment on the car or to take the family on a vacation...

...According to press accounts and information provided by IRS employees to congressional offices, no fewer than 27,000 tax returns were improperly shredded at the Philadelphia center...

...demanded an incredulous Rep...

...Getting the tax returns and refunds under control is absolutely essential before you do anything else," says Sheldon Cohen, IRS commissioner during the Johnson administration...

...no information available...

...If they are harassed or hung up on by uninformed IRS employees, they might well be tempted to shout, "Get government off my back...

...IRS processing employees work in sprawling, hanger-like buildings cluttered with paper and computer terminals...

...Without the cooperation of the vast majority who obey tax laws, the system would collapse in a swirl of blank Form 1040s...

...Sadly, the IRS actually lived up to Reagan's damning portrayal this year...

...On 11 occasions when she did get through, she was told the computer was down...

...In Philadelphia, for example, the computer's data storage unit failed to function 45 percent of the time in January and February, leaving many workers staring at blank video display terminals...

...I can't give you an idea on the numbers we need ." If the taxpayer ombudsman doesn't know how many more problem-solvers he needs, who does...

...Seventy-eight percent of such callers got through as recently as 1978...

...And it's likely that they'll wonder why the mighty IRS didn't think to have a backup computer system available for such emergencies...

...But the best vantage point from which to view IRS operations is inside of a service center...

...Goldberg stresses that officials in Washington "don't sit here and say Jane Smith in Austin [should] keypunch in X number of documents ." Fair enough...

...A staff member for the House IRS oversight subcommittee says that "with 20/20 hindsight [Congress] might have expressed more skepticism" over the pace of computer modernization...

...But when asked to evaluate a variety of specific quotas cited by workers as unrealistic, Goldberg responds, "Whether [they are] reasonable or not, I don't know...

...Refunds were months late, and when they didn't arrive at all, the IRS told taxpayers to start from scratch and refile...

...By April 17, the woman had called 203 times...

...Informing the taxpayer that the computer is down does not settle the matter...

...That any of this activity could go undetected for months suggests a failure on the part of supervisors to keep close track of the paper flow at the service centers...

...Once considered one of the most efficient bureaucracies in town, the agency has turned into an incompetent bully...

...Desperate because they fall behind the required pace, workers say there is sometimes a gnawing temptation to ease their load by destroying documents...

...At the IRS service center in Fresno, California, officials admitted in mid-May that workers had shredded 60,000 letters from people trying to resolve tax problems...

...In 1980, taxpayers filed 137.4 million returns...

...Under any sort of output requirement, workers tend to set aside difficult cases so they can fulfill the quota with easier ones, according to a former federal official with experience running a large bureaucracy...

...The mayhem was not by any means limited to the City of Brotherly Love...

...To compensate, IRS supervisors have enforced unrealistic work quotas that, in turn, have led to errors, low employee morale, and the improper destruction of documents...

...Administration officials have attempted to write off the nightmarish filing season as a fluke—the result of a balky new computer...

...Failing to meet them can lead to dismissal...

...For instance, the agency now crosschecks the forms of interest and dividends paid with taxpayers' versions of the same information...

...The administration actually tried to kill the entire direct taxpayer assistance program, but Congress blocked the move...

...Yet a GAO survey of telephone assistance in 1985 found that fewer than onethird of the tens of millions of taxpayers calling for help reached an IRS staff person on their first try...

...Nor is this anything new...

...Inadequate staffing in areas that serve the dutiful taxpayer has a direct effect on the quality of that service...

...The employee explains that to resolve a complicated problem, the IRS adviser "might have to deal with a number of departments— adjustments and correspondence, the entity department, the file department, editing and coding ." The telephone advisers, he says, "probably wouldn't make it through all that...

...That the new computer was needed, there is little question...

...Goldberg supposedly oversees the people who process returns...

...Officials of the National Treasury Employees Union, which represents 60,000 IRS workers, say privately that there has been talk among employees of similar misdeeds throughout the country...

...Or, to put it more bluntly than loyal team players Egger or Goldberg would: the Treasury Department and the Office of Management and Budget have repeatedly refused IRS requests for increased money and manpower...

...The tax code, he said, "corrupts otherwise honest people by encouraging them to cheat...

...Paul M Barrett is an editor of The Washington Monthly...

...The obvious answer is "no...

...But when asked to consider the connection between millions of futile taxpayer inquiries and significant staff cuts, O'Hanlon—the people's advocate —says tersely, "I don't care to discuss that at this time...

...Twice, IRS employees couldn't resolve the problem with the computer up and running...

...in 1985, 173.7 million...

...But IRS employees contend that as the volume of returns has increased, and the number of workers in processing has decreased, service center managers have hiked the quotas to unrealistic levels...