Report: IRS taxpayer service goes from bad to terrible

IRS service for taxpayers this past tax-filing season wasn't just as bad as predicted — it was even worse.

Phone calls dropped by the IRS switchboard skyrocketed past 8 million, rates of calls answered fell sharply and the length of time callers spent on hold grew in 2015, posing new challenges for taxpayers with questions about their returns, according to the annual objectives report to Congress by the National Taxpayer Advocate.

Nina Olson, head of the office created to help taxpayers who face IRS problems, likened the findings to Charles Dickens' A Tale of Two Cities, which opens with the famous line, "It was the best of times, it was the worst of times..."

"For the majority of taxpayers who filed their returns and did not require IRS assistance, the filing season was generally successful," said Olson. "For the segment of taxpayers who required help from the IRS , the filing season was by far the worst in memory."

According to the report:

• So-called courtesy disconnects — phone calls for which the IRS switchboard essentially hangs up because it's overloaded — soared to approximately 8.8 million during the 2015 tax filing season from roughly 544,000 in 2014.

• The IRS answered 37% of taxpayer calls routed to customer service representatives between Jan. 1 and April 18, and the hold time for those who got through averaged 23 minutes. That marked a steep drop from 2014, when the IRS answered 71% of its calls and hold times averaged roughly 14 minutes.
• The IRS answered 17% of calls from taxpayers notified that their tax returns had been blocked on suspicion of identity theft. Holding times for those calls averaged 28 minutes. During three consecutive weeks of the filing season, the IRS answered less than 10% of the calls.
• Taxpayers who sought IRS paper forms and publications also faced frustration, because libraries and U.S. Postal Service branches did not receive the material until Feb. 28, nearly halfway through the filing season. Once supplies ran out at the locations, no more were available.

The results confirmed the "abysmal" level of taxpayer service that IRS Commissioner John Koskinen acknowledged during a March 31 speech at the National Press Club.

Nonetheless, the report said the IRS ran a generally successful filing season under difficult circumstances, processing 126.1 million individual tax returns and issuing 91.8 million refunds while implementing parts of the Affordable Care Act and Foreign Account Tax Compliance Act.

Olson attributed the decline in taxpayer service levels to IRS budget cuts imposed by Congress. The agency's funding was cut by more than $1.2 billion between federal fiscal years 2010 and 2015, according to a June report by the Treasury Inspector General for Tax Administration.

However, Olson said the portion of the IRS budget devoted to enforcement is more than double the amount earmarked for taxpayer services. The agency continues to view itself primarily as an enforcer, envisioning a future that rests on the "mistaken assumption" that it can save money and end direct contact with taxpayers by automating assistance services, she said.

"It should be emphasized that more than 98% of all tax revenue collected by the IRS is paid voluntarily and timely," said Olson, who estimated that less than 2% is collected through enforcement actions. "Thus, increasing enforced collection would be a hollow victory if voluntary compliance declines because of decreasing taxpayer service and the attendant loss of good will."

Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc.