October 16, 2023
TIGTA releases audit report on TE/GE customer service with recommendations
On October 5, 2023, the Treasury Inspector General for Tax Administration (TIGTA) released an audit report, Thousands of Tax Exempt and Government Entities Taxpayers May Not Have Received Satisfactory Responses to Their Questions (report), assessing the quality of customer service provided to taxpayers by TE/GE.
Customer service statistics
Several IRS business units work on customer service, including Exempt Organization (EO) employees within TE/GE and Accounts Management employees within the Wage and Investment Division (W&I). The report focused on inquiries referred to TE/GE by W&I, which answers calls to the customer service line dedicated for tax-exempt organizations' questions, i.e., (877) 829-5500. These W&I customer service representatives respond to requests for confirmation of an application's status, generate letters affirming tax-exempt status, and provide answers on miscellaneous exempt organization, employee plan and government entity issues.
W&I customer service representatives answer taxpayers' questions on the telephone and refer requests that they are unable to resolve to TE/GE via Form 4442, Inquiry Referral. From January 1, 2017 through May 15, 2022, W&I referred approximately 45,000 unique inquiries from taxpayers to TE/GE via Forms 4442. According to the TIGTA report, taxpayers for more than 20,000 (44%) of these inquiries may not have received a satisfactory response and had to place another telephone call to have their inquiry addressed. Approximately 10,000 of these taxpayers needed to make a third call or more to the IRS concerning the same tax return.
The report also found that the IRS does not track or monitor taxpayer inquiries after their questions are referred via Forms 4442.
From FY 2019 through 2021, TE/GE's inventory for customer correspondence grew from 2,060 cases to more than 20,000 cases, while TE/GE's EO determinations (e.g., exemption applications, requests for foundation classification) inventory grew from 13,451 cases to more than 35,000 cases. According to the report, the increase was due to the COVID-19 pandemic and the transition to a new management information system. By the end of FY 2022, taxpayer correspondence inventory had been reduced by nearly half of its 2021 level, and determinations inventory returned to a level lower than the pre-pandemic level.
TIGTA recommended that TE/GE:
TE/GE agreed with all three recommendations and said it plans to take corrective actions as part of its internal management system of controls.
The IRS's response to the TIGTA report that it plans to take measures to improve its customer service shows its awareness of the problems with tax-exempt organizations' correspondence and the lack of guidance regarding organizations' tax and information returns. This is also a topic highlighted in the IRS's Strategic Operating Plan and TE/GE's Fiscal Year 2024 Program Letter (see Tax Alert 2023-1677). It thus appears that the IRS is taking the issue of improving its taxpayer relations seriously, investing resources to improve its workforce and technology to more efficiently and effectively address taxpayer inquiries. Given how highly IRS TE/GE prioritizes these improvements, we expect IRS TE/GE to implement at least some of TIGTA's recommendations in the near future.
— For more information about EY's Exempt Organization Tax Services group, visit us here.
Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor