Taxpayer demand for human help soars, despite IRS automation

In the past decade, the U.S. Internal Revenue Service has invested heavily in online self-service technology, including programs such as "Where's my Refund?" But, almost paradoxically, taxpayer demand for personal service via telephone has increased dramatically over this same period.

In 2006, the IRS received 64 million calls from taxpayers, but last year the volume reached 102 million, a 59% increase.

Many of those calls are handled by people, not by self-service systems. In 2006, the IRS routed 39.9 million calls to a customer service representative -- an actual human -- but last year nearly 48 million calls were taken by customer representatives, a 20% gain, according to IRS data. That's faster than the rate of growth in the number of taxpayers, now at 147 million, a 6.5% rise from 2006.

Online self-service systems, as well as software tax-preparation tools made by third parties, are designed to shift the work to taxpayers as well as simplify tax filing, yet the call volumes for personal help are rising. Why? The IRS doesn't have a good explanation, and all Nina Olson, the IRS's National Taxpayer Advocate, could point to in her annual report to Congresson Thursday was to identify a similar trend among banks.

In banking, conventional wisdom may suggest that systems such as ATMs and online banking services are reducing the need for tellers, but that’s not what is happening.

The number of full-time bank tellers has grown 2% per year since ATMs were widely deployed in the late 1990s, said James Bessen, a researcher and lecturer at the Boston University School of Law, in a recent paper on automation.

ATMs have allowed banks to operate branch offices at lower cost, and "this prompted them to open many more branches, offsetting the erstwhile loss of teller jobs," wrote Bessen. The nature of the job also changed. Routine cash handling became less important, and marketing and interpersonal skills more valuable.

Bessen found similar outcomes in other occupations in his paper, and found, overall, that occupations that use computers tend to have faster employment growth, said Bessen.

But the IRS sits in its own world. Its workforce is shrinking because of cuts by Congress, even as call volumes to customer service reps increase.

Roy Atkinson, a customer service advocate and principal at advisory firm Clifton Butterfield, LLC, attributed the increase in demand for personal service to the complexity of taxes.

"The more complex an issue or question, the more people desire to talk to a human on the phone or meet with them face-to-face," said Atkinson.

Bessen, in an interview, noted that even with the advent of electronic filing, the number of tax forms filed with a third-party tax preparer's signature increased from 53% in 2000 to 56% last year.

The software is clearly being used very widely, and a lot of it is being used by taxpayers, "but something is going on," Bessen said; it may be the complexity of the tools and taxes, and a need to have a human review the data.

Bessen said that the main benefit of automated tax help may not be so much to replace humans -- either IRS personnel or tax preparers -- but rather to improve the quality of tax returns. "People who are comfortable doing their own taxes without human help might still have questions about certain items," he said.

An automated help line may serve to answer those questions about the tax forms. "If so, the automated help would not necessarily be enough to enable more people to do their taxes without human help, especially if taxes have gotten more complex," said Bessen.

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