Section 920 (12-31-93)
DMP Main Report
Internal Revenue Service Business Vision
(1) The mission of the Internal Revenue Service (IRS) is to collect the proper amount of tax at the least cost to the public. To do that in a manner that ensures revenue collection using voluntary compliance strategies rather than traditional, low-yield, high cost enforcement techniques, the Service has established three principal objectives: reduce taxpayer burden, increase voluntary compliance, and improve quality-driven productivity and customer satisfaction.
(2) Unchanged in its basic management and business approach for the past 40 years, the IRS has realized in recent years that major change is necessary to meet the challenges presented by increased customer expectations, a stalled compliance rate, and diminished resources. Following the lead of many private and public sector organizations that have faced similar challenges, the IRS has chosen a systems management approach called Core Business Systems (CBSs) to transform its paper-driven, hierarchical structure into a streamlined, customer-focused organization that places high emphasis on understanding and continuously improving its work systems.
(3) Two of the key drivers of change in the IRS are a stalled voluntary compliance rate, and a growing inventory of past due accounts. Current estimates indicate a voluntary compliance rate of 82.7%, representing an estimated annual revenue shortfall of $110=F9127 billion. Each percentage point of non-compliance equates to $6=F98 billion in lost revenue. As such, the realization of even a 10% increase in the rate of voluntary compliance would make a significant contribution toward deficit reduction. Current calculations of the accounts receivable inventory suggest a figure of $118 billion in past due accounts. Trends between 1990 and 1992 indicate an increase in questionable refund returns filed from 5,713 returns (claiming $17.1 million) to 24,969 returns (claiming $66.8 million). Similar trends in terms of the number of underreporter contacts and number of non-filers provide convincing evidence of the need for effective new approaches to facilitate voluntary compliance.
Core Business Systems
(1) Traditional work systems, or functions (Taxpayer Services, Collection, Examination, Returns Processing, etc.) have evolved over the past 40 years into parallel organizations that produce good functional work, but not necessarily the best tax administration products and services. Often referred to internally by IRS personnel as "stovepipe" operations, these operations have been designed and focused around specific functional tasks...
(2) As the Service began to expand quality improvement efforts in 1986, it set forth a goal of becoming a Total Quality Organization (TQO). It became evident that what was needed was not a "quality plan," but a broad framework to change the way IRS is managed, and the way its systems operate. Study, research, and examination of experiences in IRS led to the development of such a framework, which advocated a systems approach to management. As a result, the IRS committed 30 or so of its top ranking executives to examine how the IRS systems work, without regard to current functional structures. This resulted in the identification of six CBSs. These CBSs represent the fundamental components through which the IRS accomplishes its mission. Briefly, the objectives of each are as follows:
(a) Value Tracking: to determine, communicate, and track the extent to which taxpayers value the products and services provided by the IRS, and to discover new products and service opportunities that will further the IRS mission, objectives, and strategies
(b) Informing and Educating: to enable taxpayers to comply with tax laws through effective and efficient information and education activities
(c) Managing Accounts and Assisting: to receive, maintain, and provide account and revenue information, and to assist taxpayers in account-related matters
(d) Ensuring Compliance: to preserve the integrity of the voluntary tax system by continually measuring compliance behavior, identifying non-compliance, determining root causes, and taking actions to improve compliance
(e) Resourcing: to plan, acquire, and manage resources to enable the IRS to provide the best customer value
(f) Developing and Managing Systems: Enabling and assisting the IRS by leveraging information technology to provide business processes that produce the highest net customer value.
(3) The CBS Executives (called "owners") are responsible for the Service's various systems. They are chartered with the responsibility to analyze their respective CBS area and determine what improvements or changes need to be made...
(4) The IRS faces a vital and unique opportunity to transform tax administration. Fundamental changes in the way business is done, supported by TSM and the introduction of new technology, will enable IRS to achieve several objectives. These objectives, described in detail in the Strategic Business Plan (SBP), are to:
(a) Reduce the burden on taxpayers. At present, the Service's business approach and systems require taxpayers to engage in protracted dealings with numerous IRS employees, largely by way of correspondence and face-to-face meetings. New procedures facilitated by TSM will permit minimizing the time, number of contacts, and correspondence it takes to resolve taxpayer inquiries
(b) Increase voluntary compliance. IRS is changing the way it approaches compliance activities. Voluntary compliance strategies are being devised that combine traditional enforcement actions with education and outreach. In addition, IRS will continue to try to convince Congress that the complexity of legislation directly affects IRS regulations, programs, and procedures, and therefore the tasks faced by taxpayers in dealing with taxes. Simpler legislation equals better taxpayer understanding and enhanced compliance
(c) Improve quality-driven productivity and customer satisfaction. At present, the IRS spends enormous sums each year processing paper, reworking errors, maintaining outdated equipment, patching together systems, and pursuing enforcement efforts through correspondence with taxpayers. The Service can avoid many of the costs and achieve substantial quality-driven productivity gains by modernizing, by empowering IRS employees, and by changing the way business is conducted.
(5) With the TSM Program, the IRS has undertaken a comprehensive effort to modernize its information systems to provide service on a par with the best private sector financial institutions. Modernization efforts and the systems management approach strive to meet the needs of all customers (taxpayers, internal users, and external users). It uses technology and processes that permit timely and accurate delivery of tax accounts and tax-related information, while ensuring the privacy and security of that data.
The Five Strategies
(1) The IRS has identified five key strategies that will drive the critically needed changes in tax administration during the 1990s. These strategies have been incorporated into the six CBSs to accomplish the IRS mission and its three primary objectives described above. The IRS has based its delivery approach around the strategies, as described below.
(a) Quality of Key Services Provided to Taxpayers: One of the IRS's goals is to become a TQO. The IRS is fundamentally changing the way it manages and operates its product and service delivery by continuously analyzing and improving them, based on organization as a whole. The Service's ability to meet its business objectives depends upon the success of three elements: people, work processes, and information systems. For people to be able to perform well, jobs and organizations must be structured so that each person can:
1 See the purpose and results of his or her work
2 Have the right technology, work processes, skills, and assistance to do quality work
3 Have direct contact with customers, suppliers, and colleagues, whether internal or external
4 Have control over his or her work and be able to continuously assess and improve the way work is done
5 Have the opportunity to grow and learn on the job, be recognized for a job well done, and have the prospect of a strong future.
(b) Adherence to the Highest Standards of Professional and Ethical Conduct: The foundation of tax administration is the honor and integrity of the tax administrator. Ethical conduct drives IRS dealings between employees, as well as between employees and the customers IRS serves. The Service's efforts must go beyond the clear need to comply with rules, regulations, and procedures. Ethics and integrity tie directly to the ways IRS interacts with taxpayers and to taxpayer perceptions of the IRS itself. Each and every IRS employee is responsible for actions that reflect the IRS's commitment to the fundamental values of integrity and ethical conduct when dealing with taxpayers. That commitment results in actions that are courteous, respectful, and dignified, and that resolve issues in the most timely possible fashion, and in the fairest way. The IRS ethics strategy provides the framework for ethical policies, practices, and behaviors that form the foundation for public trust in the tax system. The cornerstone of voluntary compliance is public trust that the tax laws are being administered fairly. Fostering ethical principles in every facet of IRS operations, stressing the importance of such values, and aggressively pursuing instances of ethics violations help to ensure that taxpayers can rely on the application of the tax system to be honest, fair, accountable, and in continuous pursuit of ways to better serve the customer. The IRS is committed to manifesting those values in every facet of its work, keeping its ethical principles in the forefront of all business planning, strategies, and change efforts...
(c) Compliance 2000: This strategy looks at opportunities to maximize voluntary compliance in such a way as to minimize the burden on taxpayers, the private sector, and costs to the federal government. Compliance 2000 is structured to look at taxpayer needs and behavior by aiding in identifying groups of taxpayers that share common characteristics relevant to tax compliance and administration. Comprehensive strategies will then be devised to help improve voluntary compliance. As these strategies are implemented, their success will be measured against appropriately defined baselines. Compliance 2000 strategies will assure that IRS makes the best use of enforcement resources in the years ahead, will encourage the highest degree of voluntary compliance with the tax laws, and will enable IRS to devote whatever resources are necessary to assist taxpayers in their effort to comply. Compliance 2000 is the accepted IRS tax administration philosophy for long- term compliance. The IRS believes long-term compliance will increase to optimal levels only when taxpayers understand their tax obligations and are able to meet them in the most direct, simple, and straightforward manner possible. Using a cost- effective market segment approach common in private industry, Compliance 2000 identifies groups of non- compliant taxpayers with like characteristics, and then tailors assistance, education, and enforcement measures (if needed) to get these taxpayers into compliance as quickly, efficiently, and painlessly as possible
(d) Embracing and Managing Diversity: The Service will respect and capitalize on the growing diversity in the American population, and in the IRS workforce...
(e) Tax Systems Modernization: TSM is a multi- billion dollar redesign and improvement effort that is transforming the outdated collection of IRS computer systems and processes (most of which were designed in the 1960s) into a high technology, high-speed information and telecommunications system. TSM will take advantage of many recent advances in technology, as well as new business processes defined via CBS efforts, and recent Servicewide organizational studies (SCOS, DOS, and NROS). TSM will enable IRS to leave behind the current, paper-based, batch-processing system and move to an environment where the information can be used, retrieved, and delivered electronically. Flexibility will be engineered into the modernized systems to facilitate change whenever desirable. TSM will enable IRS employees to provide the right information, at the right time, in the right place to waiting customers, and will enable the IRS to provide service that is quicker, more efficient, less intrusive, and less burdensome. Through a series of well-organized and integrated projects, the IRS will transform the mechanics of tax administration by:
1 Using currently available technology to quickly and accurately provide information to taxpayers who need it
2 Establishing a computer and telecommunications system that will permit timely access by authorized employees and allow them to store, compile, retrieve, update, and receive most information in electronic format, bypassing paper to the greatest extent possible
3 Using both existing and new technology to electronically image and store the paper received and to capture information on the return through electronic means.
4 Adopting a philosophy of one-stop service to be more responsive to the needs of its customers. This means, to the best of IRS's ability, resolving matters in one contact, rather than many, over weeks or months. One-stop service will result in eliminating millions of needless and repetitive notices and contacts, and will facilitate enhanced personal dealings between taxpayers and their government.
(1) Executive management within the IRS establishes the overall IRS mission, business vision, and objectives, and has oversight and accountability for all IRS activities.
Overview of the Design Master Plan
Background and Purpose
Scope of the Design Master Plan
Functions and Areas Included in this Version of the DMP
(a) Increase centralized management of computing facilities to reduce information systems staffing requirements for systems management, thereby reducing the previously planned baseline of ten Service Center mainframe complexes.
(b) Plan for an anticipated dramatic increase in electronic filing to reduce the requirement for paper document processing. This reduced the number of document scanning facilities and resulted in the combining of some computing locations and Submission Processing locations
(c) Plan for addition of third party payment processing, thereby eliminating much of the paper check handling processing, which reduced the need for check scanning capabilities in Submission Processing locations
(d) Increase filer issue detection upon initial processing and posting of tax returns, thereby placing Information Returns Processing (IRP) activities into the system critical processing path for the first time
(e) Shift emphasis from correspondence to use of telephones as a primary means of taxpayer contact, thereby requiring rapid access to data, increasing the need for a tight horizontally integrated information environment. Coupled with the intent to resolve taxpayer issues in one contact, this one-stop service approach significantly reduces the number of taxpayer contacts and notices, thereby enhancing taxpayer-IRS interactions
(f) Enable field operations to emphasize a mobile workforce, with work-from-home environments, thereby placing increased emphasis on automated management support systems
(g) Analyze compliance patterns and investigate market segment compliance profiles as a means to improve compliance through increased emphasis on taxpayer education, outreach, and other stimulus techniques...
(r) Compliance Research Analysis. The IRS will shift from a compliance effort driven by yield per individual case, to a market-driven approach emphasizing overall yield. This, plus increased efforts to reach taxpayers through education, outreach, and other programs, will dramatically increase voluntary compliance. The Compliance Research Analysis function maintains a database populated with ten million taxpayer accounts, provided by the Account Management and IRP functions, and case information, provided by the Case Management function. The Compliance Research function is available at only one of the three Computing Segments. The Compliance Research Analysis function is provided by the Compliance Research Information System (CRIS) Project
(1) The Customer Service Segment performs all case processing and taxpayer assistance that does not involve face-to-face interaction with taxpayers. All white mail, turnaround documents, and issues that require further information from the taxpayer are sent to the Customer Service Segment for processing. Interactions between Customer Service Representatives (CSRs) in the Customer Service Segment and taxpayers are primarily via telephone. However, U.S. mail is also used, and all Voice Response Unit (VRU) capabilities are also tied to the Customer Service Segment. Figure 923-4 depicts the Customer Service Segment and its relationship to other segments. Detailed information is presented in Section 115.23 of the TPSA document, dated April 1993...
(4) Privacy issues will continue to present challenges to the successful management of TSM. Improved technology will provide the capabilities to gather more information faster, and from more sources, and to provide practically instant access to that information. There will be capabilities to manipulate, aggregate, and derive information that were not available before. The challenge will be to manage the use of the technology and capabilities within the constraints that must be applied to protect the taxpayer and employee privacy.
(5) Furthermore, the involvement and interaction with an entire community of interested parties, or stakeholders, must be considered, including customers, users, executive management, oversight organizations, Core Business System Owners (CBSOs), and development staff. Involvement and participation of this community is key if the IRS is going to meet its objective of becoming a Total Quality Organization (TQO). The management framework for information system development of the TSM Program recognizes and addresses the need for involvement and empowerment at all levels of the organization.