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The Decline and Fall of IRS ESP

Taxpayers and practitioners who interact closely with the IRS always have a multitude of suggestions and ideas regarding improvement of the IRS services. Because they are aware of this, the IRS allows individuals to provide suggestions through the Taxpayer Advocate Service and the Office of Taxpayer Reduction. One may think that IRS employees have more significant opportunities to give their thoughts on avenues for improvement, but as it stands that assumption is incorrect. At one time, the IRS had an Employee Suggestion Program (ESP—not extra-sensory perception), but that program was eliminated on October 1, 2021, and there have been no plans to replace it. The Inspector General for the IRS (TIGTA) investigated the situation and released their report on it.

 The report found that the IRS employed 85,230 people as of January 2023, and until October 1, 2021, they could proffer their recommendations for improvement through ESP and be rewarded through a portion of the savings attributable to accepted suggestions. From fiscal years 2017 through 2021, 162 out of 4,672 ideas were adopted, with the total tangible savings for the first year of implementation amounting to $86,714 net of the awards. The IRS claimed that ESP was too expensive to operate and cost-ineffective as the total cost came to over $4 million annually. Yet, in TIGTA’s words: “If the IRS is going to make decisions about eliminating the ESP based almost exclusively on costs related to coordinators, it should make some effort to control those costs.” Most of the reported costs were due to the business unit coordinators, whose duties were purely administrative, and they were not subject matter experts. Those coordinators would conduct the initial review of the suggestions and coordinate with subject matter experts so that they would identify and manage the timeliness of the case.

The 207 coordinators did not work full-time on the ESP. Still, they spent an average of 31 hours per submission (after dismissing those that failed the “threshold criteria (i.e., statement of problem, proposed solution, and possible benefits)” each coordinator would handle fewer than three submissions per year. Nearly a third of the tips from fiscal years 2018-2021 were “over-aged,” despite the extension of the processing time from 75 days to 180 calendar days in September 2020 to allow coordinators more time to get to the suggestions. The delinquency was partially due to the coordinators’ tendencies to mislabel and misroute suggestions. The ESP was an automated digital program with a unique identification number attached to each suggestion. Yet they were not automatically tracked, and so all the tracing required manual attention.

 The report found that most suggestions were rejected early for failing to provide sufficient benefits that would outweigh the cost of adequately reviewing them, even if they did meet the base threshold for consideration. This is puzzling as formally  it was the subject expert evaluator’s job to evaluate the cost-efficiency of the proposal rather than the coordinator’s. The TIGTA observed that the suggestions’ utility cannot always be effectively monetized, making it hard to evaluate recommendations that purported to lead to things like better protections for taxpayer rights or more efficient enforcement tax law.

The TIGTA took a “judgmental sample” for review. In that review it found that 34 out of 40 suggestions were “not properly evaluated.” One suggestion proposed a computer program matching Forms W-2 with Forms 941. If a Form W-2 reported wages, yet the IRS lacked the parallel Form 941, reporting withheld payroll taxes, mischief was afoot.  The suggestion was rejected without evaluation because “the ESP is meant to suggest ideas that save the government money.” This was meant to combat taxpayers that IRS agents called “ghost employers” who would keep the withholdings for themselves. IRS Criminal Investigation independently created this automated verification almost eight years later.

The TIGTA was critical of the ESP officials’ competence stating in their report, “The ESP coordinators did not have the expertise to determine if certain suggestions should have been accepted or rejected.” For example, they were unaware of tutorial videos for ESP users. Coordinators “lacked the knowledge and experience necessary to determine whether a suggestion warranted further evaluation,” while evaluators “did not consider the overall concept of a suggestion. Instead, they made their determinations based on whether a suggestion could be adopted verbatim as described in the submission.” Finally, “ESP, while in existence, received minimal support from the individual business units’ leadership.” A 2021 survey ranked the IRS at “271 out of 432 total Federal subcomponent agencies in engagement and satisfaction.” The reasons do not appear to be due to the subject matter—the Tax Division of the Department of Justice was tied for 9th place. As a result of the report, the IRS agreed to “develop a service-wide employee feedback process to support the agency’s transformation efforts under the Inflation Reduction Act” with an “implementation date” of November 15, 2024.

If you have questions or concerns about how these news reports may affect you or your business, please contact The Burton Law Firm at: 916-822-8700 or email for a consultation.