Internal Revenue Service

9-603-010

REV: NOVEMBER 12, 2002

AMY C. EDMONDSON FRANCES X. FREI

Transformation at the IRS

Commissioner Charles Rossotti slackened his pace, then paused to consider the legacies of his predecessors, whose portraits lined the walls of 1111 Constitution Avenue. The Internal Revenue Service (IRS) collected the money that ran the government of the United States; it provided the fuel for the country’s engine and had, throughout its history, frequently been the source of passionate debate. Internal revenue had funded and supported everything from war, public education, and civil engineering of roads to foreign aid and space exploration. When Rossotti arrived in October 1997, the agency’s systems had been terribly outdated and service levels strikingly low compared with those of private-sector industries. Observed Rossotti, now three years into his five-year term: Through the 1980s and 1990s, America’s tax agency was the subject of a growing chorus of criticism, from a presidential commission, several congressional committees, and the vice president’s National Partnership for Reinventing Government, as well as the public. Tax forms were difficult to follow, and answers to questions about them were hard to come by; some taxpayers felt their rights too often were ignored, or trampled, by agency field personnel; tax collection and compliance in many areas were spotty or worse.1 Change was needed badly. Rossotti recalled: When I first came in I asked somebody to compile all of the studies they could find and to list the recommendations for improvement that had been made. There were over 5,000 recommendations suggested that were specific line items. But even before we stopped counting I realized that while incremental improvement was important, there had to be bigger, more sweeping change. Change at the IRS was not just a good idea, it was mandated by law. In 1996 U.S. President Bill Clinton charged a presidential commission to examine the IRS and its service...