One man's taxing task: IRS reform

Trying to pay the IRS a $2,709 tax debt after her divorce, one woman dealt with so many employees she lost count, but the names filled three pages. She paid her tax debt three times. Yet the IRS refused her money and said she owed nothing - at least six times. Then the IRS tried to take her house, and put a lien against her second husband's salary. Her second marriage ended in divorce. She declared bankruptcy.

Despite hearing stories like this one in the 1997 Senate IRS hearings, Charles Rossotti accepted the job of IRS commissioner, becoming the first businessperson in 50 years to head an agency run by tax experts.

Part memoir, part management how-to, Rossotti's book, "Many Unhappy Returns," explains how he succeeded. Its overriding theme is that nothing's impossible with good business practices and hard work.

Just reading about Rossotti's effort can seem overwhelming. Before he did anything, Rossotti had to convince the Clinton administration that the IRS's problems couldn't be solved by public-relations maneuvers. He had to rebuild relations with Congress and other groups that deal with the IRS - including taxpayers - while stopping the IRS from its self-defeating practice of promising everything and delivering nothing. He had to show insiders and outsiders that the agency needed to be modernized.

It was an uphill battle, and Rossotti sometimes has trouble describing it. One head-spinning chapter skips from 1997 to 2001 to 2002, and then back again to 2001.

Sworn in on Nov. 13, 1997, Rossotti was initially recruited to fix the Year 2000 problem but soon found that the agency needed more than a technology upgrade. It performed at just 40 percent efficiency, but it provided 95 percent of government income.

In one of his first acts as commissioner, Rossotti gathered a team to list the changes the agency had promised to make. When the preliminary list came to 5,000, Rossotti winnowed it to the 1,000 that deserved serious study.

From those, Rossotti and his team settled on 157 near-term initiatives to be carried out in the next 12 to 18 months. These had a common purpose: to make tangible improvements in service to taxpayers.

Dubbing their plan, "Modernizing America's Tax Agency," they set out three goals - for improved service, compliance, and productivity - and five levers of change - management, organization, business practices, performance measurements, and technology - in order to reach the goals.

Modernizing the IRS, however, had to begin with reformulating the IRS mission statement, goals, and performance measures, to ensure that the agency provided quality service and treatment to each taxpayer, while it required the compliance of all taxpayers.

First, Rossotti had to eliminate distrust, not just within the agency - employees didn't trust management; management didn't trust the national office - but between the IRS and everybody else: taxpayers, the Treasury Department, the administration, Congress, even vendors essential for the Y2K conversion. The next step was to establish a nationwide operations center in Atlanta, with staff schedules adjusted for taxpayer convenience.

Considering the magnitude of the problem, this was easier said than done. In a year, the IRS answers more than 100 million calls, answers 20 million letters, and serves more than 6 million people who visit offices for help with the extremely complex tax code.

Improving scheduling helped, but too many taxpayers were getting wrong answers. Since "wrong answers cascaded into more notices, more letters, more calls, and more unhappy taxpayers," the next items to be fixed were the reference manuals - huge out-of-date books - and the employees' computers, which used 1960s software.

But before that, Rossotti had to fix the IRS organizational structure - eight intermediate levels of management, 43 districts and service centers, each district run like a minikingdom, and no centralized IRS e-mail system. There were setbacks, delays in computer modernization, Government Accounting Office reports about IRS failures, taxpayer returns shredded by the employees of a lockbox bank, and backlogs in processing claims.

It's hard to imagine the work involved in turning around the agency, but Rossotti, writing for an audience of nontax experts (like himself), enlivens the book with numerous anecdotes, such as the one about the rallying song his co-workers wrote about him to the tune of "That's Amore": "When the Code is so thick/ That it just makes you sick/ Ring Rossotti...."

He also uses apt metaphors and photographs. My favorite shows a still of him appearing May 13, 1998, on "Face the Nation," the day after President Clinton trashed the IRS by calling the agency unaccountable and downright tone-deaf.

"I felt as though my commander in chief had just stepped onto the battlefield to shoot my wounded troops," Rossotti says, trying to explain his feelings. But the dismay, irritation, and embarrassment on his face say everything.

Nevertheless, in just five years, Rossotti had taken a massive, vitally important, but seriously out-of-date government agency and made it run like a 21st-century business. It was no small feat.

• Diane Scharper teaches English at Towson University in Towson, Md.