2005 Citizen Services

Terence Lutes

Led the development of the popular e-File system that has allowed millions of Americans to get their tax refunds in as few as 10 days, while also cutting processing costs for government by as much as 90 percent.

Quick question: Who has a higher customer satisfaction rating—McDonald’s or the Internal Revenue Service? According to a USA Today survey, American taxpayers are “lovin’ it,” because the IRS beats out Mickey D’s. It might seem hard to believe that “the most unpopular organization in America” could beat out the chain that has set standards for efficiency and quality control. But the truth is that when it comes to improving customer service, few entities in the country have come further, faster than the IRS. And no one has done more to make this transformation possible that the man who has taken the IRS from paper filing to point and click—Terence Lutes.

As the driving force behind the e-File program, which allows the public to submit their tax returns online, Lutes has literally transformed the way Americans interact with the IRS, reducing the burden on taxpayers and improving the speed and accuracy of tax filing operations. Under his leadership, the number of tax returns being filed electronically has tripled, reaching 61.5 million in 2004, and more than half of all 1040 forms are now paperless.

e-File is the ultimate win-win program. Individual taxpayers who file electronically benefit by receiving their refund in as few as 10 days, receiving electronic proof of receipt from the IRS within 48 hours and being able to conveniently file their taxes from their home computers. Government benefits because the IRS avoids expensive and error-prone paper handling. This not only increases processing speed but cuts costs by roughly 90 percent.

Electronic filing has actually been around for years, but in 1997 Terence Lutes and his co-workers really took it to scale and started the process of making it more accessible to the individual tax filer. The key to his success was his ability to build positive relationships with the tax preparation and software development communities who were essential to expanding the availability of e-filing. For years these communities had adversarial relationships with the IRS, but by the late 90s, the IRS and industry were working together cooperatively on a number of initiatives.

While e-File’s first major expansion began in 1997, it keeps getting better, thanks in large part to the public-private partnerships Lutes helped develop. In 2002, Mr. Lutes brokered an agreement to address one of the remaining barriers to electronic filing—cost. He negotiated a deal with the private sector Free File Alliance to provide free online commercial tax preparation and electronic filing services to at least 60 percent of the individual taxpaying population. In 2003, nearly 2.8 million people used this service, known as Free File, and that number grew by 26 percent in 2004 and doubled in 2005.

Terence Lutes has also made the IRS more user friendly by leading the redesign of the IRS website. IRS.gov now provides links to Free File sites, an interactive refund status application and other useful information for taxpayers. Forbes magazine cited irs.gov as a “Best of the Web” site in 2002. In 2004 the site handled over 500 million downloads of forms and publications. And in this fiscal year, the site has had nearly 150 million visitors in the just the first eight months.

And if all of this weren’t enough, Terence Lutes is going global. He is the chair of a multi-national task force that includes his counterparts in foreign governments. Together they are working to expand and improve government e-services worldwide.

With Terence Lutes’ leadership, the IRS has gone from being the poster-child of unpopular government to posting remarkable gains in efficiency and customer satisfaction, proving the adage that recent technological advances are making virtually anything possible.