April 11 (Bloomberg) -- Heading up the U.S. Internal Revenue Service has never been easy. As IRS Commissioner (1973- 77) Donald Alexander once quipped: ``The hours are impossible, the pay is lousy -- but you get lots of abuse.''

You also hear from abused customers.

In the 1990s, taxpayers were furious. The IRS's customer satisfaction ratings trailed those of 200 U.S. government agencies and private-sector companies, making the tax service the most hated organization in America.

No wonder Charles O. Rossotti thought twice before becoming IRS commissioner, a five-year sojourn he describes in his memoir, ``Many Unhappy Returns'' (Harvard Business School Press, 330 pages, $23.95).

Rossotti couldn't have stepped in at a lower point: In 1997, the year of his confirmation, congressional hearings on the IRS produced horror stories like that of the divorcee Katherine Lund Hicks of Apple Valley, California, who tried to pay a $2,709 tax debt incurred by her ex-husband, then watched the agency repeatedly refuse the payment and threaten to take her new husband's home as a penalty.

``Kafka himself could not have invented this real-life tale of an ordinary person caught in a maddeningly bureaucratic maze with no maps, no exits and no explanation,'' Rossotti writes.

Hicks paid the debt again; and again the IRS acted with a maddening lack of synchronization, levying the new husband's salary and leaving the couple $18 a week to live on. Ultimately the woman filed for bankruptcy, while her husband filed for divorce -- strategies calculated to protect them from the government that should have protected them.

Taking the Plunge

Rossotti, recruited by then-Treasury Secretary Robert Rubin and Deputy Treasury Secretary Lawrence Summers, would have lost no one's respect for retreating to the safety of American Management Systems, the Fairfax, Virginia-based information technology company he co-founded.

Call him crazy, but Rossotti took the challenge. He'd been promised a free rein, and was intrigued at being the first ``business guy'' to steer the agency. ``Dad, you don't even do your own taxes,'' Rossotti's daughter pointed out. Precisely.

Rossotti's belief, hammered repeatedly in this solid, often entertaining book, was that the IRS needed ``the same long-term, painstaking process followed by other companies that have achieved quality customer service.''

Yet as a 100,000-employee agency serving 180 million customers yearly and collecting $2 trillion in revenue, could this leviathan restore good customer service and upgrade technology? The new commissioner said yes.

Putting Out Fires

First, there were huge brush fires to put out. In 1997, Rossotti confronted the anticipated Y2K problem and the IRS's antiquated 83,000-page operating manual. He had to deal with the politics of a national restructuring commission (led by then- Senator Bob Kerry), to say nothing of 1998 legislation instituting new rules and mandates.

Next, he trimmed 5,000 already-promised reforms down to 157 near-term initiatives. `Promising everything to everyone would not work,'' he writes.

Then began the real behind-the-scenes work. Technology was an early target. On his first day Rossotti tried to e-mail his employees and found there was no nationwide system.

It got worse: the IRS's 130 separate computer systems that used 18,000 software products; an earlier tech modernization ``fiasco'' that had wasted $4 billion; and outdated computer tapes that stored vital taxpayer data.

Fixing `This Old House'

In a 1998 speech, Rossotti likened the agency's problems to living in an old house -- ``occasionally, the toilets flush when you turn on the lights.'' He subsequently implemented a system to manage toll-free phone service, upgraded electronic filing for returns and paved the way to move taxpayer records off ``the ancient master file.''

He sought to rebuild employee trust through dozens of meetings with managers, union reps, and even the IRS lawyers -- who, strangely, report to the U.S. Treasury department, not the IRS commissioner. He observed taxpayer service at strip malls and accompanied collection agents on home visits; he courted small- business owners.

Rossotti also worked on the perception that the IRS picks on ``the little guy.'' One reason: The agency had only a single income class for all taxpayers earning over $100,000 a year. Those taxpayers pay 65 percent of taxes, but the agency had minimal information to manage their audits. One lawyer, Rossotti recalls, was incredulous: ``My God, that's what we pay a first- year law associate.''

Designer Shelters

In a particularly compelling chapter, Rossotti dissects illegal tax schemes, especially ``designer'' tax shelters. As commissioner, he identified 2,500 specific abusive transactions representing $50 billion in unpaid taxes. Ultimately he redirected enforcement to look beyond phony deductions by the super-rich to target income not reported at all.

Of course, Rossotti couldn't do everything he wanted: While he brought the agency into the 21st century -- the federal Web site http://www.irs.gov is widely praised -- Congress still hasn't simplified the tax code or funded further customer service improvements.

Tell Me More

Nor has Rossotti done it all with this book. ``Many Unhappy Returns'' is a good management primer, filled with practical advice and graced with levity. Yet aside from a handful of insider revelations -- like Clinton aides asking Rossotti to find them a ``happy taxpayer'' for the State of the Union address -- we're left hungry for more. What does Rossotti think of the flat tax? The presidents he served under? He won't say. Aw, c'mon, Commish, dish.

Still, give Rossotti points for taking the IRS on. ``No other organization in America,'' he notes, ``conducts financial transactions with every adult individual every year over his or her entire lifetime.''

Managers who'll never get even close to those kinds of stakes should take careful notes.

Last Updated: April 11, 2005 00:12 EDT