The IRS Oversight Board held its annual public forum, Advancing Tax Administration, on May 1st. The forum consisted of three panels with representatives from both the public and private sectors. The panelists focused on the future of tax administration, efforts to combat tax fraud, and tax issues emerging in the global arena.
The first panel discussed at length the Real Time Tax System, a concept first advanced by then IRS Commissioner Douglas Shulman at a National Press Club speech in 2011. Up-front document matching is at the heart of the concept. The IRS would have access to third-party information returns at the time a taxpayer files a return, and this could reduce errors and avoid post-filing compliance problems. Some of the panelists believed that such a system could save time and effort and reduce tax refund fraud, but the IRS would have to address issues such as the extent of information sharing and how best to reconcile any differences.
The second panel heard about ongoing fraud challenges in tax administration. This growing problem is creating major complications for taxpayers and tax return preparers. The panel discussed expanded information reporting, leveraging paid tax return preparers, and IRS' refined pre-refund processes to identify and stop erroneous claims.
The third panel focused on global tax administration and how the IRS can best serve corporate taxpayers who operate in the international tax arena while improving overall compliance and reducing burden. The panelists noted their appreciation for programs that allow international corporations to plan and prepare to meet their tax obligations. The panelists also discussed the growing burden and complex framework of information reporting for international companies. Greater transparency and cooperation between the IRS and this important taxpayer segment are critical to understanding tax administration issues.
Written statements of all panelists are available at http://www.treasury.gov/irsob/meetings/pages/05012013.aspx.
The following day, the Board was briefed by IRS Acting Commissioner Steven T. Miller and his senior executive team on a variety of topics, ranging from the budget to the filing season to information technology.
Mr. Miller told the Board that due to the budget sequestration, all IRS employees will be furloughed for five to seven days, beginning in late spring through the end of the current fiscal year.
"The furloughs are unfortunate, and the Board is very concerned about the potential short-term effects of these budget cuts on IRS' performance and IRS employees, and the possible long-term consequences of erosion to taxpayer service and enforcement," said Board Chairman Paul Cherecwich, Jr. "We commend Acting Commissioner Miller and his team for their diligence in finding cost savings and efficiencies in areas such as travel, real estate, and training; however, the IRS is running out of places to cut and may be forced to make reductions in its core customer service and compliance programs with obvious effects on the IRS' ability to carry out its mission," he stated.
The Board is preparing a special report to discuss the President's Fiscal Year 2014 IRS budget request and the Board's related recommendations. The report will be released in the near future.
In spite of a delayed start due to the late enactment of the American Taxpayer Relief Act, the IRS delivered another successful filing season. The Board was told that the Form 1040 Modernized e-File (MeF) system functioned smoothly, and that individual e-filing continued to grow with 86.3 percent of all returns electronically filed. The IRS also achieved a 70.1 percent Level of Service (LOS) on its toll-free telephone lines so far this filing season; slightly above the 2012 experience, but still below the 80 percent level the Board believes is acceptable. Accuracy of telephone tax law and accounts responses to telephone queries both topped the 95% mark. There was also a growing taxpayer appetite for self-serve options including the Spanish version of "Where's my Refund." Board Chair Cherecwich commented: "The Board wants to recognize the IRS and the tax professional community for its work on the 2013 filing season. They overcame a lot of hurdles and adversity through dedication, determination and professionalism. Working together, they delivered for America's taxpayers."
The Oversight Board has also been closely monitoring the IRS' efforts in managing human capital, especially during these times of budget austerity. Every year, the IRS participates in the Office of Personnel Management's Federal Employee Viewpoint Survey. The Board was informed that based on the 15 agencies with 20,000 or more employees in 2012, the IRS ranked third in employee engagement and second in leadership and knowledge management.
The IRS further briefed the Board on the continued benefits generated by the successful deployment of the Customer Account Data Engine (CADE2). The IRS now processes returns on a daily versus a weekly cycle, and IRS customer service representatives can access and update taxpayer records within 48 hours versus nine days to resolve discrepancies. The Board was told that a CADE2 2014 Filing Season Readiness Plan is already being developed with a focus on continued data accuracy and robust and sustainable system performance and operational readiness. A roadmap for the next transition state of CADE2 is also being sketched out. In addition to CADE2, the Board was briefed on other information technology matters, including online services, cybersecurity, and Virtual Service Delivery.
The Board's next meeting will be on September 19, 2013 in Washington, DC.