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IRS Oversight Board: Tax Filing Season Off To Smooth Start; Budget Climate Worrisome

(February 28, 2013) The tax filing season is off to a smooth start, according to a briefing the IRS Oversight Board received from the IRS at its February 19th meeting in Washington, DC. The IRS had to delay the opening of the filing season due to the late enactment of the American Taxpayer Relief Act of 2012 and the agency's subsequent need to reprogram and test its systems and finalize forms to reflect the tax law changes contained in the legislation. "It's a great tribute to the IRS that it only delayed the opening of the filing season by eight days so that the vast majority of taxpayers could begin filing their tax returns," said IRS Board Chairman Paul Cherecwich, Jr. "Exceptional effort on the part of the IRS staff was required in the face of the major last minute changes made by the Act," he concluded.

The IRS has already processed more than 50 million returns, the vast majority of which were filed electronically. Although still early in the filing season, telephone customer level of service and both tax law accuracy and accounts also show improvements over last year's levels for this time.

"The results are noteworthy given the fact that the IRS is operating under a Continuing Resolution (CR) that funds the agency at FY2012 enacted levels which are below what the President and the Oversight Board had recommended," observed Mr. Cherecwich. "Acting Commissioner Steve Miller, his senior leadership team, and the IRS' frontline managers and employees are to be commended for their dedication and hard work."

The IRS' budget was a major point of discussion at the Board's meeting. "The IRS Oversight Board is concerned about the potential long-term consequences of the IRS having to absorb significant budget cuts, as this could lead to a meaningful decline in service and enforcement revenue," said Board Chair Cherecwich. "Further reductions in staffing, technology, and training could erode IRS' gains made in customer service and enforcement since the passage of the IRS Restructuring and Reform Act of 1998," he concluded.

The Board was also briefed on the IRS Criminal Investigation (CI) division's expanded efforts to detect and combat tax-related identity theft and refund fraud. These stepped-up efforts included a coordinated coast-to-coast identity theft enforcement action announced last month. Working with the Justice Department, local U.S. Attorney offices, and other federal state and local agencies, the sweep targeted approximately 400 people and led to more than 730 enforcement actions related to identity theft and refund fraud, including indictments, complaints, and arrests. "The Board strongly supports actions such as this. It sends a tough, no-nonsense message to those perpetrating, or considering perpetrating tax-related identity theft fraud," observed Mr. Cherecwich.

The Board's meeting covered a variety of other topics, including the IRS Return Preparer Program. A recent court order enjoined the IRS from enforcing the program's competency testing and continuing education requirements. The IRS advised the Board that on Friday, February 1st, the court modified its order to clarify that the order does not affect the requirement for all paid tax return preparers to obtain a preparer tax identification number (PTIN), and consistent with this modification, the IRS reopened its online PTIN system.

The Board was briefed on the agency's human capital priorities and employee engagement strategies, in addition to receiving updates on the National Research Program, compliance studies, and tax gap efforts. The Board also received a briefing from the National Taxpayer Advocate (NTA) who discussed her recently released 2012 NTA Report to Congress.

The Board will hold a public meeting on May 1, 2013, in Washington DC. Information will be made available in the coming weeks.

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