(Washington, DC) The IRS Oversight Board Annual Report to Congress 2011 was released today, and described “significant achievements as well as some challenges” for the nation’s tax administration system based on Fiscal Year 2011 accomplishments.
The Oversight Board reported the rollout of the IRS’ first smart phone application and the implementation of the Preparer Tax Identification Number (PTIN) for registered tax return preparers. There was a significant increase in the number of individual tax returns filed electronically. In addition, the IRS successfully administered a number of complex tax law changes, including the enactment of late tax legislation.
However, there were numerous challenges.
The level of service (LOS) on IRS toll-free telephones during FY2011 was 70 percent, a drop of four percentage points over the 74 percent achieved in FY 2010, and below the 80 percent level the Board considers acceptable for good taxpayer service.
IRS enforcement contacts, such as written notices, correspondence examinations, or field examinations, were lower than FY2010. Most of the decline is due to reduced math error notices, which were higher the previous fiscal year because of the First Time Homebuyers Credit.
The overall exam coverage rate for individual taxpayers was generally flat, although the rate of examinations for taxpayers with incomes over $1 million continued to grow. Corporate exams increased as well.
The report also addressed two longer-term, strategic issues: the tax gap and the IRS’ information technology (IT) systems. The report said that the IRS made notable progress with its IT program. However, the tax gap – annual uncollected tax revenue – continues to be a serious problem that requires attention. The IRS released an updated estimate of the tax gap in January 2012 based on tax year 2006 returns. The gross and net tax gap rose as a result of the overall growth in the US economy through 2006, but the overall voluntary compliance rates remained approximately the same, at 83 percent.
Of great concern to the Board are decreased resources to fund tax administration, coupled with growing complexity in the tax system. “The Board cannot predict that a breaking point will occur, but a continuation of current trends increases the risk that the IRS will experience serious problems in the future,” the report states.
The full report can be reviewed or downloaded at http://www.treasury.gov/irsob/reports/.