Strategy highlights service, enforcement, voluntary compliance

The Internal Revenue Service's new five-year plan, which runs through 2013, seeks to balance service and enforcement while maintaining what it called "the fairest and most effective system of voluntary tax compliance in the world."

However, it isn't an either/or proposition, according to IRS Commissioner Douglas Shulman. "Our first goal is to improve service to taxpayers to make voluntary compliance easier," he said. "Our second and equally important goal is to enforce the law to ensure everyone meets their obligation to pay taxes."

Shulman said that the IRS needs to invest in both people and technology to excel at both.

"The pendulum swings between service and enforcement, and every commissioner would like to be the one that gets it to stop right in the middle," said Roger Harris, president of Padgett Business Services and former chair of the IRS Advisory Council. "But there are clearly some commissioners identified as service commissioners and others as enforcement commissioners. And commissioners know that they're always one Senate hearing away from being one or the other."

The plan noted that the IRS faces a critical challenge in replacing experienced personnel as they grow older: "More than half of IRS employees and managers are age 50 or older - and 39 percent of IRS executives and 20 percent of IRS managers are already eligible for retirement."

"The IRS must grow employees' and managers' skills and sophistication, even while more senior people retire," it said. "To succeed in the long term, the IRS must focus on attracting and developing skilled employees, even as the existing workforce ages and the agency continues to face stiff competition for new talent."

Harris said that the problem of turnover of IRS veteran personnel is getting more critical. "Senior people with years of experience are leaving - they're facing a real brain drain," he said. "You can replace bodies, but it's difficult to replace the experience that you only get by working in an organization and learning the ropes for awhile."

Beanna J. Whitlock, a San Antonio-based tax practitioner and former IRS National Public Liaison, agreed: "There's a fine line they have to tread between getting people on the workforce, but not placing them there prematurely without enough knowledge or experience."

THE COMPLEXITY ISSUE

Two major trends addressed by the plan are the increasing complexity of tax administration and the expanding role of tax practitioners and other third parties in the tax system. Between 1993 and 2007, the percentage of taxpayers who prepared their own returns without outside assistance fell by more than two thirds, from 41 percent to 13 percent. At the same time, the use of paid preparers rose from 51 percent to 60 percent, and use of software expanded from 8 percent to 27 percent.

"Each year, the IRS must respond to new tax provisions from Congress and adjust to expiring ones," the plan stated. "In 2007 alone, 41 provisions expired, affecting a wide spectrum of taxpayers. The legislative mandates we face often have short implementation periods; these strain management capacity and demand substantial resources."

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