The newly approved commissioner of the Internal Revenue Service, John Koskinen, said Monday that he would support voluntary certification for tax preparers if the Internal Revenue Service fails to win an appeal of a judge’s decision striking down the IRS’s Registered Tax Return Preparer regulatory regime.
Last January, U.S. District Court Judge James E. Boasberg ruled in favor of three independent tax preparers—Sabina Loving of Chicago, John Gambino of Hoboken, N.J., and Elmer Kilian of Eagle, Wis.—and found the IRS had exceeded its statutory authority in imposing its RTRP requirements for mandatory testing and continuing education for tax preparers (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers). The IRS appealed the decision in the case, known as Loving v. IRS, and a three-judge appeals court heard oral arguments last September (see Appeals Court Hears IRS’s Case for Tax Preparer Regulation).
“If you could require certification of preparers and some educational requirements, it would help taxpayers feel some level of confidence that preparers actually know what they’re doing, and the vast majority of them do,” Koskinen said during a conference call with reporters after he was sworn in ceremonially Monday by Treasury Secretary Jack Lew with an audience of many IRS employees in attendance. “My sense is that we should be able to provide that same educational training and that background to preparers. If you can’t require it, offer it, and if you complete the information, you get a certificate that says, I have completed the IRS preparer course.’ I think that could be over time very valuable to preparers, and consumers could ask preparers, Have you gone through the IRS training?’ Whatever happens with the court case, we ought to be able to move forward on that and provide taxpayers with as much assurance as we can that the preparers they are dealing with have met some kind of minimum standards.”
While it would be helpful if Congress were to mandate tax preparer regulation, according to Koskinen, even if that doesn’t happen or the IRS doesn’t win the legal appeal, he believes that many tax preparers would welcome some certification from the IRS.
Koskinen was asked by Accounting Today about what he would do about reports of the IRS’s declining level of service to taxpayers and tax practitioners.
“We sometimes talk about taxpayer services on the one hand and tax compliance as if it were a separate issue,” he responded. “My strong feeling is that most people want to pay the right amount. They want to pay their taxes, and they want to be comfortable and confident that the system is fair, not only that they get treated fairly no matter who they are, but that if they are paying their fair share, everybody is paying their fair share. For compliance, you need to have uniform enforcement. But to the extent that you make it harder for taxpayers to figure out what the right amount is and to get the information, then compliance is going to suffer. So I think they’re wrapped up together.”
Koskinen wants to improve the in-person Taxpayer Assistance Centers, in addition to the IRS telephone help line and the IRS.gov Web site.
“I also think it is important for us to make it as easy as possible for taxpayers to make their payments, so we need to be efficient and responsive on the phone when they call,” he said. “We need to be able to deal effectively with them in Taxpayer Assistance Centers. We need to have a Web site that provides them information easily available in language that they can understand.”
However, he noted that the IRS regularly faces budget cuts that hamper its ability to provide taxpayer service. “When I look at the impact of the budget and the implications of further cuts or what happens the next time there’s a sequester, the first thing that happens is the waiting time on a phone call goes up and our service goes down,” he said. “We try to get to 70 or 80 percent, but sometimes it gets as low as 50 or 60, which means at 50 percent that half the people who are calling are getting no answer at all and no satisfaction. It just seems to me that’s intolerable. Taxpayers deserve better, so we need to do whatever we can to provide the services that taxpayers need and expect. They ought to be able to dial the IRS number and get an answer promptly, and they ought to be able to get accurate information.”
Koskinen believes taxpayer compliance will increase if service improves. “I think it’s a critical function and if we can continue to make improvements in that area, make it easier for people to get on the Web site and electronically get the information they need, then I think compliance rates will go up,” he said. “I’m in favor of doing it not for that reason, but because that’s what we owe individuals. We work for the public and we need to meet their expectations.”
Koskinen said he plans to address the various challenges faced by the IRS, including implementation of the Affordable Care Act, efforts to combat identity theft-related tax fraud, and controversy over the IRS’s handling of applications for 501(c)4 tax-exempt status by political groups.
One of the first challenges will be the new filing season that begins later this month, he noted. “I know that planning has already begun to ensure that it goes smoothly,” he said. “As I have assured the employees, as the new kid on the block, with all the experience they have, one of the things I can probably do most profitably to help them is to stay out of the way. As I told them this morning, there’s a lot they accomplish in the normal course of every filing season.”
Koskinen also plans to deal with the controversy over tax-exempt applications. “Another priority for the agency is to put to rest all of the issues and concerns surrounding applications for tax-exempt status,” he said. “The management problems associated with the 501(c)4 application process have shaken public trust in the IRS. The agency has already made important progress in this area under the leadership of [former acting commissioner] Danny Werfel, and it’s my job to help make sure that we complete the work being done to solve those management challenges and begin to restore public trust.”
Another priority will be tax compliance, he added. “It will also be critical to build upon the important work the IRS has done to improve tax compliance,” he said. “The code of tax laws is vital to preserving the system of voluntary compliance. The vast majority of taxpayers are law-abiding, and they must always feel confident that the system is fair and equally important that everyone is made to play by the rules. Recently, the IRS has made great strides on enforcement in a number of areas, including the fight against refund fraud, especially fraud caused by identity theft, and also international tax compliance, particularly the efforts that have been made to combat offshore tax evasion.”
He added that along with tax enforcement, the IRS would improve taxpayer service, including the assistance that people need to file their returns and help filers who face difficult times or other hardships. In addition, the IRS plans to work on implementing the Affordable Care Act.
“We must also continue to fulfill our responsibilities to implement tax-related provisions in major legislation, especially the Affordable Care Act,” said Koskinen. “The excellent work the IRS has done thus far should serve us well as we prepare for the implementation of significant portions of the ACA.”
Koskinen also hopes to rebuild employee morale at the embattled agency. “Finally, I recognize this agency’s success to build upon the experience, skills and enthusiasm of our employees,” he said. “The challenges that all federal workers have faced the past three or four years, along with the more recent adverse publicity about the IRS in the past few months, have understandably undermined employee morale. We won’t turn the situation around overnight, but ultimately I want our employees to again view the IRS as a great place to work, where their accomplishments are appreciated and supported, so I will do whatever I can to ensure that every employee has the leadership, systems and training to support them in their work and allow them to reach their full potential.”
Along with that, Koskinen intends to restore some of the money that has been cut from the IRS’s budget in recent years. “If we are to be successful in all of these areas, the IRS needs to receive adequate resources,” he said. “As I have said on numerous occasions, I am extremely concerned about the deep budget cuts that the IRS has needed to absorb over the last few years. It’s critical that we find a solution to this problem, and I will do everything I can to make sure that we do. I hope that one of the legacies in my four years as IRS commissioner is that we put the agency’s funding on a more solid basis. Fulfilling our mission, we also need to support Congress and our external stakeholders. I enjoyed meeting with many senators as part of our confirmation process and I’ll look forward to working with all of the members of the Senate and the House in the days ahead. I also look forward to continuing our longstanding partnerships that the IRS has with key stakeholder groups who are valuable sources of advice and assistance to us.”