In one of his last appearances before his departure on November 9, IRS Commissioner Doug Shulman touched on a number of issues confronting the service and the accounting profession in general.
In a speech to the American Institute of CPAs on the day after the election, Shulman, the 47th IRS commissioner, said that the U.S. tax system had made "meaningful" and "lasting progress" during his tenure.
"I'm a believer in a relentless focus on priorities," he said, adding some of the results of strategic priorities he helped set at the service:
• Strategies to combat international tax evasion;
• "Transforming" the IRS's relationship with corporate taxpayers and its "core technology;"
• The IRS's relationship with paid tax return preparers;
• Leveraging data analytics.
The global economy has created compliance challenges, he also said. "On the individual front, we have made putting a big dent in offshore tax evasion a major priority. We view offshore tax evasion as an issue of fundamental fairness ... We upped the ante in a meaningful way with our work on Swiss financial institutions -- where for the first time in history, a bank secrecy jurisdiction turned over thousands of names and account numbers."
He also noted that the IRS had increased enforcement efforts. "In a typical year, we used to get 100 or so taxpayers who used our voluntary disclosure program. When we first set up our new program in 2009, we thought that figure would rise to maybe 1,000 ... We've had approximately 38,000 voluntary disclosures from individuals who came in under the special programs," Shulman said, adding that these individuals have paid back taxes and stiff penalties amounting to more than $5.5 billion.
"We're bringing U.S. taxpayers back into the system, back into compliance, so they properly report and pay their taxes," he said.
The RTRP initiative and 'inaccurate returns'
"We're now well into the process of ensuring a basic competency level for tax return preparers and focusing our enforcement efforts on rooting out unscrupulous preparers. We have registered over 850,000 return preparers," Shulman said. "Once the majority of preparers are registered and have taken the test, we will launch a public database so taxpayers can ensure that they are using a Registered Tax Return Preparer."
Shulman also said that the service wants to better leverage data analytics, citing a pilot program applying advanced data analytics to link tax returns that showed potentially serious compliance issues to the individuals who prepared them. Preparers with "problematic" returns received due-diligence visits, outbound phone calls or letters with monitoring. "We estimate that through the treatments in this relatively small pilot, we generated almost $200 million of savings on improperly claimed EITC and Child Tax Credit/Advanced Child Tax Credit claimed on these returns," Shulman said.
He said that the IRS has stopped some $19 billion in fraudulent payments "from going out the door," compared with $12.5 billion over the same period in 2011.
Technology and corporations
Shulman said that one priority was modernizing the aging technology of the IRS, "and one critical program in particular ... our core customer account database, also known as CADE2." Calling this "the single most visible and complex issue that had been holding back the IRS for decades," Shulman noted that the IRS, which had conducted its core account processing weekly, migrated to daily processing this year. "Payoffs from this change are quicker refunds for taxpayers, up-to-date information at the fingertips of our customer account representatives and a platform for more real-time analytics and compliance," he said.
Shulman also credited the IRS with transforming its relationship with corporate taxpayers. "We now have a suite of different strategies, tools and programs we've been applying over the past few years to transform this once unproductive relationship with corporate taxpayers." He also credited the CAP program, where the IRS works with corporate taxpayers to resolve all issues before a return is filed, as well as the fast appeals process and the Service's industry issue resolution program.
"We also asked taxpayers to be more transparent with us by disclosing their uncertain tax positions," he said.
Customer satisfaction and efficiencies
Eighty percent of taxpayers file returns electronically and receive an average $3,000 refund via direct deposit within 15 days, Shulman said, adding that the American Customer Satisfaction Index has recently shown that taxpayers now rate the tax-filing experience much higher than they did a decade ago.
The IRS will, starting with fiscal 2009 and running through the budget of next year, achieve nearly $1 billion in budget savings and efficiencies, he added.
Recovery, and the future
About one third of the Recovery Act, or approximately $300 billion, ran through the tax system and the IRS, Shulman said, and the service has been asked to play "a major role" in the tax provisions of the Affordable Care Act.
"It is also my desire that Congress keep a keen eye on tax legislation that adds to complexity," he said. "You can create the most elegant piece of policy in the world but if we can't administer it or taxpayers don't understand how to take advantage of it, the value of that policy plummets."