IRS Advisory Council Wants More Consistency in Penalties

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The Internal Revenue Service Advisory Council has released its annual report for 2016 to IRS Commissioner John Koskinen, with recommendations on a wide range of tax administration issues, including the belt-tightening service’s consistency regarding penalty administration and fairness to taxpayers.

The IRSAC made several recommendations in its report on a range of issues and concerns, including evaluating the effects of penalties on voluntary compliance.

The “IRS should evaluate the effects of penalties on voluntary compliance, strive to provide greater consistency in penalty determinations, and consider developing one or more rules of administrative convenience for providing relief for penalties asserted under Section 6662(b)(2),” the report reads.

“The IRSAC has identified several areas in which penalty administration can be strengthened or enhanced to improve the fairness and consistent treatment of taxpayers … Policy decisions need to be consistent with the universally agreed-upon purpose of penalties: encouraging voluntary compliance. To ensure this,” the report adds, “the effect of penalty actions on voluntary compliance needs to be clearly understood.

“With serious budget constraints impairing the IRS’s ability to provide high-quality taxpayer service, the IRSAC also believes that the streamlining and modest liberalization of penalty abatement decisions will create greater efficiencies for the IRS, reduce the burden on substantially compliant taxpayers, and increase voluntary compliance.”

Other sections of the report include “Promoting Confidentiality of Treaty-Exchanged Information”; “Improving Fraud Prevention through Individual Taxpayer and Business Master File (BMF) Authentication”; “Enhancing the IRS2Go Mobile Application and Online Accounts”; and “Revising and Updating Circular 230.”

The report is available online.

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