IRS Commissioner Rettig reaches out to tax practitioners, but with a stark warning
IRS Commissioner Chuck Rettig addressed an audience of tax practitioners Thursday, pointing to his own history as a tax attorney, while reminding them that the IRS is watching them and their clients from the compliance and enforcement side.
During a speech at New York University’s Tax Controversy Forum, he noted that when he took the top job at the IRS last year, he felt like he was also representing the tax practitioner community, with a nod to longtime tax educator Sid Kess in the audience.
“I didn't come on board by myself,” he said. “Having been involved in a lot of different conferences, both from the accounting side — the Sid Kess accounting side — and the enrolled agents side and the tax lawyer side, I came on this journey knowing that I was not going to be coming alone, that the practitioner community was going to be coming with me,” he said. “It is vitally important to me and to every person at the IRS that the practitioner communities participate with the Internal Revenue Service as we’re moving forward. We need the help of the practitioner community, we need help from taxpayers, we need help if you're in-house. As we do things, if you have thoughts and you have comments, reach out to us, reach out to whoever you know at the IRS, reach out through the formal advisory boards and advisory committees that we have. We’re in this together and when I say ‘this,’ it’s really tax compliance, and It's trying to make the world better for everybody who has to interact with the Internal Revenue Service, whether they're on the inside, the outside, the practitioner or taxpayer. And that was my drive to come on board. It was not that I was doing something by myself. It was that I was doing something with essentially all my professional colleagues.”
However, Rettig acknowledged that he now has a new role that may put him at odds with some of his former colleagues.
“You should expect this commissioner to encourage people in the Internal Revenue Service to look with a skeptical look at the people who actually think the tax return is in some nature an offer to negotiate,” he warned. “A tax return is not an offer to negotiate. A tax return is signed under penalty of perjury. Often it's prepared by a preparer who has extensive experience. I understand you rely on the information the taxpayer provides, but you have to have some reasonable basis to rely on that information.”
Rettig is familiar with how practitioners work with clients, and the need to accept responsibility for the information reported on the tax return. “If you look askew at that, you've got a commissioner who's going to wonder why are these preparers looking askew at that, because I also believe that the preparer community, the practitioner community, should be held accountable,” he said. “I was raised as a tax lawyer to be accountable. I was raised as a tax lawyer to hold the government lawyers accountable. And I believe that that's actually what makes a difference between a profession and a job. In a job, at the end of the day I go home and forget about the job. In a profession, at the end of the day, you wake up at 3 in the morning and you wonder, ‘Did I get that right?’ If I got it right, I go back to sleep. If I didn't get it right, I log on to see what actually I did and what the person said, or should I go back and talk to the taxpayer again. Understand the scenario that you have. Understand the commissioner that you have. I understand what it's like to be in practice. I understand that taxpayers don’t always tell you everything. But I also understand from my practice that sometimes it’s not the horse, it's the jockey, or both.”
Rettig also discussed the enforcement side of the IRS, noting that the Criminal Investigation unit, led by CI chief Don Fort, will have a “seat at the table with the commissioner.”
He took issue with press reports that the number of IRS audits has declined in recent years.
“Don't read and think the IRS is resource challenged and therefore they’re not going to get to me,” said Rettig. “When we get to you, we've got you, the taxpayer. That's how I was brought up as a tax lawyer, and I think that's how everybody should actually focus in terms of going forward. When the IRS gets there, they're going to get there. There’s a lot of press in terms of audit statistics because once a year we release the Data Book, and it has a lot of information there. Understand one thing: Those statistics are closed cases. Those statistics are not open matters. It's closed cases rather than matters that might be in flight. The numbers in flight are significant, and for some of the populations, the numbers in flight are as much as a third of the population of taxpayers that we're able to close, maybe less than 10 percent of those audits during any particular year.”
He disputed how the press has been characterizing the IRS and defended the way it responds to reports in the media. “Do we message? Do we come back? Do we reach out to the tax press and say, ‘Gee, the commissioner would like to explain this statistic.’ We're a tax administration agency. We do our job. We do our job the best of any similar agency in the world. And we don't message. So you're not going to see us necessarily wrapping statistics in a message. You're going to see us continuing to do our job, I think, the best that anybody in the world can do it.”
Rettig insisted that tax season went smoothly this year, despite a host of challenges. “It really comes down to the people factor,” he said. “You understand. we had a historic filing season. When the press was taking us on, a lot of IRS experts, former IRS employees, a lot of public figures were taking us on, [predicting] we were going to crash and burn coming into filing season, for many reasons: for implementation of the TCJA, for the shutdown. You can almost fill in the blanks at some point. And there was a call inside the IRS that the commissioner should step up and say, ‘Things seem to be going smoothly.’ We never stepped up to say things were going smoothly, but once we opened the filing season we finally posted on our website our statistics. You should know, we set records. We set a record on April 15 of 15 million returns processed. We set a record on January 28 when we opened, which by the way was one day earlier than they opened last year, when we opened processing 1.6 million returns per hour and 536 returns per second without error. That didn't happen just because we have software and hardware that seems to work. That happened because people inside the Internal Revenue Service, highly dedicated, gave their best on implementation. They started long before Dec. 22, 2017 to make it happen. They worked through holiday season, they worked through birthdays, they worked through anniversaries, they worked through a shutdown, and they performed, to deliver a filing season that was basically error free.”
He predicted that the IRS’s modernization plan will deliver even better efficiency and taxpayer service in the future. “We are just beginning our integrated business modernization plan,” said Rettig. “If you haven't seen much of it, you can actually go on our website and you can watch a lot of what's happening. It’s a six-year plan. It's going to be implemented in two separate phases between $2.3 and $2.7 billion. It will change your interaction with the Internal Revenue Service. It will change the interaction of the employees of the Internal Revenue Service with taxpayers, with representatives, and all for the better. We will be able to accomplish a lot faster, and provide better across-the-board service. What we’re trying to do is to get the sort of best-in-class service, equivalent to what people get when they call an online retailer or the equivalent where they can place one call and get a whole host of services taken care of.”
Rettig encouraged the tax professionals in attendance at the conference to consider working for the IRS, just as he did a year ago when he moved from Southern California to Washington, D.C., to run the agency. “Every morning when I come into the office, I look around and I realize I made the right choice based on the people I get the opportunity and the privilege to work alongside,” he said. “And so, for those of you who were wondering, we are hiring. It can be a tremendous experience. It can be an experience that you find tremendously rewarding, and I think it's an experience that you should reach out for.”