Our editors recently had an opportunity to sit down with Internal Revenue Service Commissioner John Koskinen for an exclusive interview, and in addition to our own questions, we were able to ask him many of those we had gathered from our readers. Our wide-ranging conversation covered everything from Earned Income Tax Credit checklists and the future of the Registered Tax Return Preparer, to busy IRS phone lines and balancing service versus enforcement.
One of our readers was concerned about the Practitioner Priority and Taxpayers Assistance phone lines being insufficient to handle the calls to resolve taxpayer problems. Are there steps that the IRS can take to alleviate some of the burden on those phone lines?
Koskinen: It's a high priority for us to deal with the professional tax preparer community, because you really are, in a lot of ways, partners with us in trying to get information to people about what the right amount to pay is and figuring out how to get it done. So one of the things that we did this year was try to limit the line to people actually working with clients, trying to resolve their issues as a way of trying to take some of the pressure off the line. I take the point ... about sitting on the phone for a half an hour, an hour, hour-and-a-half, and obviously it's hard enough and bad enough for taxpayers, [who] usually have a question or two. ...
We've had to cut out a couple of services to professional preparers that we'd rather be able to provide. If we ever get the resources, we'll provide them again. But our sense was, when we looked at it, they had a lower utility than some of the more general calls [specifically, the Electronic Account Resolution service and Disclosure Authorization services].
Regarding tax preparer registration, can you give us some notion of the issues you'll be thinking about as you make the decision whether to continue appealing the Loving ruling that invalidated the preparer registration regime, or whether to pursue a legislative remedy or to offer a voluntary credential?
Koskinen: Well, we're obviously looking at all three of those. We're disappointed with the decision, although the decision is fairly final in the sense the only appeal would be to apply for a writ of certiorari to the Supreme Court. Getting a writ granted by the Supreme Court is unlikely in most cases and probably unlikely in this one as well. We don't have controversy between different circuits. ...
Obviously, a legislative fix would help us, and so we're also taking a look at trying to figure out how to get that pulled together. We've had some indications of support in the Congress, although I recognize that in today's political climate, getting legislation to give the IRS authority to do anything is probably a bit of a stretch. So it may well be that our best approach ... is whether some sort of voluntary program would be productive. It would be a way of offering a kind of educational support for preparers. ...
Obviously, the problem from our standpoint for the voluntary program is that, when it was going to be a mandatory program with our contractor, we could predict pretty well what the volume was going to be and organize it appropriately, including structuring the fees. If it's a voluntary one, it gets a little more difficult to project.
There's a feeling among some tax preparers that some of the due diligence requirements that are being pushed on to them in terms of, for instance, the Earned Income Tax Credit checklists, make them feel as if they're being conscripted to do some of the IRS's work for them. Do you have any thoughts on that?
Koskinen: We really don't want preparers to feel that they've got to go collect every document, review each document, in effect, audit the return in a level that an IRS agent would do. We think they need to be comfortable that there is support for what it is they're putting in the return, just as a taxpayer would be comfortable with that. But we don't think that the preparer needs to be in a position of having certified that they've actually got all the documents in tow and they've looked at them all and, in effect, they've done the first review as if they were a revenue agent. ...
Now, EITC is a case where we've more recently asked for more activity by preparers, because obviously the statute is very complicated, and seems to get more complicated by the day. We have a challenge of improper payments under the program that get determined to be at a large volume. So there we are asking preparers to go answer a set of questions [to prove that] they're satisfied that, again, the information they are putting into the return is appropriate and has some basis behind it. Again, when people have a large list of deductions, we're not asking the preparer to go through and certify each deduction but to certify, you know, to look at it and say this is the information that would be appropriate for supporting the return.
So, again, for EITC we're not asking them to start doing house visits to determine where the children are actually living, but to at least have made enough of a preliminary inquiry that they're satisfied that the return they're filing is accurate. ...
We're concerned - we don't mean to be driving preparers out of the preparation of EITC refunds, and there's been a trend in that direction, that there's a slightly or a somewhat smaller percentage of those returns now coming in through preparers, as opposed to people doing it themselves. We certainly didn't intend that preparers decide it's not worth the effort. We need their help. ...
Given the limited resources, do you see a conflict now or developing down the road between service and enforcement about treating them as equal responsibilities? Will there come a time when you might have to prioritize one over the other?
Koskinen: Well, we keep looking at, with the resources we have, how do we prioritize them? How do we apply them appropriately across, as you say, those dualities?
I view compliance and taxpayer services as two sides of the same coin. We need to be out chasing those who one way or another haven't paid the right amount to get them to pay the right amount. But, on the other hand, if we can't answer taxpayers' questions, if they feel that they really can't get the information they need, they're likely to go to the low side of the equation or at some point it gets to be corrosive, and it gets to a point where people would say, 'Well, maybe I'll just take my chances as to whether they can find me at all.' ...
I think it's important for people to understand that the level of taxpayer service isn't because the employees aren't working hard. I've now been to nine different cities, had town halls in each of those places. I've seen several thousand IRS employees. Their general issue is not their compensation or the fact that they're working too hard. Their issue is that they're concerned there aren't enough people to allow them to provide the service that they think taxpayers deserve.
So I think the problem is if we say, well, okay, compliance is 98 percent related to taxpayer service, so we should do more in taxpayer service to get the numbers up. You could do that, but the amount of money you're going to lose on the other side is much bigger. Compliance revenues we get by our own activities are four to five times the budget of the entire agency. So it's a Hobson's choice. Of the 10,000 employees we're down over four years, 3,100 are revenue agents and revenue officers. So to some extent clearly compliance and enforcement is suffering. But at the same time our taxpayer services, as we put as much resources as we can into it, are not very good at all.
Do you think the IRS should be administering social welfare and other government programs?
Koskinen: ... We don't have any control over it, obviously. Those decisions are made by Congress in the legislation. To some extent my view is for the employees, Congress keeps asking us to administer all of these refund programs, grant programs, programs out of the financial meltdown because in some sense we're efficient about it, we don't use up a lot of money in the overhead, and it's a way to get the money out to the public effectively. But it does challenge us, as we're going to be challenged with the back end of the Affordable Care Act, in a context where people say our budgets have gone down by a billion dollars in four years and the workload's gone up significantly.
A full transcript of our interview is available here.
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