SHULMAN PROPOSES TAX TECHNOLOGY OVERHAUL

Washington, D.C. - Internal Revenue Service Commissioner Doug Shulman described his vision for a next-generation tax compliance system that would allow the IRS to pre-populate a taxpayer's return with W-2, 1099 and other information reporting forms before a taxpayer files a return.

During a speech in early April before the National Press Club, Shulman talked about how the IRS has been evolving in recent years from a "look-back" approach, involving audits that occur years after a tax return has been filed, to a more proactive approach.

The next step would be for the IRS to have access to the information reports filed by companies and present taxpayers and preparers with the information before the tax return is filed. Those could include the W-2, along with information returns for mortgage interest, interest and dividend distributions from banks, credit unions, mutual funds and other securities, and K-1 forms.

"The vision is relatively straightforward," he said. "The IRS would get all information returns from third parties (W-2s, 1099s, etc.) before individual taxpayers filed their returns. Taxpayers or their professional return preparers could then access that information via the Web, and download it into their returns, using commercial tax software. Taxpayers would then add any self-reported and supplemental information to their returns, and file the returns with us. We would embed this core third-party information into our pre-screening filters, and would immediately reject any return that did not match up with our records. That's right; we reject the return and ask you to fix it before we process it. We would then have more accurate returns and deal with many more problems up-front. We could shift resources to spend more money getting it right in the first place, and do less back-end auditing."

Shulman acknowledged that the IRS is nowhere near implementing such a system at this point. "Even once this is done, we would have a lot of work to do in the technology area," he noted.

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