The IRS looks ahead to 2022
It’s not just practitioners who take the summer months to plan and retool their strategy for the future. The Internal Revenue Service, on top of its continuing obligation to oversee the tax system and process returns, has put forward a five-year strategic plan to improve taxpayer service and tax administration.
The service also said that it will specifically budget $291 million out of the congressionally designated $320 million to implement tax reform on technology. Its overall budget was set at $11.4 billion, an increase of $200 million over last year.
“The $291 million doesn’t seem like that much to spend on technology, given the overall budget and the fact that this is by far the biggest tax reform we’ve had since 1986,” observed Melissa Horne, a CPA and tax partner in the tax services group at Atlanta CPA firm Smith & Howard. “There is an unbelievable amount of changes that the IRS has to incorporate. They have to come out with guidance on a host of issues. Then they have to decide exactly how it will be implemented and take that and build their systems out to handle it.”
The IRS has not been up to speed on technology, according to Horne. “In general, they are behind the eight ball as far as technological advances go,” she said. “By the time anything gets approved and goes through their system, it’s out of date. We deal with a lot of agents. When they get new computers, it’s been so long to go through the approval process that it’s behind in technology by the time they get it.”
“If they stay within that budget I’ll be impressed, especially since they anticipate a lot of additional man hours,” she added.
“Technology issues around the IRS’s outdated system have been a common thread around efficiency problems when dealing with the IRS,” agreed Emily Matthews, a CPA and principal at Boston-based Edelstein. “Updating the technology will no doubt help the IRS reach the goals laid out in their plan.”
Service versus enforcement
The emphasis on better customer service in the strategic plan reflects some of the concerns in the “Taxpayer First” legislation in the House, H.R. 5444. The bill would require the IRS to submit to Congress a comprehensive plan to improve its customer service strategy, based on best practices from the private sector.
“Providing service to taxpayers is a vital part of the IRS mission, and the new strategic plan lays out a vision of ways to help improve our tax system,” said Acting Commissioner David Kautter. “The plan is part of an ongoing effort by the IRS to work with the tax community and find ways to improve our work for taxpayers and for the nation.”
The Fiscal Year 2018-2022 IRS Strategic Plan focuses on six goals for the next five years, and will serve as a roadmap to help guide the agency’s programs and operations. The goals are:
- To empower and enable all taxpayers to meet their tax obligations;
- To protect the integrity of the tax system by encouraging compliance through administering and enforcing the Tax Code;
- To collaborate with external partners proactively to improve tax administration;
- To cultivate a well-equipped, diverse, flexible and engaged workforce;
- To advance data access, usability and analytics to inform decision-making and improve operational outcomes; and,
- To drive increased agility, efficiency, effectiveness and security in IRS operations, utilizing modern IT systems and technology.
Among the tasks in implementing the Tax Cuts and Jobs Act that the IRS will focus on with its funding are creating new and revised taxpayer forms, instructions and publications; providing technical support to taxpayers on issues involving interpretations of the law, and of related published guidance; training IRS employees on the new law and helping the public, tax professionals and other industry partners understand how the law applies to them by issuing timely guidance; and reprogramming information technology systems, with a special focus on return processing and compliance systems — the backbone of the tax system.
In addition, the IRS plans to offer taxpayers more choices in how they interact with the service. According to the strategic plan, the IRS’s multichannel strategy has the potential to increase overall levels of service. Updates to IRS digital services may reduce the number of simple, informational interactions on the phone or in person for many taxpayers, allowing the IRS additional time to service taxpayers with more complex needs.
“We’re thrilled to see the IRS address some of the known issues within the agency,” said Matthews. “Not only is it helpful to taxpayers, but to professionals like us.”
“These changes will allow CPAs to spend more time servicing clients at a higher level, rather than navigating communications with the IRS,” she said. “The efficiency aspect is appealing — it’s tough trying to get in touch with the IRS and being placed on a long hold.”
Goals and metrics
One issue with the strategic plan is that it fails to put forth a way to measure its progress, according to Beanna Whitlock, a San Antonio-based tax practitioner and educator and former head of IRS National Public Liaison: “The strategic plan is great but they don’t have any way to measure it. They need to specify how they will measure whether it’s working or not, and what they will do if they discover it’s not.”
“On the surface, the strategic plan makes sense to the extent you can plan anything out five years or more,” said Roger Harris, president of Padgett Business Services. “As for the $291 million to spend on technology, you can always argue that they should spend more — but in this environment, you have to be happy with what you’ve got.”
“That’s one of the problems,” he said. “When they ask for money, someone always complains about what they did with it the last time they asked. Congress always likes to say they passed a bill that made the IRS behave better.”
Meanwhile, American Institute of CPAs vice president of tax Edward Karl suggested that the Senate, as it considers its own approach to IRS modernization, designate an executive-level practitioner services unit. “Over time, the IRS has established a number of functional departments,” he explained in a blog post. “Unfortunately, these units are not coordinated in a way that enables practitioners to access quickly critical information, such as their clients’ account status.”
Karl said that a practitioner services unit would benefit taxpayers served by the practitioner community and allow the IRS to leverage their limited resources in serving unrepresented taxpayers.