Update from Washington: The IRS’s next burden
Most tax practitioners take some time in the early autumn to begin getting ready for next year’s filing season, but the IRS can’t wait that long, according to National Conference of CPA Practitioners president Steve Mankowski.
”Prior tax reform bills were implemented over several years,” he said. “With the Tax Cuts and Jobs Act, the IRS has until June 30 to get everything ready for its programmers and tax software providers. The timeframe is very restricted, and it’s difficult because there are so many unanswered questions.”
“As tax professionals, we’re asking for guidance and interpretations of some of the vague parts of the new tax law,” he added. “It’s tough for the IRS to provide guidance when they are learning and trying to understand these changes just like the rest of us. Over 400 forms are affected, and they have an extremely tight window.”
Mankowski recently attended the April IRS National Public Liaison meeting, which focused on tax reform implementation, the Tax Day system crash, recommendations from the Taxpayer Advocate, and a private debt collection update.
The Tax Reform Implementation Office has a difficult job, Mankowski emphasized: “There are 119 provisions in the new tax bill. There are three levels of governance for TRIO.”
Those three levels are:
- A steering committee chaired by the IRS commissioner.
- A team of five executives, each with different responsibilities.
- A council comprised of contacts from each operating division. This is where the majority of the work is being done.
“One of the first accomplishments was the new W-4, along with the online calculator and publications. Next will be the 1040 family of forms and schedules with an estimated time frame of late May” Mankowski explained.
“Regarding the final Tax Day system crash, the issue was at the Martinsburg facility where the system went down and could not accept tax returns,” he said. “While this was the only system down, it affected other servers. The options were to either restart the system or use a duplicate sever in Memphis. IT determined that a restart was appropriate and that the cause was a hardware failure.”
The sharing economy was cited as among the issues the Taxpayer Advocate sees as serious, according to Mankowski. “Many small businesses, contractors, and part-time workers are not familiar with record-keeping, estimated payments, and other accounting practices,” he said. “The sharing economy is a growing portion of our economy, projected to grow from $15 billion to $325 billion from 2013 to 2025. … [One] recommendation is to allow voluntary withholding for independent contractor agreements.”
The Taxpayer Advocate is looking to Congress to make changes, Mankowski noted: “The House passed the Taxpayer First Act, and we applaud that. But at some point the IRS needs additional funding if it is to truly modernize. There have been budget cutbacks for the last few years, and Congress keeps asking the IRS to do more with less. While they have given the IRS funding for the implementation of the new tax law, that’s not speaking to necessities for modernization of computer systems and other needs.”
Private debt collection, in its current form, has mixed results, according to Mankowski. “It goes back to 2004,” he said. “The Transportation Act of 2015 established the current criteria for using private debt collectors, with the expectation that full implementation would take several years.”
“This iteration has been in effect for a little over a year,” he said. “While it took some time to get up and running, and to ensure the protection of the identity of taxpayers whose accounts went to debt collectors, the revenue generated has been much lower than anticipated. The numbers they provided weren’t the most up to date, but the figures reported to Congress showed outlays of approximately $20 million, much of which was setting up the infrastructure, while collections had only amounted to $6 million, of which $3 million would be going to the IRS. It looks to be another case of a money-losing proposition. With a 50-50 split, they need to collect $40 million just to break even. And they expect another sizeable outlay, as business accounts are brought into the fold of private debt collection.”