The IRS Advisory Council, a federal advisory committee that provides a public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public, sees a danger in chronic underfunding of the agency.
IRSAC made the point in its annual report, which also highlighted the importance of the Taxpayer First Act and opportunities to expand the e-filing and online application process.
The 2020 report includes recommendations on 26 issues, which also include telephone response times for the Practitioner Priority Service and taxpayer digital communications.
Among this year’s major points:
Inadequate IRS funding is a fundamental risk to tax administration.“A tax system rooted in voluntary compliance requires appropriate levels of customer service and enforcement, both of which depend upon adequate and consistent funding,” the report said. “Congressional appropriations provide the vast share of operating funds for the IRS to administer the nation’s tax system, and collect over $3.1 trillion in net revenue.” In fiscal year 2019, more than 80 percent of federal government spending was funded by federal taxes collected by the IRS.
Yet “overall funding for the IRS has decreased roughly 20 percent on an inflation-adjusted basis since FY2010,” added Charles Read, CEO of GetPayroll in Lewisville, Texas, and one of 12 council members whose terms end this year. “The result of these budget reductions since FY 2010 is a 22 percent decline in the number of employees at the agency and a 30 percent decline in the number of employees working in enforcement roles.”
Among IRSAC’s recommendations are advocacy for funding at a level no lower than the FY2010 benchmark adjusted for inflation, or $14.3 billion, or at minimum a level that will provide for a net increase in staffing on a sustained yearly basis; and advocating for consistent or multi-year funding for long-term initiatives, including the customer service strategy, training strategy and business modernization plan.
The Taxpayer First Act should inform IRS operations. Following the “welcome recognition by Congress of the value of the IRS” and the agency’s extraordinary measures to keep functioning during the pandemic, the Taxpayer First Act Office is recommending a 10-year plan of outreach to and education of taxpayers, expanded digital services, reaching underserved communities and streamlining the taxpayer customer-service experience with the IRS, among other initiatives.
IRSAC generally agreed with the TFAO recommendations and further recommended expanding taxpayer pandemic relief and expediting consideration of penalty abatement requests, among other recommendations.
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Expand the e-filing and online application process. “The IRS has been gradually expanding electronic filing of returns, applications and other documents,” the report reads. “While the IRSAC applauds these efforts, the COVID-19 pandemic has clearly demonstrated the need to accelerate this.”
The council recommended further digitizing of forms; the report provides a partial list. “Some of them will be of great value to accountants when available in digitized form,” Read said.
Among fully and partially implemented recommendations from IRSAC’s 2019 report are consideration of enabling e-signatures on key forms, continuing refinement of the application of first-time penalty abatement under some circumstances, and placement of clarified guidance related to Sec. 199A qualified business income on IRS.gov.
“If history is any indication, many of the recommendations of IRSAC will be implemented in the coming years,” Read said.