For the IRS to-do list: Build trust with Congress, use clearer language with taxpayers

By Martha Waggoner

The IRS needs to build trust with members of Congress and speak more plainly with taxpayers in order to capitalize on the modernization that's expected of the agency, an advisory panel said in a report issued Wednesday.

"As the IRS continues to recover from the far-reaching impacts of the COVID-19 pandemic, builds on its budgetary success achieved through the Inflation Reduction Act, and encounters shifting political and economic conditions and workforce issues, the IRSAC has endeavored to support the IRS in providing effective, timely taxpayer service," the 34 members of the IRS Advisory Council wrote in the report.

Their report reflects several recurring themes, the members said:

  • The need for consistent and multiyear funding for the IRS to achieve its goals of providing efficient, effective, modern service as well as providing ideas and support for IRS initiatives to modernize. Later, the report noted that Congress, through the Inflation Reduction Act, P.L. 117-169, did provide "a once-in-a-generation opportunity to upgrade the IRS's service, enforcement, and IT capabilities. However, we would note that the Inflation Reduction Act was largely partisan legislation and may not foreshadow the broader bipartisan support necessary to sustain the IRS's policy objectives over the long term." (Congress appropriated $80 billion to the IRS over 10 years through the Inflation Reduction Act.)
  • The need to improve taxpayer interactions while supporting crucial enforcement efforts and navigating a rapidly changing digital world along with feedback on how to accomplish those goals.
  • Suggestions on how to move taxpayers to digital.
  • The importance of effective communication between the IRS and "a diverse nation of taxpayers."

While the IRS has engaged with congressional members, committee staff, and other stakeholders to make them aware of the agency's modernization plans, "Congressional understanding of and confidence in (those plans) seems spotty," the report said.

"In several 2022 Congressional hearings that the IRSAC reviewed, elected officials did not seem to be familiar with the IRS's current modernization plan and its progress," the report said. "Alternatively, even if they were aware of the modernization efforts, some elected officials expressed a lack of confidence in IRS's ability to complete the modernization effort — in some cases because of perceived failures many years ago. The IRS needs to continue its efforts to work with Congressional stakeholders in a transparent manner to build trust and confidence based on current IRS performance."

Ways to achieve this include communicating through the taxpayers' perspective by taking actions such as using clearer language such as "taxpayers 24/7 on-demand access to IRS services" rather than "deliver a fully digital experience," the report said, along with using graphics more often.

It also would be helpful if more elected officials could see or hear "tangible examples of taxpayer (and IRS employee) challenges — whether through firsthand visits or video/audio media," although that might require Congress to waive some disclosure requirements, the report said.

IRSAC is administered under the Federal Advisory Committee Act by the Office of National Public Liaison, part of IRS Communications and Liaison. Its members come from the taxpaying public, the tax professional community, representatives of the low-income community, small and large businesses, tax-exempt and government entities, the payroll industry, and academia.

Five subgroups report to the parent council. Those groups and their areas of focus for the report are:

Information reporting

■ Alignment of electronic signature requirements on withholding certificates;

■ Sec. 1446(f): Withholding on transfers of interest in publicly traded partnerships;

■ Enabling business online accounts communications and transactions; and

■ Wage reporting for payments to incarcerated individuals.

Large Business & International

■ Accelerate issuance of IRS Form 6166, Certification of U.S. Tax Residency;

■ Retaining different corporate addresses for different types of tax;         

■ Procedures for partners that receive late Schedules K-1; and

■ Improvements to the bridge phase of the CAP program.

Small Business/Self-Employed

■ Examination customer coordination and innovation office; and

■ Improving the taxpayer experience in docketed cases within the jurisdiction of the Independent Office of Appeals that arise from compliance actions by the IRS's Correspondence Examination or Automated Underreporter functions as well as feedback regarding Examination's efforts to improve taxpayer experience with respect to those functions.

Tax Exempt and Government Entities

■ Series 8038 form redesign and updates;

■ Recommendations for employee plans examination compliance approaches;

■ Recommendations for changes to group trust rules;

■ Recommendations for TEOS improvements; and

■ Recommendations for effective state engagement to promote employment tax compliance.

Wage & Investment

■ Business Master File (BMF) Transcript Delivery Service;

■ Artificial intelligence BOTS for customer service;

■ Tax Pro Account online features; and

■ Form SS-4, Application for Employer Identification Number (EIN), and daily limit per responsible party.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.

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