The Inflation Reduction Act’s long-term financial boost for IRS should be a game changer for tax administration, taxpayers, and tax professionals.
According to David King, who works with Optima Tax Relief, for the agency to make prudent expenditure decisions, it needs to have a clear plan, trained employees, and reasonable oversight.
The Inflation Reduction Act of 2022 has just been signed into law by the President of the United States, Joe Biden.
In the wake of the law, tax professionals have been attempting to comprehend its tax provisions, and a great deal of ink has been spilt on the topic of what the law’s $80 billion in funding spread out over 10 years means for the Internal Revenue Service and taxpayers.
Unpacking the tax provisions will definitely be done by tax professionals, with assistance from the Internal Revenue Service and the Treasury Department.
I have faith that the widely held but incorrect belief that the Internal Revenue Service (IRS) will hire around 87,000 agents to pursue taxpayers under the premise that “everyone gets their own personal agent” will eventually be dispelled and replaced with a more accurate explanation.
The long-term funding boost for the IRS should also be a game changer for tax administration, taxpayers, and tax professionals. While the law’s climate and health-care provisions are of broad importance, they are not the only provisions of significance.
In recent years, people who work for the Internal Revenue Service (IRS), such as the company I run, have witnessed the agency’s difficulties.
People who owe money to the IRS or have not filed their tax returns, and quite often both, seek the assistance of my company.
We have a one-of-a-kind perspective on the actions of taxpayers who do not comply with the law since we are the largest company in the United States that is solely focused on post-filing concerns.
When the Internal Revenue Service (IRS) made the unprecedented decision to suspend practically all notices — its major enforcement weapon — we anticipated that it would lead to more activity that was not in compliance with the law.
Despite our worst fears, we were correct. We have observed a general “wait and see” mentality from taxpayers who owe money, even though their tax balances are rapidly increasing as a result of fines from the IRS and rising interest rates.
We have also observed a concerning 40% increase in the number of tax extension files year over year, and we suspect that a large number of these taxpayers will not file their taxes by the delayed deadline, which is an issue for all Americans.
Since at least the beginning of this decade, leaders of the Internal Revenue Service have argued that the Tax Administration Agency requires substantial and continuous funding. This funding for the IRS comes from the recently passed statute.
Because this is an opportunity that comes around only once in a lifetime, the organisation now has the responsibility of making prudent expenditure decisions.
It will be essential to focus on the following three areas: a substantial, clear, and executable plan; qualified senior personnel; and actual, timely, and appropriate oversight.
First, let’s go in the sequence given.
Have a Well-Defined Strategy
A well-considered and carefully crafted plan will produce a crystal-clear and unmistakable description of what constitutes a successful outcome.
Utilizing the knowledge that the stakeholders possess is essential to gaining their support and ensuring the plan’s success.
The variety of parties involved is staggeringly extensive and includes state tax authorities, small businesses, tax practitioners, software companies, personnel of the IRS, and, of course, taxpayers themselves.
It’s been 20 years since former IRS Commissioner Charles Rossotti made the statement that the agency ought to consult first before making decisions, rather than making decisions first and then explaining them.
That assertion stays accurate. The parties involved need to be aware that while everyone will have the opportunity to express their opinion, not everyone will get their way. Even if the IRS cannot make everyone happy, it can—and should—take into account the insights that each person offers.
I believe that the agency’s primary focus needs to be on providing service at each level, including pre-filing, filing, and post-filing.
The Internal Revenue Service has to reduce friction and recognise that no one solution will work for all 150 million individual taxpayers.
And finally, the Treasury Department ought to have a key part in the development of the first plan as well as the process of approving it.
It will be one of the most significant initiatives for the Treasury Department in the next decade to successfully implement this strategy, and it will benefit no one if both the Treasury Department and the Internal Revenue Service continue to employ the pronoun “they” instead of “we.”
In November, Commissioner Chuck Rettig’s statutory term of five years will come to an end. Recruit Qualified Employees The entire organisation will look to the chief of the agency to lead in the creation and implementation of projects, so selecting a candidate for the position is of the utmost importance.
Even without the duty of a total reform, the fundamental responsibilities and scope of an 80,000-person institution with a $13 billion budget that impacts practically every American are daunting.
Despite the fortunate timing of the new law, no one has been proposed for this post, which ought to be a top priority for both the administration and Congress.
Because of what I do for a living, having a tax expert like Rettig in charge is really beneficial to me. However, the next commissioner ought to be an experienced manager who has a strong background in both IT development and providing excellent customer service.
In addition to this, one of my goals is to have the Byrd Rule amended so that appropriators no longer have the right to authorise rapid hiring.
This authority would pave the way for success for the new commissioner and make it possible for them to bolster the existing team with senior advisors who are familiar with taxpayers.
Make Use Of Reasonable Supervision
Following closely on the heels of planning and personnel, it will be necessary to have programme oversight.
Treasury, the United States Government Accountability Office/Inspector General, as well as Capitol Hill, will each have a part to play in this process.
All too frequently, monitoring is interpreted as a game of “gotcha” rather than as an integral part of continual assessment and review.
For this enterprise to be successful, the supervision has to be coordinated, transparent, and carried out promptly.
In addition, it should be offered in the attitude of assuring success without concern about who would receive the credit for that success.
The IRS should welcome effective monitoring, which helps leaders to alter course as necessary, bring openness to a complicated and occasionally controversial undertaking, and to ensure success.
To this end, supervision needs to be integrated; no one gains when the Government Accountability Office (GAO), the Treasury Inspector General for Tax Administration (TIGTA), and congressional committees are continuously tromping around in search of unconnected and uncoordinated deliverables.
Timeliness is another requirement for supervision; no one will gain from a report that takes 18 months to complete from beginning to end.
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The process of modernising and revamping the Internal Revenue Service (IRS) is a massive undertaking. Although adequate funding is required to carry out these reforms, it is not currently available.
This is a once-in-a-generation chance for the agency to provide effective and efficient tax administration, meet people where they are, and decrease friction throughout the company.
I’m on the Internal Revenue Service’s side. You ought to be as well.
