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HMRC must ensure the communication of key information on the rollout of MTD for ITSA is of a high standard to ensure a smooth transition for accountants and their clients, [...]

The scale of the challenge posed by Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) means accountancy practices and their clients must avoid last minute compliance pushes, market [...]

The IRS has not met its goals in increasing the amount of taxpayers who file returns electronically. The agency hoped 80 mil taxpayers would file electronically in 1999 and only 29.2 mil did. Future goals are more ambitious, and the newly formed Electronic Tax Administration Advisory Committee is advising the IRS on strategies. However, financial incentives and mandates must be included if goals are to be reached.

Former IRS commissioners Margaret Richardson and Lawrence B. Gibbs commented on Congress's plans to restructure the IRS at a Jan 23, 1998 meeting of the ABA's Tax Section. Both indicated their concerns about the proposed tax return-free system which was not studied by the National Commission on Restructuring the IRS. The system would add heavy administrative burdens on the IRS and third parties such as financial institutions and employers. The proposed oversight board was also the subject of comment.

A May 1997 meeting of the IRS's Information Reporting Program Advisory Committee (IRPAC) focused on foreign trust tax guidance, gambling winnings reporting thresholds, the year 2000 computer problem, IRS electronic filing programs, fringe benefits reporting, and several other issues. IRS officials discussed the status of the simplified tax wage and reporting system or STAWRS, electronic Form 941 filing, the Electronic Federal Tax Payment System or EFTPS, and IRA rollovers.

The IRS is using its tax refund offset program to collect nontax debts owed to 34 other federal agencies such as the Depts of Health and Human Services and Housing and Urban Development. The refund offset program, which has collected over $9 billion since 1986, offers agencies a quick, inexpensive way to settle debts. However, the IRS contends nontax debt collection hurts voluntary compliance. Although a General Accounting Office study disputes this belief, the refund offset program can be thwarted by nonfiling or underwithholding.

Reorganization at many levels of the IRS often makes little sense and seems to be carried out for the sake of change, not for a more effective or less expensive Internal Revenue Service. The constant consolidation of regional offices begs the larger question about the need for any regional offices at all, and the constant shifting of responsibilities without clear guidance could severely limit the service's ability to function. Furthermore, reforms could lead to many of the IRS' best employees leaving due to a lack of advancement opportunities.

The separate federal and state income tax systems are a burden on taxpayers and the government and should be combined in one uniform system administered by the federal government. This would save the state governments the cost of administering an income tax system and save taxpayers the cost of complying with two separate systems. It would also make tax planning easier. Unfortunately, states are unlikely to give up their right to shape state income tax laws for political purposes. A possible combined state-federal income tax system is described.

The IRS will relax compliance rules for information reporting, and it will also bring in new information technology to ease paperwork. For example, the passive foreign investor taxpayer identification number project will be redrawn. Such numbers will not be required for investment type incomes such as portfolio interest. As for electronic filing, some large domestic firms may have to use it in 1996. While wage reporting has been delayed, proposed penalty notices will increase to former levels.

The IRS is making greater use of alternative dispute resolution as a supplement to its traditional tax conflict methods. Administrative procedures improvements include Delegation Order 236, Early Referral, Accelerated Issue Resolution and competent authority. Arbitration includes Tax Court Rule 124. Mediation usage is occurring with docketed cases and appeals. Advance Pricing Agreements are also proceeding.

The Information Reporting Program Advisory Committee, which advises the IRS on reporting regulations, discussed a variety of ways to reduce the reporting burden in a Nov 1994 meeting. The IRS is considering the implementation of many new regulations aimed at making reporting easier and less time consuming for both the taxpayer and the IRS. Issues discussed include the reporting of wages, discharge of indebtedness, grantor trusts, benefits and nonresident alien issues.

The IRS' use of advanced pricing agreements (APA) to avoid disputes arising from IRC section 482 has been successful at reducing the time and costs these disputes cause. APA is a form of alternative dispute resolution in which taxpayers meet with the IRS before filing in order to solve potential transfer pricing problems. Such dispute resolution occurs in a non-confrontational atmosphere that allows the parties confidentiality and saves time and money for both sides. Prospects for extending such dispute resolution methods to other tax issues and fine-tuning the current APA program are discussed.

The IRS' market segment specialization program was created to produce more efficient auditing procedures through educating IRS auditors about the specific accounting and business practices used in different industries. Previously, all auditors were generalists who may have lacked the specific knowledge needed to audit certain market segments. The IRS will eventually focus on 28 permanent market segments, with each of these containing numerous subsegments. Compliance trends can then be studied on a segment-by-segment basis, giving the IRS a greater ability to ensure taxpayer compliance.

The IRS will update three dozen publications as a result of changes in tax policy reflected in the 1993 tax bill. Many of the revised forms should be available to the public by Nov, 1993 if all goes as scheduled. IRS publications relating to filing can be obtained by calling 1-800-TAX-FORMS. More technical publications are harder to acquire due to a lack of internal organization within the IRS. A list of IRS publications is included.

The author discusses the tax return-free plan being prepared by Senator Byron L. Dorgan and IRS Commissioner Charles O. Rossotti's consultations with the Senator concerning the plan.

IRS Commissioner Charles O. Rossotti outlined several reforms he has implemented or supports to reduce taxpayer paperwork at a hearing on government paperwork reform during the week of April 12, 1999. The IRS has improved Form 1040 and the Form 5500 series. The IRS encourages electronic tax filing. It has also aided specific groups, such as small businesses, in their tax administration.

The long-term overhaul of the IRS will not disrupt short-term IRS administration, according to an 18-month plan introduced by IRS Commissioner Charles O. Rossotti in March 1998. In fact, short-term administration should improve. Improvements include 24-hour-a-day IRS telephone service beginning in 1999, rewriting in plain language Form 1040 instructions and other commonly used brochures by 2000, and assisting taxpayers in filing paperless returns. All improvements are listed in the IRS Customer Service Task Force report, "Reinventing Service at the IRS."

Tax practitioners at the ABA Tax Section's Jan 1996 meeting debated issues such as IRS use of private collection agencies, economic reality audits, and the expanded role of the taxpayer ombudsman. The IRS had opposed the plan to use private agencies to collect on delinquent taxpayers, a concern shared by many meeting participants. IRS officials at the meeting listened to complaints about the economic reality audits, but indicated the audits would be continued. Taxpayer Ombudsman Lee Monks discussed the expanded scope of his office in problem resolution and the IRS's successful 1995 antifraud programs, which resulted in 800,000 fewer dependent claims.

The IRS is promoting Telefile and electronically-deposited refunds as part of efforts to revitalize its sagging electronic filing program. The program, hurt in 1995 by fraud and social security number matching problems, experienced an 18% drop in electronic returns. Telefile is a successful program, but its restricted eligibility limits its impact. Moreover, the direct deposit option being made available to paper filers diminishes the early refund advantage enjoyed by electronic filers. IRS guidance on alternative signature methods will help to facilitate filing via the Internet, a program that may begin in February, 1996.

IRS Commissioner Margaret Richardson has called for a simplification of Form 1040, but is unlikely to get it. Most lines on a 1040 are not filled out by most taxpayers, but they are all necessary to someone. A better approach to simplification might involve not requesting as many supplemental forms, many of which are never processed. Other options include allowing return-free filing and lobbying Congress to simplify tax administration.

Taxpayers' rights legislation being considered in the House would place the burden of proof in refund or tax deficiency proceedings on the IRS, an idea that could undermine the entire income tax system, according to IRS Commissioner Margaret Richardson. Other bills being considered would replace the Taxpayer Ombudsman position with a Taxpayer Advocate, whose job duties would include protecting taxpayers from hardship due to IRS action. Other bills would waive interest on some late payments and allow all delinquent payers the opportunity to enter into installment arrangements.

The IRS is implementing an 'economic reality' training program for its auditors in order to better prepare them for building cases against people suspected of cheating on their taxes. Auditors will be trained to compare a person's standard of living, based upon three years of tax records, along with motor vehicle and mortgage documents, to see if they are living beyond what their tax forms would suggest are their means. This process will only be used on people who have been selected for audit. The moral implications are discussed.

The National Association of Computerized Tax processors (NACTP) hasn't lost site of its main objective (to bring together the views of the tax processing industry and make tax preparation easier […]

Revenue Canada, Taxation (RCT) has made several innovative changes that will benefit taxpayers and tax preparers alike. With service, simplification and convenience as its primary focus, RCT is applying electronic data exchange technology to filing, the direct deposit of refunds and the payment of employer remittances. Taxation centers are improving customer relations while RCT management is being decentralized. The most outstanding changes are the filing of returns without computations and a 'fairness package' which features quick and simple refund and appeals processing and the removal of appeal and election deadlines, interest and penalties.

LOOKING GOOD IRS Takes Steps to Improve Service Significant improvements have been made in the way the IRS service centers are doing business. These improvements will result in less hassle [...]

Issues related to IRS plans to electronically match partnership Schedules K-1 tax forms with other partnership tax forms are examined, focusing on the difficulty of realizing the plan. Topics include the complexity of large taxpayer/partner returns and the effect of IRS plans on voluntary compliance.

State tax administrators and corporate America face the same challenge: how to do more with limited resources. Sales and use tax compliance and administration are prime examples of this challenge. [...]

Starting with the 2001 filing season, the IRS's new "Checkbox Initiative" (Initiative) will allow paid preparers, with their Clients' permission, to work directly with the IRS to resolve return processing [...]

The IRS has started to teach its employees about the 1993 tax audit procedures and guidelines. The new guidelines make a distinction between non-filer audits and traditional examinations of filed returns. The importance of information gathered through oral interviews is stressed, and documentary research plans should be based on information gleaned from the interviews. Penalties will not be waived in non-filer cases unless there is reasonable cause to do so. Practitioners are still unsure of the legal status of non-filers.

This article concerns the IRS Corporate Division's initiative allowing corporations to participate in a prefiling test program intended to reduce factual disputes in postfiling audits. IRS official Larry R. Langdon's comments on this issue are included.