There was a lot to talk about when the IRS Oversight Board met recently to discuss different ways to improve how the IRS does business. The IRS Oversight Board is composed of presidentially-appointed experts who advise the IRS on how to improve the operation of the US tax system. The Journal of Accountancy offered a summary of the discussions in a recent post on their website. We’ve included the highlights below.
Preventing Fraud
Preventing tax fraud was at the top of the agenda during the meeting. Failing to file taxes, fraudulently claiming undue tax credits, underreporting income, and offshore tax evasion were noted as urgent tax fraud issues that need to be addressed by the IRS. According to Michael Phillips, acting principal deputy inspector general, Treasury Inspector General for Tax Administration (TIGTA), tax credits such as the American Opportunity Tax Credit are frequently abused. The IRS has recently stopped $12.1 billion in potentially fraudulent refunds from being paid.
James R. White, director of tax issues for the U.S. Government Accountability Office (GAO) suggested that a way to reduce fraud would be to revise the information required on certain tax forms such as Form 1098-T, Tuition Statement and Form 1098, Mortgage Interest Statement. He also suggested increasing the requirements for 3rd-party information reporting such as those required for contractor service payments.
Identity Theft
The epidemic level of identity theft was another important topic discussed by the IRS Oversight Board. The need for the IRS to consolidate the twenty-one departments that currently assist taxpayers who have been victims of identity theft was noted. Proposed IRS regulations that will allow tax filers to truncate identifying numbers such as a Social Security Number on certain types of information returns was noted as positive initial effort in battling identity theft. It was urged that truncation of a filer’s Social Security Number eventually be permitted on all forms and returns submitted to the IRS. Expanding the current system that allows taxpayers who have been victims of identity theft to use a PIN number in place of their Social Security Number for filing tax returns to all taxpayers was also put forward. This would allow all filers to avoid filing tax documents with a visible Social Security Number.
Gathering Tax Information In Real-time
The proposed IRS real-time tax system occupied a large part of the discussion. Under this system the IRS would compare data in its records with information submitted by the taxpayer in real-time. If a discrepancy was noted the IRS would notify the taxpayer before it accepted the return and allow them the chance to fix it. Currently the IRS data matches information a year or longer after the original tax returns have been accepted.
It was noted that the real-time system held promise, especially when it came to helping states with their tax collection process. There was some question about if the IRS had the customer service capabilities to accommodate this type of tax collection system. Extending the tax filing deadline to June 15th was suggested as a way to accommodate a more involved real-time tax collection effort.
This meeting generated some good thoughts and advice for a range of topics. The IRS must now consider how best to use this advice as it continues to find ways to improve the way it administers the US tax collection system.
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