Who is in charge? Dealing with conflicting guidance

In March 2022, the Joint Committee on Taxation released a Bluebook on tax legislation enacted in the 116th Congress (JCS-1-22, 3/8/22). On page 315 of this report, there is what I find to be a troubling statement and footnote on how the Employee Retention Credit (ERC) works. The ERC was enacted in March 2020 by the CARES Act and applied to qualified wages from March 13, 2020 through September 30, 2021 (longer for recovery startup businesses). So this credit has been around for a while and widely claimed.

The issue is one I raised in a blog post on 6/4/20. The ERC is fairly complex due to numerous definitions and special rules and changes made when it was extended and one change enacted in December 2020 was retroactive. The ERC works differently depending if the employer is large or small based on number of full-time employees.

The CARES Act Sec. 2301 provides the following in defining full-time employee: "in the case of an eligible employer for which the average number of full-time employees (within the meaning of section 4980H of the Internal Revenue Code of 1986) employed by such eligible employer during 2019 was not greater than 100."

As I noted in my June 2020 blog post, section 4980H defines full-time as working at least 30 hours per week. For purposes of section 4980H to determine if an employer is an applicable large employer who must offer minimum essential coverage to full-time employees to avoid risk of penalties, the employer must also factor in full-time equivalent employees (FTE). 

I don't read the above CARES Act text as including FTE but just to use the 30 hour measure for full-time. Of course, it would have been more clear to just say full-time is 30 or more hours per week rather than add confusion by referring to section 4980H. 

BUT, please look at my June 2020 post on why for policy reasons the ERC measure should include FTE, but that doesn't seem to be what Congress wrote.

AND, in Notice 2021-20 (Q&A31) and Notice 2021-49 (footnote 3 and pages 20-21) the IRS is explicit that full-time for the ERC does NOT include FTE ("For purposes of determining whether an eligible employer is a large eligible employer or a small eligible employer, eligible employers are not required to include full-time equivalents when determining the average number of full-time employees.") That is very clear!

Well, in JCT's April 2020 report on the CARES Act (footnote 145), JCT says full-time includes FTE. That was issued before the IRS issued its binding guidance in Notices 2021-20 and 2021-49 saying the opposite.

And now in March 2022, text and footnote 1120 in the 116th Congress Bluebook states: 

  "The definition of qualified wages depends on the average number of full-time and full-time-equivalent employees of the eligible employer during 2019." [emphasis added]

That is also very clear and opposite of what we have in 2021 binding guidance from the IRS.

The fact that the JCT continues to say FTE is included after IRS has said otherwise and likely all employers followed IRS's taxpayer-favorable binding guidance, is troubling. Why didn't JCT either change its interpretation or explain why the IRS took a different view?

What if the JCT guidance was taxpayer favorable compared to the IRS guidance? Would it be ok to follow that? Can taxpayers pick and chose which guidance it wants to follow?

Missing: What does Treasury think? In testimony before the House Ways and Means Subcommittee on Oversight on March 17, 2022, Commissioner Rettig emphasized that IRS doesn't make policy as that is the role of Treasury. When Congresswoman Plaskett (D-VI) challenged him to say that IRS has influence over what Treasury does regarding tax policy, the Commissioner stressed that was not correct.  He said, policy is the "exclusive arena of Treasury we are a tax administrative agency that follows the law."  [Emphasis added. See the hearing recording starting at about minute 51 where there is a question about the Virgin Islands]  [note this hearing was not about the ERC]

And Treasury does have a connection with IRS IRB guidance. First, the IRS is an agency of the Treasury Department. According to the website of Treasury's Tax Legislative Counsel: "In consultation with IRS, TLC is responsible for review of all Treasury regulations and IRS revenue rulings, revenue procedures, and other published guidance relating to domestic tax issues."

So, we should assume Treasury and the IRS created the interpretation on ERC. Why is there still a different interpretation between the JCT and Treasury/IRS two years after enactment of the CARES Act? What are taxpayers and practitioners to do?

The question remains: What is "the law"? The CARES Act language which is not entirely clear? The position of the Joint Committee on Taxation who is present when the law is being written? Or the IRS with its role to administer the law? I think it is JCT. So why did Treasury and IRS not follow JCT interpretation of the CARES Act? Given that the ERC became effective March 13, 2020 and the CARES Act was enacted March 27, 2020, there certainly wasn't time for proposed regs and public comment so likely there was little policy discussion and no opportunity for public input.

This is not the first time that IRS interpretation differed from JCT. One more is the JCT Bluebook on the TCJA page 189 that says a meal is non-deductible entertainment if included in an activity or event that primarily constitutes entertainment. Yet, Notice 2018-76 and Final Reg. 1.274-11(b) instead provide that if the meal is separately billed/charged it is not entertainment.

To best help taxpayers and practitioners, can't JCT and Treasury/IRS work to resolve these matters before guidance is issued?

What do you think?

How about making April 30th Celebrating Taxpayers Day?

How about making April 30th Celebrating Taxpayers Day? 

A few things lead me to suggest this. The reasons mostly tie to my recent research and writing on improving transparency of our tax systems.*  I like all principles of good tax policy (I hope we all do). I think that two on the AICPA set of principles of good tax policy need more attention because doing so will help tax systems to better meet the other ten principles the AICPA promotes. These two principles:

• Transparency and visibility - Taxpayers should know that a tax exists and how and when it is imposed upon them and others.
• Accountability to taxpayers - Accessibility and visibility of information on tax laws and their development, modification and purpose are necessary for taxpayers.

If people better understand our tax rules and policies, they are more likely to question why, for example, a special rule exists or was introduced or enacted, why permanent or temporary, how a deduction benefits those in higher brackets more than those in lower brackets (unless there is a phase-out), marginal tax rates and relevance, and that the amount of one's refund has little to do with their total tax liability. They would ask better questions of elected officials and those running for office. They would be better aware of the taxes they and others owe. And, hopefully, compliance would improve and be something we are proud of and celebrate.

Here are three recent events that lead me to suggest starting a Celebrating Taxpayers Day.

1. IRS Commissioner Rettig issued a message on April 12 thanking taxpayers. The first two paragraphs follow:

"As the tax filing deadline approaches on April 15, I’d like to thank taxpayers for taking the time to file and pay their taxes. Our nation’s tax system is built around the concept of voluntary tax compliance, meaning citizens comply with their civic duty each year by preparing and filing their taxes – without direct government intervention.
  This principle has helped make our tax system a model for the entire world. Thanks to taxpayers, this system helps fund our great nation. Each year, 95% of the gross receipts of our country flows through the IRS – about $3.5 trillion last year – funding critical aspects of the U.S., ranging from roads and schools to the nation’s military."

Why not make this "thank you" an annual event on a specified date with an explanation of why taxpayers should be thanked, the importance of voluntary compliance, and seize an opportunity to build and support positive tax morale.

2. In my research I came across a 2015 OECD report, Building Tax Culture, Compliance and citizenship: A Global Source Book on Taxpayer Education. It lists activities of 28 developing countries for promoting tax compliance. A few of them have celebration days. For example, Rwanda has an annual Taxpayers Day celebrating compliance and helping citizens understand and appreciate how taxes and the country's development are connected. The president officiates at the event and a report on tax revenue data and tax agency challenges is released. Bangladesh holds a National Income Tax Day 15 days before the tax due date. There are street processions, workshops, conferences and tax clinics. They also show documentaries and dramas on taxation. 

   Celebrating Taxpayers Day in the U.S. could be educational and a reminder of the importance of taxes to our economy and society. It could also be a day where state and local governments help explain their taxes and budgets to their citizens, an opportunity for debates on current tax issues, and release of important government reports about our tax and budget systems. All levels of government release many tax and budget reports throughout the year, why not highlight some key ones on April 30 to draw greater attention to them?

3. Our tax gaps are growing - The IRS estimates the federal tax gap at $458 billion per year. This is more than we collect from the corporate income tax even before the corporate rate was lowered by the Tax Cuts and Jobs Act. A report from the Treasury Inspector General for Tax Administration (TIGTA), Expansion of the Gig Economy Warrants Focus on Improving Self-Employment Tax Compliance (2/14/19) reports some alarming data that indicates we need greater taxpayer education and to better support positive taxpayer morale. Among many findings was that 25% of individuals in a sample of 3.8 milion gig workers filed a 1040, but didn't report their gig income on either the other income line or Schedule C. And, 13% with self-employment tax income who received Form 1099-K did not include Schedule SE or pay their SE tax with their 1040. The IRS also found a 237% increase from 2012 to 2015 in discrepancies between Forms 1099-K filed and what was reported on Forms 1040. 

    A 2018 report from the California Franchise Tax Board found that about 70% of gig economy service providers receive no tax reporting form, which increases non-compliance. With understanding of tax rules and recordkeeping low, compliance without reporting forms become a bigger challenge and frustration. A 2018 QuickBooks survey found that 32% of self-employed individuals admit they don't report all of their income.

The above threee items indicate to me that a Celebrating Taxpayers Day would be a positive step in building respect for our tax systems, building a culture of filing and paying and being proud of that fact, and improving understanding of our tax systems. And, hopefully have some fun with it!

Why April 30?  Well, people are still busy on April 15 filing and sometimes due to weekends and Emancipation Day, filing day falls on April 16 or 17 or 18.  April 16 is Emancipation Day (the day in 1862 when President Lincoln signed an emancipation decree for the District of Columbia). April 30 gives preparers time to recover, and individuals getting refunds to hopefully have them in time for the celebration. In history, April 30 is the day George Washington was inaugurated (1789), the U.S. Navy was formed (1798), San Jose State University formed** (1857), the ice cream cone was unveiled in the U.S. at the World's Fair in St. Louis (1904), and the World Wide Web emerged in the public domain by Tim Berners-Lee (1989) and its source code was released to the public in 1993.

On April 30, we still have income tax filings on our mind and have time to reflect on such things as, "well, next year, I'll keep better records," or "perhaps I should adjust my withholding." So April 30 would be a good day to help taxpayer get their tax compliance needs in order (January 1 would be better, but we all have too many other things we're focused on then). Also, bills are making their way through Congress, and June and November elections are coming up, and K-12 is still in session.

Yes, there is something called Tax Freedom Day® by the well-respected Tax Foundation. They describe this day as the one marking "how long Americans as a whole have to work in order to pay the nation’s tax burden." For 2019, it is April 16. It isn't a national celebration day though. Also, this information is useful, but I find it is easily misunderstood. Most people do not work until April 16 to pay their taxes but think they do when they hear this information, which harms understanding of our tax system. But it would be a good topic for discussion for April 30 Celebrate Taxpayers Day, to help improve tax literacy and transparency.

So, Celebrating Taxpayers Day on April 30. What do you think?


*See for example, Nellen, "'Oh, I See': Suggestions for Greater Tax Transparency," State Tax Notes, 11/20/17. Also, Nellen, Suggestions for Improved Transparency and Accountability of California Taxes and Related Information, 10/12/18.

**I'm not suggesting April 30 for the SJSU connection. In fact, I wasn't focused on the exact date of the founding of Minns' Evening Normal School (how SJSU started in San Francisco); on campus, we all just say SJSU was founded in 1857 (btw, I'm one of SJSU's historians).

Congressman Brady Asks IRS To Issue More Guidance on Virtual Currency

On 9/19/18, Congressman Kevin Brady (R-TX), chair of the House Ways and Means Committee sent a letter to the IRS asking them to issue more guidance, as it had promised in 2014, on taxation of virtual currency. Chairman Brady also refers to the 2018 letters from the ABA and AICPA requesting guidance.

In the letter, Brady states:

"While the Committee appreciates the IRS’s need to undertake enforcement actions to ensure that taxpayers generally meet their tax obligations, in this case, we are concerned that the IRS is seeking to enforce guidance that does not adequately advise taxpayers of their tax obligations when using virtual currencies.  Furthermore, while the issues surrounding virtual currencies are complicated and ever evolving, a key component of the IRS’s duties as the nation’s tax administrator is to assist taxpayers in understanding what their tax obligations are and how they may best meet them.  A failure to put forth adequate guidance severely hinders taxpayers’ ability to do so.  The IRS has had four years to work through these issues since its preliminary guidance was issued, providing more than adequate time for the IRS to thoughtfully consider what additional information is needed.

We therefore strongly urge the IRS to expeditiously issue more robust guidance clarifying taxpayers’ obligations when using virtual currencies. We also ask that you provide a written response outlining where the IRS is in its efforts to issue updated virtual currency guidance, what the IRS intends to cover in this guidance, and a timeline for its release.  In addition, to assist the Committee in better understanding this issue, we will be asking the Government Accountability Office to undertake an audit on this matter."

I hope this can occur before the extended due date for 2017 returns (10/15/18).  Let's see.

What do you think?

AICPA and other groups call for improvements to IRS services

Years ago, the IRS had about 104,000 employees. Today it is around 83,000. Certainly, they don't need as many people to open envelopes due to e-filing, but this change results in a big drop in taxpayer services and audits. A common lament I hear from tax practitioners is the challenge of having to deal with notices from the IRS. It is difficult to get to talk to someone from the IRS who has the knowledge and file access needed to resolve the issue and you likely need to wait 30 minutes or more to talk to someone. 

Today, less than 1% of individual returns are examined (it's higher for higher income returns). Many of these exams are via correspondence.  This harms voluntary compliance, increases the tax gap and results in greater borrowing by the government and reduced spending. It is also unfair that some taxpayers will get away with both intentional and unintentional errors.

This is all very unfortunate.

In May 2015, the AICPA Council passed a resolution calling for -

"policy makers to create an objective, bi-partisan forum to engage stakeholders to expeditiously make recommendations that enable the Internal  Revenue Service to achieve its stated mission and to transform it into a modern-functioning, evolutionary, and respected federal agency for the 21st Century."

Earlier this year, the AICPA Tax Section called together several practitioner groups to work together on getting comments to Congress on the importance of improving IRS taxpayer services and offering various suggestions. One of the suggestions is to create a new unit to serve tax practitioners (about 60% of returns are prepared by a paid preparer).

I hope you'll take a look at the IRS transformation framework suggested (and 4/3/17 press release). As chair of the AICPA Tax Executive Committee I'm proud and pleased to have been part of this effort to highlight the need for a 21st century focus at the IRS and the need to be able to serve all stakeholders. Hopefully Congress will consider these suggestions as part of tax reform or any tax administration legislation.

What do you think?

New tax filing security protocols

New Security Step – IR-2016-124 (9/22/16) – The IRS alerted people filing an extended return electronically for 2015 (due 10/17/16), that they likely would be asked to enter their AGI for 2014. The purpose is to help properly identify the taxpayer. The information release reminds people how to order a tax transcript from the IRS should they not have it.

Some states are using a similar system where they might ask for a driver’s license number or other identifying data that a thief might not have (although a thief might easily get someone’s driver’s license, such as because it is on their checks and cancelled checks were thrown out in the trash).

The Alabama Department of Revenue has a few programs to improve security and reduce identity theft. For example, taxpayers may register for a service where they are notified if a return is filed with their Social Security Number. The DOR also has a protection program that begins with the “ID confirmation quiz.” The state also highlights its programs in the Form 40 instruction booklet (although few people likely read this).

What more do you think the IRS and state tax agencies should do to protect the very sensitive information they have?

Helping new economy clients - June 22 event can help

A theme that came through at Part 1  and  Part 2 of House Small Business Committee hearings in late May on The Sharing Economy: A Taxing Experience for New Entrepreneurs, was that these freelancers need help with their tax planning and compliance. For example, someone who signs up to drive for Uber or Lyft likely doesn't realize that they just became a self-employed entrepreneur with tax obligations that include:

• Keeping records of mileage for driving and other costs involved in being a driver (or freelancer for some other network platform operation).
• Quarterly estimated tax payments for federal and state income tax as well as federal self-employment taxes.
• Reconciling any 1099-MISC or 1099-K received against their records.  And if they don't receive such a form, such as because the payment processor is only required to issue 1099-K and the freelancer did not have more than 200 transactions and over $20,000 of payments, sufficient records to report the income earned.
• Registration at the local level if required, such as for a business license tax. [See for example, San Francisco + 4/15/16 SFGate article.]
• Possibilities of favorable retirement plan options.
• Whether they want to operate as a sole proprietor or perhaps another form, such as a Subchapter S corporation.

And, even before jumping to the conclusion that one is a self-employed entrepreneur filing Schedule C, a determination is needed to be sure they are engaged in the activity for profit (it might instead be a hobby).  Some drivers are just doing it for fun or to derive a little cash flow.  [For more on this issue, see the nine factors of Reg. 1.183-2 and info below.]

Other new economy activities include renting our all or part of your home or other property, such as via Airbnb. That also raises some complex federal, state and local tax considerations.  I also list marijuana operations in the realm of new economy activities and that raises various tax issues as well as ethical ones for the tax adviser.

The 4th Annual IRS-SJSU Small Business Tax Institute on June 22 in Santa Clara aims to help practitioners serving small business clients. We'll have practitioners and IRS folks explaining the rules, offering words of caution and we'll also address some of the ethical issues for practitioners [agenda].

I hope you'll check out the agenda and register - http://www.tax-institute.com.

“Abolish the IRS” Distracts from Needed Reforms

Republican presidential candidates Senators Ted Cruz and Mike Huckabee would like to abolish the IRS. They are not saying they want to abolish taxes, just the agency that collects them. Even if either is able to simplify taxes to the point that no taxpayers have questions or need guidance, we still need a tax collector, as well as an auditor to ensure compliance.

A call to abolish the IRS is a distraction. That’s too bad because there are significant improvements needed to our federal tax system – a system that includes not only the income tax, but also employment, excise and estate and gift taxes.  Tax reform must be the focal point, not termination of the entity that collects revenues to fund schools and roads, provide national defense, and much more.

The IRS is an easy scapegoat for complaints about our tax laws. But those laws come from Congress. Yes, the bills must be signed by the President to become law. But if no tax bill arrives at the President’s desk, no statutory change is possible. For reform, let’s first look to where Senator Cruz resides – Congress.

Reforms are needed. Here are just three examples to illustrate problems in our federal tax system. Resolving these types of problems can enable our tax system to be simpler, more equitable and better promote economic growth.

First, our federal tax system is too complex resulting in excessive compliance costs and errors. According to the IRS National Taxpayer Advocate, businesses and individuals devote over 6 billion hours annually to tax compliance – the equivalent of over 3 million full-time jobs. Examples of this complexity include a 43-page instruction book for Form 1040-EZ and over eight rules for tax benefits for college costs, explained in a 96-page publication from the IRS (Pub. 970).

Second, our tax system is inequitable. For example, for decades, employees have been allowed to exclude the value of employer-paid health insurance from their income, thereby lowering their income and employment taxes.  Employees get this exclusion regardless of income level (and employers deduct what they pay for the health coverage). Starting in 2014, the Affordable Care Act (“Obamacare”) provides a refundable tax credit to individuals without employer-provided health coverage who buy insurance on the exchange (such as Covered California). However, these individuals losethat subsidy if their income exceeds 400% of the federal poverty line ($45,960 for a single person for 2014). 

Take for example, Jane and Sara, each 50 years old, single and having $100,000 of taxable income for 2014. Jane obtains health coverage from work with her employer covering the entire cost of $6,000. Jane is allowed to omit this $6,000 benefit from her taxable income. Sara obtained her insurance from Covered California at a cost of $6,000, paid out of her own pocket. Because Sara’s income exceeds $45,960, she obtains no tax subsidy. Meanwhile, Jane gets a tax subsidy of $1,680 (based on a marginal tax rate of 28%). Sara is out-of-pocket $6,000 while Jane gets a $1,680 subsidy (and has no out-of-pocket costs for health insurance). Why does this inequity exist? This is just one of many tax system inequities where some individuals receive tax reductions while others at similar, or even lower income levels, do not.

Finally, our tax system has not kept up with technology and new business models. Today, most countries only tax businesses on income earned within their borders rather than the U.S. approach of taxing worldwide income. Corporate tax rates in other countries are lower while also supporting R&D on a permanent basis rather than the temporary approach used in the U.S. since 1981. Also, today, any size business likely has international operations yet tax rules can be as complex for small ventures as they are for large companies. And, technology should be used to make tax compliance for most people as easy as ordering goods online.

We need to improve our tax system, focusing on all federal taxes, not just the income tax. Our tax system can be simpler, more equitable and better support today’s ways of living and doing business.  Let’s focus on these important issues and not be distracted by absurd rhetoric about abolishing the tax collector.

More to come - "abolish the IRS" is not the only odd tax reform coming from candidates.

What do you think?

IRS Data Breach Unfortunate in Many Ways - PIN?

The IRS news release that its "Get Transcript" web tool was hacked is distressing in many ways.  First, of course, is the exposure of highly sensitive taxpayer data - apparently of about 100,000 taxpayers, with attempts on about 200,000 accounts.  Additional concern is the the possibility of modernizing tax compliance is harmed.  I have often suggested that tax compliance for many taxpayers (with fairly straightforward tax computations), should be as easy as buying something from Amazon.com (for example, see my 5/14/15 post).  

Sounds like greater security hardware and software is needed.  Why not use of a PIN as is used to access bank data and use credit cards?  Would that help?

Are stricter laws needed to punish hackers?

What do you think?

IRS News Release of 5/26/15.

Conference June 18 - IRS/SJSU Small Business Tax Institute

The second annual IRS-SJSU Small Business Tax Institute will be held on Wednesday June 18, 2014 on the San Jose State campus. The theme this year is Assisting New and Growing Businesses.  This all day event offers continuing education credit to CA CPAs and tax preparers, Enrolled Agents and CA attorneys.

Topics include forms of entity, start-up expenses, worker classification, ethical consideration in serving the new business, and a small business tax update. Also, a venture capitalist will talk about what it takes to be a successful entrepreneur today. Speakers include IRS agents, practitioners and academics.

Registration is open now; fee includes meals, parking and materials. This is also a great networking event.

See the registration link here and additional information - http://www.tax-institute.com.

It is also listed on the IRS offerings on small business taxation.

21st Century Expectation for the IRS - Health Care Enforcer?

Some aspects of the complicated health care legislative proposals have been in the news in the past few months, but it seems that little attention has been paid to some of the tax provisions. Certainly, we should all be used to tax provisions designed to modify behavior. But what about the health care proposals that impose new duties on the IRS? Is this what we expect tax agencies to be doing now or in the future?

The Kiplinger Tax Letter of 11/25/09 describes the likely effect as follows:

"The Service will grow by leaps and bounds as it puts a slew of tax changes related to health care into effect and sets up systems to enforce the rules." [subscription needed]

Some of these possible new duties of the IRS include information collection and enforcement of new excise taxes on employers not providing health benefits and credits for small businesses to help them provide benefits (Sections 501, 511, 512 and 521 of House-passed H.R. 3962).

When you think about it, the whole system seems odd. Due to a rule enacted decades ago regarding employee compensation levels, some employers started providing health insurance benefits. The system grew and employer-provided health benefits became a norm - unlike car insurance which we handle on our own. "Reform" includes keeping this odd system and even has the IRS playing a greater role in the delivery of employer-provided health benefits. I'm only aware of one proposal in the past few years that proposed to break the link between employment and health care - Senator Wyden's S. 334 (110th Congress), the Healthy Americans Act (more info here).

While technology should be allowing the IRS to be more efficient and perhaps not need to replace all of the employees who are retiring soon, new mandates could cause it to grow, without any positive impact on reducing the tax gap! That seems like a poor use of tax agency talent and expertise. I don't see that as helping the IRS move into the 21st century. Why not look for a health care reform option that doesn't shift so much work and enforcement activity to a tax agency?

What do you think?

IRS Strategic Plan and Technology - Let's Hope for 21st Century Technological Approaches to Tax Compliance

In April 2009, the IRS released its 2009-2013 strategic plan. In the first part of the introductory message from IRS Commissioner Shulman, he summarizes well some of the opportunities and challenges facing the IRS:

"The IRS strives to maintain the fairest and most effective system of voluntary tax compliance in the world. The environment in which we operate is complex and constantly changing, and the IRS must change with it.

For example, accelerating globalization and development of new business models challenge IRS efforts to ensure that all businesses pay the taxes they owe. The tax laws are increasingly complex, and the role of tax practitioners and other third parties in the system is expanding. The explosion in technology has raised taxpayer expectations for new ways to interact with the IRS - and has significantly increased security risks, requiring more vigilance."

It is good that he highlights the complexity of the system - much of that complexity comes from Congress rather than Treasury/IRS. In fact, Treasury and IRS have often found ways to simplify something that Congress had made complex. One example that comes to mind is that the IRS wrote the IRC Section 263A (unicap) regulations to exempt small producers from the rules even though Congress had only exempted small resellers.

I hope that IRS will take seriously the comment about technology raising taxpayer expectations about how they should interact with the IRS. One of the objectives in their strategic plan is to "build and deploy advanced information technology systems, processes and tools to improve IRS efficiency and productivity." I hope this goes far enough. I think that to move tax administration into the 21st century (where you'd think we'd be for a 2009-2013 plan!), IRS needs to think about deploying technology in the same way that a business would think about how it can be used to better reach and serve customers.

Here is an example that came up in my graduate tax accounting class the other day. The guidance on how to change your accounting method with automatic approval from the IRS (Revenue Procedure 2008-52) is 100 pages long. It is difficult to get through the very long list of covered changes to see if your desired change is listed. Technology could have been used to solve this problem. A program could have been written that poses questions. The answers would lead to an answer of either, you can use the automatic change procedures or you cannot. The taxpayer could then print that one-page answer sheet and attached it to their Form 3115 (the accounting method change form) and proceed with greater confidence and time saved that they were following the proper IRS procedure.

There are many other examples. I think taxpayers and practitioners will have to continually push for such technological solutions. The IRS will have to think more like a business that sees how technology can be used in ways that just don't duplicate a paper process, but offers something that can only be done with technology. For example, the 3115 example above could also result in the completed 3115 and a computer message to either attach it to your return (or e-file it) or hit the button that sends it directly to the IRS person who needs to personally review it (and that should be rare).

I have a short article on more details of the IRS Strategic Plan - here.

How do you think the IRS could better use technology for simplified tax compliance?