IRS sees IT modernization helping enforcement

IRS sees IT modernization helping enforcement

Electronic filing—by reducing the time it takes to process returns and hand them off for investigations and audits—will contribute to better tax enforcement, IRS commissioner Mark Everson said yesterday.

Although the IRS has improved service through better-trained personnel and the introduction of services over the Internet, enforcement has lagged. “Most would agree that improvement of IRS taxpayer services was achieved in large part at the expense of needed enforcement activities,” Everson said during a speech in Washington.

The IRS will clamp down on abusive tax shelters by increasing its enforcement staff by 10 percent, adding 5,000 people to its audit and criminal investigations staffs [see GCN story].

Between 1997 and 2002, the tax agency drew down its enforcement resources significantly and cut revenue agents by more than a quarter. Audit rates declined, as did criminal prosecutions and enforcement revenues, Everson said.

It takes two years on average now before complicated corporate returns are put in the hands of the assigned examiner. “Electronic filing by corporations will facilitate our analysis of data and help us calibrate risk,” he said.

With speedier audits, the IRS will provide better service to the compliant taxpayer by resolving questions sooner and holding accountable those who seek to game the system, Everson said. “We are creating a web of disclosure, registration and maintenance of investor lists that will provide information about abusive transactions,” he said.

IRS efforts to modernize its systems will also bolster service and enforcement. E-services are available for practitioners to get employer identification numbers and soon will let them pull up and check taxpayers’ transcripts.

“While we’ve done very well at some things, such as e-filing, we haven’t yet converted successfully, or been able to deliver, a couple of our big systems, such as updating our Master File and our financial systems. We’ve been struggling with that. That needs to be done if we’re going to be fully successful in updating and improving both the service side and the enforcement side,” Everson said.

The IRS yesterday announced a joint task force with Australia, Canada and the United Kingdom to share information about abusive tax transactions, including sharing expertise, best practices and information about promoters of illegal schemes. “This is an unprecedented step in the battle against the plague of abusive tax transactions,” said Everson.

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