February 26, 2018
by Mark W. Everson, former IRS Commissioner and alliantgroup Vice Chairman
After nine years of a contentious relationship with the Internal Revenue Service, Republicans find themselves in the uncomfortable position of needing the IRS to deliver on tax reform. The stakes are high. In 2016 there were 30 percent more individual income tax returns processed by the IRS than votes cast in the presidential election. And execution matters. Just think of the ObamaCare exchanges, when a botched rollout of the website – involving only a small fraction of the people who interact with the IRS – did lasting damage to a signature legislative achievement supported by a single political party. Here’s what should be done:
Give the IRS the money it needs to pull this off. The service will have to staff up and train personnel in its call centers to accommodate a spike in taxpayer and practitioner questions. There will be plenty of systems work as well. Recent years have seen an outright decline in enforcement, with audit rates for those earning over a million dollars a year about half of what they were 10 years ago. The IRS needs competent, trained examiners. This is especially true for pass-through entities and businesses operating overseas, which will be two of the compliance challenges under the new law. The service should also beef up the research shop so that it can monitor changes in taxpayer behavior and provide feedback to stakeholders.
Congress should oversee implementation on an ongoing basis. It can take years to understand the meaning and impact of new tax provisions and how they are being administered by the IRS. Because returns are confidential, and time consuming regulation writing and litigation frequently delay interpretation of the law, Congress won’t really know the full result of its work for years. Still, some areas requiring technical and substantive changes will become clear quickly. Let’s not follow the Affordable Care Act model and leave problems unaddressed for partisan reasons.
Delay any reorganization of the IRS for at least a year until the dust settles. It doesn’t make sense to have employees worrying about reorganization when they have so much to do. Moving too fast could put the 2019 filing season at risk. Instead, gain some experience with the new law and adjust the structure in a considered manner that drives from the new code and the changes that will certainly be made by other countries.
Finally, the Trump Administration should work with Congress to get Chuck Rettig promptly confirmed as IRS commissioner. Mr. Rettig is well-qualified to lead the agency. With the 2018 filing season already underway, he should be in place to guide reform implementation from its early stages and see the effort though. I would also counsel the president to fill the deputy secretary slot at the Treasury. A deputy is needed to manage day to day operations at the department, and will be critical to holding the IRS accountable for a fair, balanced administration of the nation’s tax system. Whatever one’s position on the merits of the policies Republicans have written into law, it is very much in the national interest to have a functioning and respected system of tax administration.
Mark W. Everson is the Vice Chairman of alliantgroup, a provider of specialty tax services. Everson was Commissioner of Internal Revenue from 2003 through 2007. He oversaw implementation of the Immigration Reform and Control Act of 1986 from 1986 through 1988 at the INS.
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