This month, IRS Commissioner Charles P. Rettig will step down, opening the door for a successor to lead the agency as it continues to operate from a backlog brought on by the Covid-19 pandemic.
First, he moved to Rettig as a dynamic commissioner and led the agency through some historic storms — Covid-19, the longest government shutdown, and continued underfunding. Douglas O’Donnell will serve as IRS commissioner once Rettig’s term ends on November 12.
As Kelly Phillips Erb points out in a recent Taxgirl column, succeeding the commissioner faces an immense challenge. With nearly 80,000 employees, whoever takes the reins from Rettig will have responsibilities cut, and the objects they press will need to be beaten. As Erb astutely pointed out, the IRS has hit a few snags, so the $80 billion allocated from inflation reduction will be a welcome response.
So what can the next leadership agency do to propel the IRS forward in a meaningful way?
The backbone of the economy
The roadmap is laid out in its Strategic Plan for Fiscal Years 2022 to 2022. It was released earlier this year and lists service, enforcement, people, and transformation into four strategic goals to put taxpayer benefits first and improve the taxpayer experience. It will surely help to have added resources and resources. And while transforming IRS operations and increasing enforcement are required for efficient and effective tax administration, one pillar that must be strongly focused on is the “service” objective.
In particular, the new commissioner must look at how the agency serves Americans’ small- and medium-sized businesses (SMBs), the backbone of the US economy. I recognize that my perspective on supporting and working with SMBs is a little unclear since I was the former commissioner of the IRS’ Business and Self Employed Division.
In a recent speech to IRS employees, Treasury Secretary Janet Yellen said “during the most recent filing season, the IRS averaged a 10-15% service level, meaning they answered less than 2 out of every 10 calls. In this coming filing season, the IRS will commit to an 85% service level.” Although these statistics mainly focus on individual service levels, SMBs also have access to IRS officials when tax bills arise.
As part of its laudable efforts to improve customer service, the IRS aims to provide “proactive outreach and education to improve taxpayers’ understanding of their rights, responsibilities and obligations.” US SMBs would greatly benefit from an agency having an eye toward their needs in this area.
Specifically, the IRS will continue to focus on education, work to provide better information about their rights as taxpayers, and increase control over taxpayers’ use of tax benefits established by Congress, while increasing the ability for voluntary compliance.
A perfect example of how the agency can make progress with this goal would be to aggressively increase business credit and the incentives that the tax code provides to SMBs.
Although many of our country’s major businesses take advantage of these incentives, they probably don’t have the resources to be adequately informed about the benefits of these credits and incentives, or even if they join a business. Due to the complex nature of these incentives, it helps when providing educational services to meet the overall intent of the Congress and that SMBs can be fully informed about the eligibility of tax savings.
With this introduction in mind, one of the pillars of the IRS’ Taxpayer Bill of Rights is the “right to be informed.” Helping SMBs know what they need to comply with tax laws and provide prompt, courteous and professional trade management in line with strategic objectives. In addition, a continuing theme found by SMBs and their accountants is that the IRS must improve the ability for SMBs to access tax status, ask tax-related questions, and work through tax disputes in an efficient manner.
Of course, the lack of resources, but also the funding contributed to the inability of the agency to provide the efficient and supportive service that it probably wants, but still the problem persists.
Here again, the Taxpayer Rights column also includes the rights to “challenge the IRS position and be heard,” “service quality,” and “a fair and just tax system.” The ability of SMBs to approach IRS representatives in a reasonable timeframe and with a clear understanding of their rights to challenge agency positions is crucial, and will likely continue to boost SMBs’ confidence in the world’s best tax administration.
The next chapter of the IRS will, like its predecessors, face challenges in terms of how to allocate funds and internal resources to achieve these goals. Additional funds may be provided to the IRS to ensure that the new trustee can move forward with these types of goals.
The agency indicated the need to increase employment with new funding; however, by placing equal weight on the rights of taxpayers, it can clearly show that the IRS is there to help and serve them. The next commissioner should increase the agency’s focus on a specific type of taxpayer in the next few years: American SMBs.
This article does not necessarily reflect the opinion of the Group, Inc.
Eric Hylton director of compliance at alliantgroup and the immediate past commissioner for the Small Business and Self Employed Division of the IRS.
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