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Shulman Looks At IRS Priorities

May 2011 - Tax & Private Client. Legal Developments by Hassans.

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During remarks made by the United States Internal Revenue Service (IRS) Commissioner Doug Shulman to the Johns Hopkins Carey Business School in Baltimore, he looked at the IRS?s main strategic priorities for the next decade.

He began with the IRS?s efforts to make a ?significant dent? in offshore tax evasion as a major priority. ?Our approach follows a natural course,? he said, ?cleaning up the abuses of the past and then mining and leveraging the data we receive to mount a greater attack on the abuse?.

While the IRS was pleased that it had approximately 15,000 disclosures from individuals who came in under the voluntary programme, and an additional 4,000 disclosures from individuals since that programme closed, Shulman added: ?We are now mining the information we have received to date and have launched our next wave of investigations on banks, bankers, intermediaries and taxpayers?.

He pointed out that the IRS?s overall goal ?is to fundamentally change the risk calculus of taxpayers ? we are well on our way to deterring the next generation of taxpayers from using hidden bank accounts to cheat on their taxes. Through our on-going efforts, we are demonstrating that the world has become a smaller place?.

He then looked at the fact that the reality of tax filing in the US has changed and that now more than eight out of 10 taxpayers use a tax preparer or tax software. He therefore considered that a second major priority is the IRS?s return preparer initiative.

?In essence,? he said, ?we are in the process of ensuring a basic competency level for tax return preparers and focusing our enforcement efforts on rooting out unscrupulous preparers. We have registered over 700,000 return preparers and next year will start requiring any preparer who is not a certified public accountant, attorney or enrolled agent to take a competency test and annual continuing education. The goal is to ensure that taxpayers receive top quality service from this important industry, which is a key ally in our efforts to boost overall service and compliance.?

Finally, he saw the IRS? third priority to reside in more and better use of data. He looked at the general agreement both in the US and globally ?that withholding and third-party information reporting are powerful tools to improve and maintain taxpayer compliance.?

He noted that ?over 96% of income that is subject to substantial information reporting and/or withholding, such as wages, interest, and dividends, is accurately reported on timely tax returns. However, most estimates show that only around 50% of income is accurately reported where there is little or no information reporting.?

He pointed to some recent legislative changes that have given the IRS new tools in its information reporting toolkit. For example, he said, ?IRS research exposed the huge scope of misreported capital gains and losses largely due to taxpayers not accurately reporting their securities? cost, or basis. Congress took action and beginning this year, brokers must supply to their investors easy-to-understand basis information to help them file accurate and complete returns. The Joint Committee on Taxation estimates that the new law will yield almost USD6.7 billion in revenues over a 10-year period.?

Furthermore, beginning in 2012, ?electronic payment processors, including credit and debit card processors, will also be required to make an annual information report to the merchant and the IRS stating the gross amount paid to the merchant during a calendar year. This will help improve voluntary tax compliance by business taxpayers and help us determine whether their returns are correct and complete.?

He finally confirmed that the IRS now has a number of ?innovative, forward-thinking programmes and forums?, such as the Industry Issue Resolution Programme, Compliance Assurance

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