Prepared Remarks of IRS Commissioner Douglas Shulman before the AICPA
by Terri Eyden on
Today is the day after the elections and of course, political Washington is all abuzz...bloggers are blogging...commentators are commenting...folks on Twitter are tweeting...the pundits are dissecting last night's results.
However, I am not here to wade into those political waters. Rather, I come before you today to talk about something entirely different.
In a few days time - November 11th to be precise - my term as the 47th Commissioner of the Internal Revenue Service officially comes to a close. And looking back, I can say it has been a true honor and one that I wouldn't trade for anything.
I suppose it's quite natural when one has completed a significant task like running the IRS for almost five years to pause...to reflect on the journey taken...to mark the milestones met...and to ponder the lessons learned.
Standing before you today...standing on the shoulders of those who came before me...building on their work and achievements...it is gratifying to share with you the meaningful...and I believe, lasting progress that has been made to our nation's tax system.
People often ask me, "How do you drive change and significantly move the needle in an organization as big as the IRS?" Two of the key factors are to set the right strategy, one which people believe in and you can explain, and then to stay focused.
I'm a believer in a relentless focus on priorities - not getting distracted by too many crises or incoming demands - and making sure that you communicate these priorities clearly inside and outside the institution that you run to ensure there is broad support and engagement among stakeholders.
This is much easier said than done - especially in a government agency - but staying focused and consistent over multiple years is a key to success.
Today, I want to share with you some of the results of almost five years of relentless focus on a handful of strategic priorities we set for the IRS. The priorities are:
- Creating breakthrough strategies to combat international tax evasion;
- Transforming our relationship with corporate taxpayers;
- Transforming the IRS' core technology;
- Rethinking and reimagining the IRS' relationship with paid tax return preparers;
- Leveraging data analytics for continuous improvement;
- Driving efficiency and taxpayer service improvements; and
- Positioning the IRS workforce to make sure we are prepared for tomorrow's challenges.
So, let me begin with our efforts on the international front. Both corporations and individuals operate in the global economy, as corporations seek out new markets and individuals have global exposure through their investments, including retirement accounts.
Yet, this fundamental shift to a more global economy has created a real set of compliance challenges for the IRS. On the individual front, we have made putting a big dent in offshore tax evasion a major priority.
We view offshore tax evasion as an issue of fundamental fairness. Wealthy people who unlawfully hide their money offshore aren't paying the taxes they owe, while schoolteachers, firefighters and other ordinary citizens who play by the rules are forced to pick up the slack and foot the bill.
Over the past five years, we have significantly increased our resources and focus on offshore tax evasion, and the results have been substantial. We upped the ante in a meaningful way with our work on Swiss financial institutions - where for the first time in history, a bank secrecy jurisdiction turned over thousands of names and account numbers.
As we increased our enforcement efforts and gained significant momentum, we gave taxpayers a chance to come in voluntarily and avoid going to jail. In a typical year, we used to get 100 or so taxpayers who used our voluntary disclosure program. When we first set up our new program in 2009, we thought that figure would rise to maybe 1,000.
So we are very pleased that we've had approximately 38,000 voluntary disclosures from individuals who came in under the special programs.
To date, these individuals have paid back taxes and stiff penalties amounting to more than $5.5 billion, and the number continues to grow. We are mining the information we have received and have launched our next wave of investigations on banks, bankers, intermediaries and taxpayers.
Collecting additional revenue for past misdeeds - as important as that may be - is not the only, or even primary, consideration here. It's perhaps more important that we're bringing U.S. taxpayers back into the system...back into compliance...so they properly report and pay their taxes for years to come. We have fundamentally changed the risk calculus of taxpayers who are thinking about hiding their money overseas, and we are well on our way to deterring the next generation of taxpayers from using hidden bank accounts to cheat on their taxes.
We're also transforming our relationship with corporate taxpayers...many of whom operate in a global environment. Even before I became Commissioner, I was aware that the relationship between the IRS and large corporate taxpayers was frequently unconstructive. One of the assumptions built into the dynamic was the so called "adversarial relationship" between the IRS and the taxpayer. This was one of those "givens"...the relationship would never change.
I have always challenged this basic assumption. The historic framework for the nation's tax laws is a system of voluntary compliance. Our tax system is set up in such a way that taxpayers fill out their own returns. This self-assessment system reflects the fact that it is the taxpayer, and not the IRS, who possesses all of the information relevant to tax liability. We then use information reported by the taxpayer to make judgments about issues to pursue, and returns to audit. Inherent in this system is the basic assumption that the taxpayer will be forthcoming and the government does not need to be an "adversary" in most situations.
We now have a suite of different strategies, tools and programs we've been applying over the past few years to transform this once unproductive relationship with corporate taxpayers. At first blush they may seem unique and unrelated...with all of their different acronyms and structures. But if you look deep into their genetic blueprint you will see the same goals at their center...transparency and issue resolution. The tools include:
The CAP program, where we work with corporate taxpayers to resolve all issues before a tax return is filed, so that when the taxpayer files a return, there is certainty; fast track appeals process, where we move our administrative appeals process into an audit to try to resolve issues when they arise - rather than taking the issue through an appeals process after an audit is completed; our industry issue resolution program where we produce guidance to taxpayers, mostly in the form of safe harbors, so they need not worry about later controversy, and others.
We also asked taxpayers to be more transparent with us by disclosing their uncertain tax positions, which they book as reserves on their financial statements. The end game is a more productive relationship, which allows us to focus on corporate taxpayers and issues that pose the greatest compliance risk - and not spend time on taxpayers who pose a lesser risk of non-compliance.
Our strategic priorities also focused on critical foundational operations and infrastructure, without which the IRS could not fulfill its mission. And one of our most critical goals was modernizing our aging technology, and one critical program in particular...our core customer account database, also known as CADE2.
When I arrived at the IRS I initiated a broad review of the IRS technology portfolio. We pruned our portfolio of projects to focus on addressing the single most visible and complex issue that had been holding back the IRS for decades. Since the 1960s, the IRS had conducted its core account processing on a weekly basis. This processing included maintaining basic taxpayer information, such as your current account balance...whether you have outstanding amounts due...and whether you've made any recent payments.
It is enormously gratifying that the IRS successfully migrated from a weekly processing cycle to daily processing this year. This was a multi-year, incredibly complex undertaking that went to the heart of systems that process trillions of dollars in tax revenue. This is an incredibly important milestone for the IRS, one which we first set our sights on in the late 1980s.
The payoffs from this change are quicker refunds for taxpayers, up-to-date information at the fingertips of our customer account representatives, and a platform for more real-time analytics and compliance. It is already benefiting taxpayers this year, and will produce major benefits for the nation's tax system for years to come.
I cannot emphasize enough the importance of continuing to invest in the technology infrastructure supporting the IRS. The IRS is one of the most complex financial institutions in the world, and only through investments in technology will the agency keep up with evolving taxpayer needs.
You may like these other stories...
School tax breaks get House support as Democrats objectRichard Rubin of Bloomberg reported that the House of Representatives on Thursday voted to expand and simplify tax breaks for education as Republicans continue to pass...
Many senior US tax professionals believe that a streamlined audit process will be the top benefit resulting from the IRS Transfer Pricing Audit Roadmap, a new toolkit organized around a notional 24-month audit timeline,...
Tax accounting to be simplified for money-market fundsThe US Securities and Exchange Commission (SEC) voted 3-2 on Wednesday for sweeping changes to institutional money-market funds, Emily Chasan, senior editor of...
Upcoming CPE Webinars
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
FRF for SMEs Series--Measurement and Disclosure Principles for various Consolidations and Business Combinations, Part 4B
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
In this session we'll review best practices for how to generate interest in your firm’s services.
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.