IRS faces challenges keeping up with the regulationsby
By AccountingWEB Staff
Turns out, it's not just taxpayers who find the tax code confusing. The Internal Revenue Service (IRS) itself is having a hard time keeping up with constantly changing tax laws.
The Trends in Compliance Activities Through Fiscal Year 2010 report, released July 18 from the Treasury Inspector General for Tax Administration (TIGTA), states that while the IRS has hired about 4,300 revenue agents and tax compliance officers in fiscal years 2009 and 2010, the agency struggles to keep up with the heavy workload of enforcing multiple tax changes.
For example, the American Recovery and Reinvestment Act of 2009 included 56 tax provisions. The act's Making Work Pay Tax Credit, with its new income tax withholding provisions, was particularly challenging. The First-Time Homebuyer Credit program added requirements that led to the need for paper returns rather than electronic ones. Also, 42 of the total 514 Affordable Care Act of 2010 provisions affected the tax code. Eight required the IRS to set up new operations.
"The IRS faced many challenges during fiscal year 2010, including implementation of provisions related to new tax legislation", said J. Russell George, Treasury Inspector General for Tax Administration, in a statement he made regarding the report. "Taken together, revisions to these laws represent the largest set of tax law changes in 20 years."
The TIGTA reviews tax compliance statistics every year to analyze IRS trends in collection and examination activities. The TIGTA report says that in 2009, the IRS saw the biggest hiring increase in the past 5 years, and hiring increased even more in the next fiscal year. In that time, gross collections did not increase. The report called for additional staffing in collections to keep up with the workload and attrition. The report also said that enforcement revenue collected increased, as did the number of examinations.
Here are just some of the statistics found in the report:
- The combined number of Collection and Examination functions enforcement personnel increased by 19 percent since fiscal year 2006.
- From calendar years 2005-2009, the total number of tax returns filed grew by nearly 6 percent, from about 177 million to 187 million.
- Since fiscal year 2008, gross collections have decreased by 15 percent, to $2.35 trillion in fiscal year 2010.
- Enforcement revenue collected during fiscal year 2010 increased by 18 percent, from $48.9 billion to $57.6 billion – the first increase since fiscal year 2007.
- In 2009, 63 percent of taxpayers in a survey cited fear of examination as a factor that led to their voluntary compliance. This increased to 64 percent in 2010, which is the largest percentage in the past 5 years.
The report concludes that "the IRS faced many challenges during fiscal year 2010, including implementation of provisions related to new tax legislation, the condition of the economy, and changes to its workforce. Several indicators showed the impact of these challenges, including little change in gross collections, an increase in accounts receivable, and an increase in the number of cases that might never be worked. However, many other indicators increased, including increases in the number of delinquent cases being closed, enforcement revenue collected, and examinations performed. These indicators could suggest that the hiring and training of new personnel is having a positive impact on the IRS's ability to enforce the Nation's tax laws, even though the full benefit from these individuals has yet to be realized."