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Could IRS reform mean smoother waters for tax practitioners?

Ed Karl blog image - 7-22-2018“. . . once again there is an historic opportunity to overhaul the IRS and transform it into an efficient, modern, and responsive agency.” - Report of the National Commission on Restructuring the IRS, 1997

Last year, I wrote a blog about tax reform and quoted country singer Michael Ray that [t]oday only happens once in a lifetime.” I talked about how I was around for the 1986 tax reform process and passage of the legislation, so happening once in a lifetime might be twice for me, as tax reform was then developing. I’m also hoping that twice in a lifetime refers to IRS reform.

I’ve drafted several blogs about IRS reform including a recent one in May. But I’m moved to write again because July 22, 2018 is the 20th anniversary of the Internal Revenue Service Restructuring and Reform Act of 1998, H.R. 2676. In one of the more expeditious, and bi-partisan processes in my 35 years in advocacy, Congress:

  • Approved L. No. 104-52, H.R. 2020, that created the National Commission referred to above on November 19, 1995 (and amended on April 26 and September 30, 1996)
  • Gave the National Commission a year from its last amendment to issue its Report which was done on June 25, 1997
  • Passed the actual restructuring legislation, L. No. 105-206, H.R. 2676, on July 22, 1998

What’s amazing is that, on average, only about five percent of bills introduced in Congress are ever signed into law. And many of those were originally introduced in a prior Congress and failed to move. The 1998 legislation emerged from a bi-partisan Commission that issued its report in only a year. Surprisingly, it was enacted a year later.

The introduction to that report stated: “[I]t has been over forty years since Congress and the President have considered significant reforms to the . . . IRS. With this report, once again there is an historic opportunity to overhaul the IRS and transform it into an efficient, modern, and responsive agency.” That time is here again.

In April, the AICPA undertook its fourth “Survey on Tax Practitioners’ Experience with the IRS” in an attempt to guage our members’ experiences. There has been some improvement since 2015 but problems still abound:  

  • Although overall practitioner wait times to talk to IRS assistors have decreased, the satisfaction with the quality of the service has also decreased.
  • Courtesy disconnects and long wait times are still happening, mainly during non-busy season.
  • The biggest impact to practitioners remains the inefficiency with which the IRS responds to written communications. There has been no significant improvement in the IRS’s ability to provide a “substantive response” to correspondence in a timely manner. This is happening despite the IRS saying that additional funding from Congress was for more telephone assistors who would focus on correspondence when they weren’t handling calls.
  • Other reasons for practitioner dissatisfaction with the IRS are the long wait times and the inability to talk with someone knowledgeable who can actually help resolve a taxpayer issue.
  • Over half of practitioners do not think the IRS is on the right path to becoming a modern-functioning, evolutionary and respected federal agency.

These member reactions, which were evident in earlier survey results, were part of the reason the AICPA led an effort, in collaboration with other professional organizations and former IRS executives, to develop a framework we called “Ensuring a Modern-Functioning IRS for the 21st Century.”  A central part of that effort is our push for a dedicated “practitioner services” division that would centralize and modernize the IRS’s approach to tax practitioners. Simply put, this division would allow the IRS to leverage its limited resources to serve taxpayers by doing a better job with practitioners.

So where do things stand? A package of nine bills have been introduced, and are intended to:

  • Redesign the IRS to emphasize customer service,
  • Provide new taxpayer appeal rights,
  • Improve responsiveness to victims of identity theft,
  • Modernize IRS technology.

These bills were appended to H.R. 5444, the Taxpayer First Act, and passed unanimously in the House on April 18. Senate Finance Committee Chair Orrin G. Hatch (R-UT), and Sen. Ron Wyden (D-OR)., the committee’s ranking member, introduced similar legislation, S. 3246, the Taxpayer First Act of 2018 on July 19. In addition, Senate Finance Committee members Rob Portman (R-OH) and Benjamin Cardin (D-MD) are expected to introduce “complementary” legislation to S. 3246 the week of July 23. However, with the mid-term elections looming, it’s unlikely we’ll see movement. Maybe during the “lame-duck” session of Congress where, starting November 13, the House will be in session for 16 days and the Senate for 19 days…

As Hal Borlan, an American author, journalist and naturalist once said, “[k]nowing trees, I understand the meaning of patience. Knowing grass, I can appreciate persistence.” Persistence is a good virtue in the legislative process. And persistence will be necessary to once again pass IRS reform even if we have to look all the way back to July 22, 1998.

Edward Karl, CPA, CGMA, Vice President- Taxation, Association of International Certified Professional Accountants

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