The Internal Revenue Service (IRS) released its strategic five-year plan (Strategic Plan) for 2022 – 2026 with four main goals:
Service: Provide quality and accessible services to improve the taxpayer’s experience
Enforcement: Enforce tax law fairly and efficiently to increase voluntary compliance and close the tax gap
People: Foster an inclusive, diverse and well-resourced workforce and strengthen relationships with external partners
Transformation: Transform IRS operations to become more resilient, agile and responsive to improve the taxpayer experience and close the tax gap.
In the portion of his opening statement dealing with enforcement, IRS Commissioner Chuck Rettig focused on listed transactions and said, “We have continued to make important advances in our compliance programs, with a particular focus on abusive tax advantages, including syndicated protection relief.” and Microcaptive Insurance Arrangements”.
The strategic plan promises an increased focus on non-compliant, high-income and affluent taxpayers, partnerships and large corporations, which the report says “account for a disproportionate share of unpaid taxes.” The IRS intends to enhance efforts to collect unpaid taxes with effective deterrence and enhanced enforcement capabilities. Agents also have access to Enterprise Case Management, which provides agents with a taxpayer’s full history and other tools to prevent and respond to violations. The IRS also wants to reduce the burden on taxpayers by reducing the time between filing returns and resolving compliance issues. Finally, the IRS plans to increase public confidence by promoting compliance through public disclosure of criminal prosecutions and civil enforcement efforts.
In addition, the IRS points to increased efforts to proactively identify fraud schemes. The Office of Fraud Enforcement is establishing a new Virtual Currency Learning Academy for all IRS employees – from novice to expert – with training on cryptocurrencies, blockchain tracing, money laundering compliance and altcoins.
While the responsibilities and workload at the IRS have increased, the resources to combat criminal fraud and tax evasion have decreased. The IRS says it must continue to update necessary tax guidance for new investments, invest in analytical approaches to improve case selection, and maintain institutional knowledge of how to combat avoidance activity.
The strategic plan indicates that the IRS continues to overcome challenges related to insufficient funding, a declining workforce and hiring difficulties. In response, the IRS intends to expand electronic services with online accounts and digital filing capabilities. The IRS also plans to expand resources for international taxpayers and implement a multilingual strategy with new publications in multiple languages. Other goals include increasing reach with improved social media strategies and prioritizing security while protecting taxpayer data.
The roadmap also addresses the IRS’s aging workforce and above-average turnover rates. In response, the IRS intends to hire additional staff, improve employee retention and implement a comprehensive training strategy.
Finally, the IRS plans infrastructure improvements, including reorganizing operations, upgrading and modernizing systems, accelerating cybersecurity modernization efforts from cyber threats, and reducing paper volumes through more effective use of digital data.
Commissioner Rettig stated: “[w]Achieving these strategic goals with consistent multi-year funding will help us better achieve our mission and long-term vision, and deliver on the promise of a new IRS that takes an innovative approach to the future of tax administration to better serve all taxpayers.”
The roadmap notes that the IRS collected $4.1 trillion in gross taxes in fiscal 2021, including $75 billion in collection proceeds. The report also mentions that the IRS processed 269 million federal tax returns in 2021 and distributed a total of 492 million economic relief payments in 2020 and 2021.
Practical note: Additional adjustments and technology upgrades could certainly improve the taxpayer’s experience and contribute to faster audit resolutions. However, it remains to be seen whether additional staff will be focused on relieving an overburdened agency or geared toward increased auditing and compliance, particularly among wealthier individuals and businesses.