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TIGTA Considers Challenges Faced By IRS

by Mike Godfrey, Tax-News.com, Washington

13 December 2010


The Treasury Inspector General for Tax Administration (TIGTA), in its annual memorandum, has detailed the management challenges that will face the United States Internal Revenue Service (IRS) in the 2011 fiscal year.

The TIGTA is required by the Reports Consolidation Act of 2000 to provide its perspective on the most serious management and performance challenges confronting the IRS for inclusion in the Department of the Treasury’s annual accountability report.

In its annual memorandum outlining the management and performance challenges the IRS will face in the next fiscal year, the TIGTA has listed the following challenges in order of priority: modernization; security; tax compliance initiatives; implementing health care and other tax law changes; providing quality taxpayer service operations; human capital; erroneous and improper payments and credits; globalization, taxpayer protection and rights; and leveraging data to improve program effectiveness and reduce costs.

The IRS’s Business Systems Modernization Program is, it was said, a complex effort to modernize IRS technology and related business processes. It involves integrating thousands of hardware and software components while replacing outdated technology and maintaining the current tax system. However, TIGTA has found that, although the Program has continued to help improve IRS operations, project development activities have not always implemented planned processes effectively or delivered all planned system capabilities.

Millions of taxpayers, the TIGTA continues, entrust the IRS with sensitive financial, personal, and other data that are processed by and stored on IRS computer systems. Nevertheless, the risk that taxpayers’ identities could be stolen by exploiting security weaknesses in the IRS’s computer systems continues to increase, as does the risk that IRS computer operations could be disrupted.

Increasing voluntary compliance and reducing the tax gap is currently the focus of many IRS initiatives, but it is facing significant challenges in obtaining more complete and timely data, and developing the methods necessary to interpret the data.

The TIGTA pointed out that the IRS must continue to seek accurate measures for the various components of the tax gap and the effectiveness of the actions taken to reduce it. Broader strategies and better research are needed to determine what actions are most effective in addressing non-compliance.

In addition, each filing season tests the IRS’s ability to implement tax law changes made by Congress. The TIGTA stresses that correctly implementing tax law changes is a continuing challenge because the IRS must identify the tax law changes; revise the various tax forms, instructions, and publications; and reprogram the computer systems used for processing returns. Changes to the tax laws have a major effect on how the IRS conducts its activities, what resources are required, and how much progress can be made on strategic goals.

Although not listed as a challenge, tax law complexity was also said to warrant additional consideration. While “complexity of the tax law” does not appear on this year’s list of challenges because it has been overtaken by other concerns, the TIGTA considered that it remains a serious, underlying issue with wide-ranging implications for both the IRS and taxpayers.

It was added that tax law complexity and frequent revisions to the Internal Revenue Code make it more difficult for the IRS to explain and enforce the tax laws, and more costly for taxpayers who want to comply. However, the TIGTA concluded, as the IRS lacks the authority to enact changes to the tax law, it can do little but continue to react to the frequently changing Internal Revenue Code.

TAGS: compliance | tax | business | tax compliance | law | Internal Revenue Service (IRS) | United States | regulation

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