IRS Commissioner Douglas Shulman’s most recent two speeches are worth a few minutes to read. The Commissioner explained to the National Press Club (click here to read the speech) his vision for a future of tax administration in which the IRS checks a tax return against W-2’s and 1099’s before the taxpayer can successfully submit the tax return electronically. If the taxpayer received interest income reported on a 1099, the tax return will be forced to include that income. This can lead to problems (what about paper-filed returns where this failsafe is lacking; or what if the taxpayer disputes that he/she received the interest payment; etc.) but the future concept seems better than the current system. The Commissioner observed that sometimes, the IRS audits a taxpayer for issues of this ilk 2 or 3 years after the taxpayer filed the return. By this time the taxpayer may have lost his or her records, and the taxpayer now faces interest and penalties. Our business relies on a certain frequency of taxpayers who face these audit problems, but like any sincere doctor would say, we’d prefer if nobody ever got sick in the first place, and we’d find something else to do. (That’s my personal opinion.)
In the other speech, the Commissioner explained what’s next for large corporate taxpayers, now that the IRS has made the Compliance Assurance Process (CAP) program permanent so that large corporations (by invitation only) can resolve some tax questions at an early stage before the tax return is filed each year.