The Internal Revenue Service Advisory Council (“IRSAC”) issued its yearly Public Report (the “2021 report”) on November 17, 2021, outlining recommendations to the IRS on new and ongoing tax administration issues. The purpose of IRSAC is to provide the Commissioner of the IRS with policy proposals, critiques, and suggestions for operational improvements, by reviewing the outcomes and public perception of existing tax policy. The 2021 IRSAC is composed of 34 diverse members with broad tax expertise, and is organized into five subgroups: Wage & Investment, Small Business/Self Employed, Large Business & International, Tax Exempt/Government Entities, and Information Reporting. Prior to publishing this annual report, the 2021 IRSAC has provided real-time feedback on a variety of IRS projects, including support for Fiscal Year 2022’s budget request.
The 2021 report reflects several key issues, principal among them the damage caused by chronic reductions in IRS budget and human capital rates. It is a critical mission of the IRS to enforce federal laws while serving U.S. taxpayers—not only collecting tax and identifying noncompliance, but also making it easier for taxpayers to understand and meet their obligations. Without adequate funding and an adequate number of well-trained employees, it becomes difficult for the IRS to accomplish either of these goals effectively. For this reason, IRSAC supported the Fiscal Year 2022 base appropriations request for $13.2 billion, a ten percent increase over 2021, as well as the IRS proposal for a $417 million program allocation funding investments to improve the overall effectiveness and efficiency of its tax enforcement program, thereby helping the government earn future revenue.
The 2021 report clearly demonstrates IRSAC’s commitment to improving taxpayer experiences when interacting with the IRS. IRSAC focuses much of its feedback on suggestions regarding increased training and support for IRS employees, modernization of IRS digital tools, and fair and impartial enforcement of the tax code. As one example, the report includes a detailed analysis of the IRS Independent Office of Appeals (“Appeals”), including both its current operations and recommendations about how it can better protect the right of taxpayers with collection or examination issues to appeal decisions with which they disagree. IRSAC found that Appeals is already making positive changes, such as implementing helpful new technology like the Taxpayer Digital Communication internet portal and Enterprise Case Management software to facilitate communication and speed up the time it takes to resolve cases. However, Appeals lacks sufficient personnel and training, and could benefit particularly from the knowledge and experience of tax practitioners from outside the IRS. IRSAC also makes recommendations for increased transparency to taxpayers and their representatives regarding the status of cases before Appeals and the documents Appeals is examining. The 2021 report similarly promotes taxpayer rights in other sections, by calling for regulatory safe harbor language which would provide penalty relief to filers who have made good faith efforts to comply with new requirements, the expansion of certain postponed filing deadlines, and increased education about taxpayers’ obligations. To read the full report, click here.