Will IRS Have the Resources to Implement Tax Reform?

Posted by Angie Petty on January 2, 2018

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The cash strapped agency has been struggling for a number of years to process U.S. tax returns using outdated legacy systems.  With 15,000 fewer employees today than in 2010, it’s been long criticized for poor customer service. And its budget has shrunk by $1 billion over the same time period.  Now the IRS must implement the most massive tax overhaul in the last 30 years. 

Once the president signs the tax reform legislation, the IRS will need to change tax tables almost immediately in preparation for January 1st when the new law takes effect. It would then have just the span of a year to prepare for the first filing season under the new tax code. On top of that, Republicans are considering reorganizing the agency in 2018. 

Kevin Brady (R-TX), Chairman of the House Ways and Means Committee told The Washington Examiner he plans to meet with acting IRS Commissioner David Kautter to discuss implementation of the tax bill and the agency’s needs. He said that last week, he began that conversation with Treasury Secretary Steve Mnuchin.

In mid-December, the Ways and Means Committee’s Oversight Subcommittee met to hear testimony regarding how the IRS might handle its new, pending responsibilities.  According to Government Executive, Chairman Vern Buchanan (R-FL) said he “envisioned $500 million in funding for reforms that would require IRS employees to design new tax forms, write new guidance publications and train customer service staff to implement a rewritten tax code.”  Subcommittee members envision IRS needs such as improving customer service at call centers, modernizing technology, and developing and disseminating information to taxpayers.

Democrats at the subcommittee hearing expressed their concerns about increasing the workload of an already overburdened agency. Earl Blumenauer (D-OR) said, “We need a deeper dive into what Congress has done to the agency,” which he called “political malpractice.”

Rep. Meehan (R-PA) stated that tax reform was intended to simplify tax filings and withholdings, and should ultimately result in less work for taxpayers and the IRS. Other representatives before the subcommittee expressed their concern with the IRS’ intent to move more and more services online and reduce human staff. They believe tax payers in rural areas may not have easy access to the internet.

The Examiner interviewed Mark W. Everson, the commissioner of the IRS under former President George W. Bush and currently chairman of Alliantgroup which provides of specialty tax services to small and mid-sized companies. Everson believes that the IRS will have particular difficulty writing the rules for the new regimes for international taxation, and businesses like partnerships and sole proprietorships. According to Everson, those two parts of the overhaul would create entirely new legal structures that the IRS would then have to enforce within a year.

Tax experts also fear that individuals and business will try to game the new tax system, which IRS will have to police and enforce.

With limited resources, the IRS may need to turn to federal contractors to fill gaps as it implements the new tax legislation before the 2018 tax filing season.

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