By Jeffrey Silverberg, Manager, CironeFriedberg, LLP   On June 8, 2021, Charles P. Rettig, Commissioner of the Internal Revenue Service, addressed the Senate Finance Committee on the IRS budget issues and concerns over implementation of the American Rescue Plan Act of 2021. Mr. Rettig discussed the 2021 filing season and challenges to the IRS which included the following:

• Efforts to reduce the tax gap. The tax gap is defined as the difference between the amount of tax owed by a taxpayer for a given year and the amount that is voluntarily paid on a timely basis. In dollar terms, this is the annual amount of tax noncompliance.
• The tax gap has many causes but willful evasion is a contributing factor. More investments will be made by the IRS in improving the effectiveness and efficiency of their overall tax enforcement program with modernization of their systems. The IRS was allocated $13.6 billion for the agency in fiscal year 2022 to help achieve these goals. Hiring additional IRS staff to replace employees lost through attrition and to expand their workforce is also planned.
• Advances in artificial intelligence, advanced data, and analytic strategies have enhanced the IRS capabilities in identifying noncompliance when compared to a few years ago. More tax gap approaches and methodologies will be soon be implemented to identify noncompliance.
• Improve tax administration by increasing oversight of paid tax preparers and establish mandatory minimum competency standards. Some of the complexity in the tax law can contribute to the tax gap. Implementation of competency standards may help to reduce tax preparers who are not qualified to prepare returns or who refuse to sign the return they have been compensated for.
• Introduction of comprehensive financial account reporting is on the horizon. Financial institutions would be required to report gross inflows and outflows for physical cash, transactions within a foreign account, and transfers to and from another account with the same owner. Separate reporting requirements would apply to those taxpayers that buy crypto assets from one broker and transfer them to another. Proposals are in the works but would not become effective until after December 31, 2022.

The tide may have turned as tax compliance audits have been at record lows due to lower IRS funding and resources for numerous years. As the deficit widens, greater enforcement of current tax laws will be a high priority and pursuit of the Commissioner’s mission on behalf of all taxpayers.    

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional.  You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.