Commissioner Charles Rettig wants practitioners and others to become “highly engaged” in an enhanced relationship with the IRS as the Service continues to develop its thoughts on a potential reorganization required by the Taxpayer First Act, P.L. 116-25, he told the AICPA National Tax Conference in Washington on Thursday.
This engagement is a shared responsibility, he said.
“This belongs to you; it belongs to your clients; it belongs to every person in the IRS workforce, and we want to get it right,” Rettig said.
At the same time, Rettig gave what he called “fair warning” to taxpayers and advisers who engage in or promote tax-evasive schemes, underscoring his tough message in a press release released Tuesday that targeted syndicated conservation easement transactions (IR-2019-182). He also singled out for heightened enforcement two other ongoing priorities: abusive microcaptive insurance arrangements and unreported cryptocurrency transactions.
That refrain was then taken up by a panel of other leaders within the IRS: Sunita Lough, deputy commissioner for Services and Enforcement; Don Fort, chief of Criminal Investigation; Douglas O’Donnell, commissioner of the Large Business and International (LB&I) Division; Edward Killen, deputy commissioner of the Tax-Exempt and Government Entities Division; Eric Hylton, commissioner of the Small Business/Self-Employed Division; and Ken Corbin, commissioner of the Wage and Investment Division.
The conference also heard Thursday from IRS Chief Counsel Michael Desmond and Acting National Taxpayer Advocate Bridget Roberts.
Rettig also highlighted progress the IRS has made in recent years in combating fraudulent refund claims using stolen taxpayer identities. Not just during Security Awareness Week coming up in early December, but all year, “we all have a responsibility for security of tax return information,” he said. Last year, taxpayers reporting they were victims of tax-related identity theft numbered about 160,000, down from about 700,000 in 2015. But the threat remains as criminals employ novel strategies, he said, besides about 1.4 billion “sophisticated” attacks on the IRS’s computer systems in the last year.
The passage this year of the Taxpayer First Act opened a door for the IRS to restructure itself and improve customer service, he noted, but the IRS must also better serve taxpayers lacking electronic means of communication or for whom English is not their primary language, he said, repeating a point he has emphasized in the slightly over a year since he was sworn in as commissioner on Oct. 1, 2018.
The news release on syndicated conservation easements reminded taxpayers that the IRS identified these transactions in Notice 2017-10 issued in December 2016 as listed transactions under Regs. Sec. 1.6011-4(b)(2).
“We appreciate the value of conservation easements,” Rettig said. “We don’t appreciate the activities that have gone on with respect to the syndicated conservation easements; there are some artificial appraisals there, some fatal flaws.” O’Donnell, the LB&I commissioner, said later that his division was studying the disclosures required for the easements and other listed transactions and enlisting appraisers and other experts to assess and review the information. Lough, the deputy commissioner for Services and Enforcement, added that the IRS was also looking for trends and similarities among the data.
Rettig and his lieutenants all invoked the increasing role that data analytics will play in tax enforcement going forward. Most importantly, it will allow the IRS to calibrate its mode of interaction with taxpayers to their situations and desire to comply with their tax obligations, they said.
“We have worked with data analytics to use the right tool and the right touch at the right time,” Lough said. “And that’s how we have to work, whether we have many resources or few resources.”
Roberts, making her first public appearance before the AICPA after the recent retirement of Nina Olson, who was national taxpayer advocate for over 18 years, said the Taxpayer Advocate Service is working through a glut of cases caused by wage verification holds on refunds involving the earned income tax credit and/or the child tax credit, which have quadrupled in the past three years.
Rettig also noted that although the IRS has rolled out voluminous guidance on new provisions of the law known as the Tax Cuts and Jobs Act, P.L. 115-97, it still has much to do. And he acknowledged a push by the AICPA and others to urge the IRS to establish an internal practitioner services division.
“I’m respectful of the struggles that you have,” said Rettig, a former tax practitioner himself and the husband of a tax accountant.
— Paul Bonner (Paul.Bonner@aicpa-cima.com) is a Tax Adviser senior editor.