Commissioner: We are progressing toward a user-friendly IRS

The IRS is progressing on its plan to become more accessible to taxpayers and tax professionals, with improved or new online accounts, mobile-friendly forms, and a new platform for Forms 1099-K, Payment Card and Third Party Network Transactions, just in time for the first tax season with stricter requirements for filing those, Commissioner Danny Werfel said in a call with reporters.

In addition, the IRS is spending some of its billions of dollars from the Inflation Reduction Act, P.L. 117-169, to crack down on tax-evading millionaires, Werfel said Thursday in a planned quarterly call. In the last few months, the IRS has closed about 175 delinquent tax cases for millionaires, generating $38 million, he said.

“We’ve started transforming IRS operations,” he said. “These will provide significant benefits for taxpayers, tax professionals, and the tax system over the next decade. We have a unique opportunity, a once-in-a-generation chance, to envision and realize the future of tax administration” because of the additional funding.

Taxpayers should experience the same functionality in their IRS online account as they do with their banks, he said.

Examples Werfel mentioned:

• The IRS is deploying enhanced capabilities for the tax professional online account, including account authorization management and payment viewing by the end of fiscal year 2023 and secure two-way messaging in fiscal year 2024.
• The launch of business online accounts, allowing businesses to view outstanding balances, make payments online, and conduct a business tax check. These features will first be available to sole proprietors by the end of fiscal year 2023.
• The ability, by filing season 2024, for taxpayers to submit 18 forms via mobile devices. This is an important upgrade, because about 15% of Americans rely on mobile phones for their internet access.

In December, the IRS delayed implementing the law lowering the reporting threshold for Forms 1099-K to $600 from $20,000 because it needed more time to prepare. Now, Werfel said, bulk filers will be able to transmit hundreds of thousands of these forms via a new platform on the information return intake system (IRIS), Werfel said.

Implementation of IRIS is an important milestone, he said, because it shows the IRS can quickly build on its new technology products. “The IRS just launched the 1099 tool in January, and its capabilities are already being significantly expanded.”

Funds from the Inflation Reduction Act are paying off in enforcement, especially among high-income taxpayers, Werfel said.

“Prior to the Inflation Reduction Act, over a decade of budget cuts prevented us from keeping pace with the increasingly complicated set of tools that our wealthiest taxpayer used to hide their income and evade paying their share,” Werfel said. “Our audit rates for these individuals was anemic. We are now taking swift and aggressive action to close the gap.”

In October, the IRS said the annual tax gap — the difference between the estimated total tax liability for the period and the amount that taxpayers pay on time — averaged $496 billion for tax years 2014 through 2016. Based on projections, the Service said the estimated average gross tax gap will be $540 billion per year for 2017–2019.

In addition, the $80 billion allocated to the IRS over 10 years through the Inflation Reduction Act was cut by about $20 billion as part of the debt ceiling deal reached in June.

In an atmosphere where a congressional effort could derail these advances by undercutting the funding further, Werfel made it clear that none of the improvements will happen without a reliable stream of income.

“I hope that we can make the case to Congress and the American people that we are putting our resources to work for them,” he said. “Scaling back means less accountability for the wealthy who owe and aren’t paying, and less of an ability to help taxpayers navigate our ever increasingly complicated tax code.”

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.