Shulman Looks Back on His Accomplishments

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photo via npr.org

Doug Shulman will be completing his term as IRS Commissioner on November 11, 2012. He spoke to the AICPA in Washington D.C. today. Shulman said that he likes to focus on priorities and not get distracted by crises that tend to crop up. His principal achievements:

  1. Shutting down international tax evasion through voluntary disclosure programs
  2. Softening the “adversarial relationship” between the IRS and corporate taxpayers
  3. Transforming the IRS’ account processing from a weekly cycle to a daily cycle to achieve more real-time processing and analytics
  4. ensuring basic competency for paid tax return preparers by getting them registered and keeping them educated
  5. leveraging data analytics to, for example, vet out tax return preparers who make a habit of preparing inaccurate returns or avoid paying out fraudulent returns
  6. improving the customer service experience when taxpayers phone the IRS seeking tax relief and account-related questions
  7. performing all the other tasks that the IRS is called upon to do (such as the enforcement function of the Affordable Care Act)

 [P]roviding quality customer service is a key priority of mine…and every bit as important as enforcement.

~ Doug Shulman, Commissioner of the IRS

At the End of Shulman's Term

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photo via topnews.net.nz

With Doug Shulman concluding his service as Commissioner of the Internal Revenue Service early next month, I thought it might be nice to look at some of the details of the office itself and look back at some prior Commissioners.

The Office of Commissioner was created by Congress on July 1, 1862 even though the modern history of the IRS really began in 1913, ten years after the income tax was abolished.  IRS Commissioners are appointed by the President of the United States with the approval of Congress.  There was no set term prior to 1998.  For example, Guy T. Helvering was “sentenced” to over 10 years of service (from 1933 to 1943).  He holds the record for the longest term as Commissioner.  The shortest term was just over 3 months by Robert E. Hannegan which, coincidentally, was immediately following Helvering’s term in 1943.

Shulman came very close to serving a full 5-year term as he got his start back in March 2008.  Shulman took over after Mark W. Everson, who also served a 4-year term.  IRS has a complete list of all past Commissioners, in case you’re curious.

According to Shulman’s bio, his emphasis has been to strike a balance between providing excellent service to taxpayers (hopefully offering tax relief where appropriate) and enforcement of tax laws (i.e., collection back tax debt).  Has Shulman succeeded?

Steven Miller to Serve as Acting IRS Commissioner After November 9th

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We had heard this was coming: the Commish is officially stepping down on November 9th.

Doug Shulman, Commissioner of the Internal Revenue Service, the grand overseer and bestower of tax relief, tax policy, and tax programs good and bad, has served in this post ever since March 2008 when he was appointed by President George W. Bush.  He will be replaced by a “acting commissioner,” Steven Miller until a permanent replacement is named.

Since the position of commissioner is a presidential appointment, we won’t know who the permanent replacement is until after we know the outcome of the presidential election.  Experts agree that whoever it is that fills this position will be coming in at a critical and difficult time.  But there is also agreement among those that know him, that Mr. Miller will do a fine job in the interim.  In fact, one writer believes that Steven Miller will do a much better job with the Whistleblower Program than Shulman ever did.

The 4809 “Informational” Letter Campaign

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Throughout the month of November, tax preparers across the nation will be grumbling about having received IRS Notice 4809, some under their breath, and some publicly.

One of the gripes I am seeing is that people don’t appreciate feeling like the target of some IRS sting operation. The letters were meant to be informative, but the tone of the letter comes across a little accusatory and condescending.

Funny how 4809 is indicative of a broader problem with our nation’s tax system, one which the Commish touched on in his recent speech to an audience at Harvard’s Kennedy School of Government. Much of his speech focused on the need to simplify the tax code:

[M]aking the tax code less complex is the single most important thing that could be done to improve taxpayer service and boost compliance.

~ IRS Commissioner, Douglas Shulman

 

Changes to the tax code, even for the goal everyone agrees on – simplicity – are hard because inevitably it means more money for some and less for others.

~ IRS Commissioner, Douglas Shulman

The problem is that “to simplify” usually means “to generalize,” and when you generalize, some people get the shaft. I think that’s what the Commish is saying here. These 4809 letters are no different. The IRS could have made this campaign very complex: it could have conducted extensive research to determine which tax preparers are complying with the law and which are not. The Service could have spent a huge amount of time and money on this project. But instead the IRS decided to simplify and send them out in a “shot gun” strategy to all return preparers who may ever remotely encounter the issues that they wanted to emphasize. In the process, some top notch, extremely competent return preparers are going to be insulted and offended. And, unfortunately, many of those who should be paying attention to the contents of these letters will toss them aside without giving them a second thought.

What we have these days is a tax system that tries to be tailored to every individual and situation, but it’s way too complex. As policymakers consider making drastic changes to the tax code, hopefully they can achieve the desired simplicity without lumping everyone together unfairly.

IRS Return Preparer Program

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After yesterday’s comments from the Commish (that’s IRS Commissioner Douglas Shulman) at the AICPA fall meeting, there is reason for some tax preparers to be concerned. They have to be careful that their desire to offer taxpayers maximum tax relief and maximum refunds does not override their desire to perform their duties ethically.

Boiled down to its essence, the program will ensure a basic level of competency for return preparers while enabling us to focus on finding unscrupulous preparers.

~ Douglas Shulman, IRS Commissioner

The enforcement segment of the IRS Return Preparer Program will include:

  1. Letters to preparers who have been identified as “high risk,” making sure they are doing their due diligence.
  2. In-person visits with preparers who have been identified as “egregious.”
  3. Letters and in-person visits to return preparers who are not using the Earned Income Tax Credit correctly.
  4. Special crackdown on “ghost preparers” (those who don’t sign or identify themselves with their PTIN)
  5. Undercover shopping visits to preparers who are suspected of engaging in fraud.
  6. Civil and/or criminal prosecution where appropriate.
  7. Coordinated effort with the Office of Professional Responsibility and the Department of Justice.
While there are many undefined terms being thrown around, there appears to be a spectrum of poor conduct and discipline emerging. At one end is the return preparer who has exhibited a pattern of honest-appearing errors who will receive a letter from the IRS (this is something new). At the other end is the preparer who is suspected of something more “egregious” who very well could be tracked down and thrown in jail (this is not new).

IRS May have to Make Do with Less in 2012

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In difficult financial times, individuals are forced to take a good hard look at every single expense to make sure it is necessary.  And in the federal government, it’s no different.  Lawmakers are looking across the board at every service, program, committee, and agency.  Expenses that cannot be eliminated will be reduced as much as possible, . . . and rightly so.  Right?

What about expenses that generate revenue?  Should there be an exception?  IRS Commissioner Douglas Shulman believes that not all government expenses are created equal.  He believes that his agency should be treated differently.

The House Appropriations Committee has recently approved proposed legislation that would cut funding to the Internal Revenue Service by $600 million for fiscal year 2012 and Shulman is up in arms about it.  He has some bold words:

[T]hese budget cuts will result in a direct increase to the nation’s deficit.

~ Douglas Shulman, Commissioner of the IRS

Nice soundbite at least.  Here’s what he thinks will happen if we cut funding to the IRS.

  1. reduction in service
  2. reduction in revenue collected
  3. negative impact on voluntary compliance for years to come

As for a potential “reduction in service,” Shulman says that, in some instances (if the budget cuts are approved), it would take 5 months for the IRS to respond to taxpayers’ written inquiries and only half of those telephoning the agency would get through.  Resolution of back taxes would be slowed significantly.  I don’t know, maybe Shulman should welcome these cuts — it would allow his agency to continue providing low quality service, except now they would have a good excuse.  Read Shulman’s full letter here.