IRS Plans Public Meetings on ‘Real-Time Tax System’

The Internal Revenue Service plans to host the first of a series of public meetings next Thursday on its plans to create a “real-time tax system” that would provide immediate feedback on whether the information in a tax return matched the IRS’s records.

The futuristic tax system is one that IRS Commissioner Doug Shulman has been described during an appearance before the National Press Club in April (see IRS Commissioner Proposes Tax Technology Overhaul)

With the new system, the IRS would move away from its traditional “look back” model of compliance, and instead perform substantially more “real time,” or upfront matching of tax returns when they are first filed with the IRS with the data in the information returns it has received from other sources. The goal is to improve the tax-filing process and improve overall tax compliance.

Under Shulman’s vision of a real-time tax system, the IRS would be able to match the information submitted on a tax return with third-party information right up front during processing and provide the opportunity for taxpayers to fix the tax return before acceptance if it contains data that does not match IRS records.

Shulman recently described the system in an interview with Accounting Today senior editor Roger Russell (see IRS Commissioner Doug Shulman Wants a Real-Time Tax System). “Since my swearing in, it has really sunk in that the tax system is very much based on a ‘look back,’” he said “Individuals and businesses file a return, we process the return, and we put freezes on clearly fraudulent returns where we see a red flag. But in general people file a return, it processes through the system, and then a lot of the work of tax administration happens a year or two after filing. So if there's a mismatch that we find from an information return, we'll send a letter out six, nine or 12 months after the return is filed. If we flag a potential problem on a return, our exams often occur a year or two after the return is filed, and the return is after the economic activity took place, so often the exam is several years after the actual economic activity reflected on the return. That's why I've laid out a vision for a more real-time tax system, and the broad outline of that is having a tax system in which we load our system with information returns before the filing occurs. We do a lot more matching work, potentially blocking work, and helping taxpayers correct their return as it comes in. Consequently, instead of interacting with people after the fact, which is quite burdensome, we get accurate returns in the first place. If this is executed correctly, and this is a long-term execution, we would see a tax system with a lot less burden on the American taxpayers and with much higher compliance.”

At the public meetings, IRS officials will solicit feedback and input from outside stakeholders to provide comments and insight. The first meeting will feature representatives of consumer groups, the tax professional community, and government representatives.  A future public meeting will include, among others, representatives of the employer and payroll community, the software industry, financial institutions and additional government representatives. 

The first meeting is scheduled for 9:00 a.m. on Dec. 8, and will take place at the IRS Headquarters Building Auditorium, 1111 Constitution Ave., NW, Washington, D.C. Those who would like to attend the meeting should e-mail the IRS at CL.NPL.Communications@irs.gov with the contact information for the attendees or call the IRS at (202) 622-3359.

The next public meeting will be held early next year.