role of tax professionals in achieving improved tax compliance mark w. everson commissioner of...
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Role of Tax Role of Tax Professionals In Professionals In
Achieving Improved Achieving Improved Tax ComplianceTax Compliance
Mark W. EversonMark W. Everson
Commissioner of Internal RevenueCommissioner of Internal Revenue
United States of AmericaUnited States of America
IRS Strategic Plan GoalsIRS Strategic Plan Goals
Improve Taxpayer ServiceImprove Taxpayer Service
Enhance EnforcementEnhance Enforcement
Modernize the IRS Through Its People, Modernize the IRS Through Its People, Processes and TechnologyProcesses and Technology
Enhance Enforcement Enhance Enforcement of the Tax Lawsof the Tax Laws
Key Objectives:Key Objectives:
I.I. Discourage and deter noncompliance Discourage and deter noncompliance with emphasis on corrosive activity by with emphasis on corrosive activity by corporations, high-income individual corporations, high-income individual taxpayers and other contributors to the taxpayers and other contributors to the tax gaptax gap
II.II. Ensure that attorneys, accountants and Ensure that attorneys, accountants and other tax practitioners adhere to other tax practitioners adhere to professional standards and follow the professional standards and follow the lawlaw
Enhance Enforcement Enhance Enforcement of the Tax Lawsof the Tax Laws
(continued)(continued)
III.III. Detect and deter domestic and off-Detect and deter domestic and off-shore based tax and financial criminal shore based tax and financial criminal activityactivity
IV.IV. Deter abuse within tax-exempt and Deter abuse within tax-exempt and governmental entities and misuse of governmental entities and misuse of such entities by third parties for tax such entities by third parties for tax avoidance or other unintended avoidance or other unintended purposespurposes
Role of Tax Professionals in the USRole of Tax Professionals in the US
Over 1.2 million tax professionals help US Over 1.2 million tax professionals help US taxpayers understand and comply with taxpayers understand and comply with their tax obligations their tax obligations
Paid return preparers used by over 50% of Paid return preparers used by over 50% of taxpayers taxpayers
Many are not regulatedMany are not regulated
IRS e-Services Support Tax IRS e-Services Support Tax ProfessionalsProfessionals
New e-Services offer tax professionals an New e-Services offer tax professionals an efficient way to receive and exchange efficient way to receive and exchange information with the IRSinformation with the IRS
Obtaining tax transcriptsObtaining tax transcripts Filing Powers of AttorneyFiling Powers of Attorney Resolving accounts electronicallyResolving accounts electronically
Erosion of Professional StandardsErosion of Professional Standards
Vast majority of professionals follow the Vast majority of professionals follow the law and support tax compliancelaw and support tax compliance
Notwithstanding a general commitment to Notwithstanding a general commitment to ethical behavior, standards eroded in the ethical behavior, standards eroded in the 1990s1990s Growth of abusive transactions Growth of abusive transactions
developed and promoted by tax developed and promoted by tax practitionerspractitioners
Number of steps taken by the IRS to re-Number of steps taken by the IRS to re-establish high professional standardsestablish high professional standards
Office of Professional Office of Professional Responsibility (OPR)Responsibility (OPR)
OPR sets and enforces professional OPR sets and enforces professional standards for standards for AttorneysAttorneys AccountantsAccountants Enrolled AgentsEnrolled Agents In-house counselIn-house counsel
OPR does not currently have jurisdiction OPR does not currently have jurisdiction over other tax return preparersover other tax return preparers
OPR RevitalizedOPR Revitalized
Recruited new OPR leader – Recruited new OPR leader – Cono Namorato, a prominent former Cono Namorato, a prominent former prosecutor and defense counselprosecutor and defense counsel
Increased OPR staffingIncreased OPR staffing
Better utilization of existing disciplinary Better utilization of existing disciplinary toolstools
OPR is actively examining misconduct OPR is actively examining misconduct issues involving major law and accounting issues involving major law and accounting firms and their role in abusive sheltersfirms and their role in abusive shelters
Regulatory Actions to Address Regulatory Actions to Address Abusive PracticesAbusive Practices
Additional standards for written advice—Additional standards for written advice—1.1. Specify form and content of opinions used for Specify form and content of opinions used for
penalty protectionpenalty protection
2.2. Include best practices for advisorsInclude best practices for advisors
3.3. Allow firms to be held responsible if no internal Allow firms to be held responsible if no internal controls exist to ensure compliancecontrols exist to ensure compliance
New standards build on recent victories New standards build on recent victories in court on false claims of privilegein court on false claims of privilege
Next revisions to professional standards Next revisions to professional standards will address broader ethical issueswill address broader ethical issues
Enforcement Initiatives Enforcement Initiatives Promote Compliance with Promote Compliance with
Professional StandardsProfessional Standards
Parallel proceedings coordinate criminal, Parallel proceedings coordinate criminal, civil and OPR actionscivil and OPR actions Traditional approach of suspending Traditional approach of suspending
other actions until criminal review is other actions until criminal review is finished no longer works as abusive finished no longer works as abusive practices can be promoted over the practices can be promoted over the InternetInternet
Enforcement Initiatives Enforcement Initiatives Promote Compliance with Promote Compliance with
Professional StandardsProfessional Standards
Son of BOSSSon of BOSS settlement set tough terms on a settlement set tough terms on a clearly abusive transactionclearly abusive transaction Participants required to pay full amount of Participants required to pay full amount of
tax, plus a penaltytax, plus a penalty 1,165 taxpayers accepted the offer, over 1,165 taxpayers accepted the offer, over
$3½ billion paid to date$3½ billion paid to date
Recent Congressional Action Recent Congressional Action Strengthens IRS Regulation of Strengthens IRS Regulation of
Professionals Professionals
Tax professionals subject to monetary Tax professionals subject to monetary fines, up to the gross income derived from fines, up to the gross income derived from the misconductthe misconduct
Firm may be fined if it knew or should Firm may be fined if it knew or should have known of misconducthave known of misconduct
Monetary penalties may be imposed in Monetary penalties may be imposed in addition to or in lieu of limits on practice addition to or in lieu of limits on practice privilegesprivileges
Pending Legislation Concerning Pending Legislation Concerning PractitionersPractitioners
Expand OPR jurisdiction to include Expand OPR jurisdiction to include tax return preparerstax return preparers
Open OPR proceedings to publicOpen OPR proceedings to public
Require disclosure of Refund Anticipation Require disclosure of Refund Anticipation Loans termsLoans terms
US Internal Revenue US Internal Revenue ServiceService
Taxpayer Service and Taxpayer Service and Enforcement MeasuresEnforcement Measures
Toll-Free Telephone Level of Service
56%68%
80%87% 84%
0%
20%
40%
60%
80%
100%
FY 2001 FY 2002 FY 2003 FY 2004 FY2005Proj.
Toll-Free Tax Law Accuracy
80%
84%82%
80%
88%
70%
74%
78%
82%
86%
90%
FY 2001 FY 2002 FY 2003 FY 2004 FY2005Proj.
IRS.gov Internet Downloads (millions)
317438
560
739
0
200
400
600
800
FY 2001 FY 2002 FY 2003 FY 2004
Percent of Individuals Filing Electronically
31%36%
41%46%
51%
0%
10%
20%
30%
40%
50%
60%
FY 2001 FY 2002 FY 2003 FY 2004 FY2005Proj.
Total Individual Audits(in thousands)
0
500
1,000
1,500
2,000
2,500
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04
High Income Audits (over $100,000) (in thousands)
-
50
100
150
200
250
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04
Audits of Corporations (Assets over $10 million)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04
Audits of Small Businesses (Assets under $10 million)
-
10,000
20,000
30,000
40,000
50,000
60,000
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04
Criminal Investigations Completed
-
1,000
2,000
3,000
4,000
5,000
6,000
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04
Enforcement Revenue ($ billions)
38.0 37.2 35.232.9 33.8 33.8 34.1
37.6
43.1
05
1015202530354045
FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04