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IRSAC warns about IRS underfunding

Continued underfunding of the Internal Revenue Service undermines the tax system, and the agency must dedicate the resources necessary for areas of post-tax reform guidance identified by industry, according to the IRS Advisory Council’s annual report for 2019.

“Recent deficiencies in funding are eroding the significant investments and substantial progress made in the last two-and-a-half decades in modernizing and streamlining the IRS,” the report noted. “Insufficient funding may have even more dramatic and costly future effects on our system of voluntary compliance and self-assessment, particularly if the rate of that voluntary compliance starts to slip down a slippery slope of taxpayer respect for our system of taxation.”

The 2019 Public Report includes recommendations on a range of topics and concerns, including accelerating the use of e-signatures in federal tax administration; the W-4 for 2020; and broadening and improving a self-correction program for tax-exempt bonds.

IRSAC commended the IRS for efforts to release post-Tax Cuts and Jobs Act guidance but said more was needed. “For example, employers are seeking guidance, particularly in the tax-exempt sector, on how to comply with the calculation for unrelated business income from providing parking to employees and how to properly identify a separate trade or business for the Unrelated Business Income Tax,” the report reads.

An IRS office building in the East Harlem neighborhood of New York
An IRS office in New York

The IRSAC also identified such issues as maintaining the hiring of attorneys in the Office of Professional Responsibility; an “efficient and educational approach” to the First-Time Abate Policy; and improving the Free File program.

The IRSAC is a federal advisory committee that provides an organized public forum for discussion of relevant tax administration issues between IRS officials and representatives of the public. It draws members from the public, the tax professional community, small and large businesses, tax-exempt and government entities and the payroll industry.

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