IRS Seeks Public Comment on the Development of a “Real-Time” Tax System

On Dec. 8, 2011, the Internal Revenue Service (IRS) held the first of several public meetings to gather feedback on the development of a real-time tax system that will enable the agency to collect 1099s, W-2s and other documents before taxpayers file their full returns.

During the meeting, IRS Commissioner Doug Shulman described his vision for a system that would move away from the traditional “look back” model of compliance and perform substantially more “real time,” or upfront, matching of tax returns when they are first filed with the IRS.

If implemented, the IRS believes this system would improve the tax filing process by reducing the burden for taxpayers and improving overall compliance upfront.  Further, it would give taxpayers the opportunity to address discrepancies found between the tax return and data in the IRS records before the return is accepted.

Shulman notes that this system will allow the IRS to catch up with consumers who have been utilizing quick transactions with banks and other financial institutions for years.  However, these changes would require major changes for the tax-preparation industry.

In her remarks at the public meeting, Kathy Pickering, executive director of H&R Block’s Tax Institute, noted that a real-time tax system “would require a significant investment in infrastructure and the ripple effect of implementing it would be far-reaching.”

The AICPA has voiced its support for the overall objective of the real time tax system, which they believe will eliminate the need for millions of IRS contacts with taxpayers. 

The IRS will hold the next public meeting in early 2012.  Those who are interested in attending should email the IRS at CL.NPL.Communications@irs.gov with their contact information, or call 202-622-3359.

Also In This Month's Issue

IRS Audit Requests for Electronic Files Generates Fear of Fishing Expeditions Among Small Businesses

January 2012 Hot Dates