“Complexity of Tax Law” Not a Challenge for IRS?

What challenges are the IRS facing this year? Apparently not the complexity of the Tax Code.

The Treasury Inspector General for Tax Administration (TIGTA) released its perspective two weeks ago on the most serious management and performance challenges confronting the IRS. The top 10 challenges in order of priority are:

  1. Modernization;
  2. Security;
  3. Tax Compliance Initiatives;
  4. Implementing Tax Law Changes;
  5. Providing Quality Taxpayer Service Operations;
  6. Human Capital;
  7. Erroneous and Improper Payments and Credits;
  8. Globalization;
  9. Taxpayer Protection and Rights; and
  10. Leveraging Data to Improve Program Effectiveness and Reduce Costs.

In TIGTA’s twelve page memo (downloadable here as a pdf), the agency offers an assessment of the major IRS management challenge areas for fiscal year 2010.

“Complexity of the Tax Law” did not appear on this year’s list of challenges. TIGTA felt that the IRS had bigger fish to fry.

Not surprisingly, TIGTA found that many of the IRS Modernization Project milestones were “significantly over budget” and “significantly behind schedule.” That would explain why it ranks first on the list of challenges faced by IRS.

Also a top challenge? Taxpayer data security. Identity theft is a growing concern as more and more taxpayer data is stored in IRS computer systems and transmitted online. The IRS has demonstrated, through internal audits, that there are concerns with respect to both accessing private data and the stability of the data at IRS sites. Additionally, phishing and other targeted taxpayer scams are on the rise, which is an area of serious concern.

Another challenge worth noting: taxpayers with international activities. It’s no surprise to see this on the list considering the emphasis that the current administration is putting on offshore accounts. As US revenues shrink, US corporate revenues abroad are growing. In fact, TIGTA reports that US-based corporations more than tripled their foreign profits between 1994 and 2004, from $89 billion to $298 billion. Yet, considerably more than half of those profits were earned in low-tax or no-tax jurisdictions. Tracking that income is a serious concern to the acting Commish.

It’s always interesting to see what shows up on the list as top tax concerns. It often serves as a heads up to targeted enforcement practices and other shifts in policy. However, I have to say, this go around, I still can’t wrap my head around tax complexity not remaining a top issue. It’s a huge issue. Maybe the bigger problem is that we’ve become nearly apathetic to the cause. Perhaps it’s so complex that we don’t even think about it anymore? Kind of how we don’t even blink when we hear the word “billion” nowadays. The Code is not becoming less complex, maybe we’re just getting used to it.

Comments

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  2. Mary O'Keeffe

    I agree that complexity is a huge challenge.

    However, the purpose of the TIGTA report was to develop a list of top 10 priorities (“management challenges”) for the IRS to work on, and tax complexity is largely outside the control of the IRS.

    Congress is responsible for the complexity in the tax law, not the IRS.

    But the TIGTA report authors were not charged with creating a top 10 priority list for Congress.

    That said, the TIGTA report does prominently identify “complexity” as an important underlying concern on the very first page of the report.

  3. Author
    Kelly

    Oh Mary, I totally understand that Congress created the mess. I just find it a little sad that TIGTA in its report, while acknowledging that complexity is a serious issue, kind of dismisses it, going so far as to say: “Complexity of
    the Tax Law” does not appear on this year’s list of challenges because it has been overtaken by other concerns.

    I think many of those other issues would be abated with a little simplification is all. ;)

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  5. BJWils

    Approximately 1.1 Trillion dollars is earned annually from illegal activities. and almost all of this income goes untaxed. Another reason for the Fair Tax. If the Fair Tax was implemented, we wouldn’t have to worry about any of the top ten challenges facing the IRS.

  6. Evan

    Kelly,

    I feel like listing, “Tax Complexities” by the TIGTA is 100% completely worthless. If they listed it, I would have dismissed it saying in my head, “Yeah, right.”

    At least the list kind of justifies their job lol

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