IRS Commissioner Doug Shulman Wants a Real-Time Tax System
Commissioner Doug Shulman has presided over the continued reorganization and modernization of the Internal Revenue Service since March 2008.
I recently had the opportunity to speak with him about his experiences and the issues affecting the agency. His answers are revealing, and comforting in knowing the respect he holds for taxpayers, tax professionals, and his 100,000 or so employees. Following are some of his answers. The full interview will appear in the December issue of Accounting Today.
Looking back to the beginning of your tenure, what notions did you have about your job when you started that proved to be off the mark (if any); and which proved to be right on target?
Shulman: I knew that the IRS was a widely respected agency and I had a sense that it had very good people, but since coming to the agency I've really been amazed by the talent. We've got a world-class senior management team, one that I would stack up against any private-sector senior management team in the country, and throughout the organization we've got committed public servants who are working every day to make the nation stronger. I often tell people, if they wonder what IRS employees talk about in the hallways—whether I walk the halls here or other facilities across the country and ask employees what they are up to today, the answer I hear is "I'm serving taxpayers." The other thing I would say is because the agency is so well respected, we've been called upon to execute a lot of the top priorities of the country, especially in these difficult economic times. There are many examples, but one is that a third of the Recovery Act was run through the tax system, and I think the reason the nation's leaders had confidence to give us a major task that had a major impact on the country was because we're such a well-respected agency.
What has been the most surprising thing you have learned about the tax system and your job as commissioner since your swearing in?
Shulman: While not really surprising, since my swearing in, it has really sunk in that the tax system is very much based on a "look back." 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.
Have you had a chance to talk to individuals that served as commissioner before you? Did they offer any advice?
Shulman: It's been a real honor for me to follow in the footstep of such a distinguished group of men and women who have served as IRS commissioner in the past. Before I was confirmed and then after I arrived, I've had the chance to speak to all of the former commissioners. One constant piece of advice that I've gotten from all of them is that there are lots of things that are going to come at you as commissioner, from oversight of tax-exempt organizations to complex business issues to refund fraud, but the one thing you need to remember as commissioner is don't screw up the filing season. The American people are wrestling with an extremely complex code and they depend on us every year to answer their questions, process their tax return, and 80 percent of American individuals actually get a refund. So while there's lots of moving parts, the main piece of advice I got is never screw up the filing season, and I try to keep that forefront in my mind.