Protect the Integrity of the Tax System by Encouraging Compliance through Administering and Enforcing the Tax Code
The American tax system is based on voluntary compliance and supported by appropriate enforcement. As part of our efforts to close the tax gap,1 we will pursue innovative approaches to understand, detect and resolve potential noncompliance. We will use behavioral insights on how people process and react to information. This will inform how we design programs to encourage voluntary compliance.
One of the IRS’s key responsibilities is to ensure taxpayers comply with the tax law. We will develop innovative approaches to understand, detect and resolve potential noncompliance to keep taxpayer confidence in our tax system strong. Analyzing new tax laws and regularly assessing trends in noncompliance will enable a more proactive approach. We will respond to high-risk areas thoughtfully.
When noncompliance occurs, we’ll use behavioral insights and robust data analysis to address the noncompliance in the most appropriate way. This will include expanding self-correction options and early intervention treatments, allowing taxpayers and tax professionals to resolve errors quickly, without compounding issues over time. Enhancing our ability to select cases and implementing a new case management system will shorten the time from when an issue is detected to when it is resolved. Feedback throughout this process will help improve our deterrence, detection and treatment of compliance issues in the future.
We understand many taxpayers experience stress when learning they have a potential compliance issue that needs to be addressed. We will help taxpayers navigate the process of issue resolution, ensuring they’re aware of the Taxpayer Bill of Rights and the resources available to them. While working to help taxpayers who want to comply, we'll pursue those who intentionally violate the tax code.
Objectives and Supporting Activities
- Analyze the risk landscape continuously to determine priority compliance issues.
- Create comprehensive strategies to prevent and address noncompliance in high-risk areas (e.g., Large Business & International's compliance campaigns).
- Identify resource and skill needs to support high-priority risk areas and incorporate them into workforce planning.
- Develop early-warning and notification systems to identify potential issues as they occur and engage taxpayers earlier in the process to resolve issues faster.
- Review and refine risk-based filters to detect anomalies early.
- Assess taxpayer and tax professional compliance behavior to identify opportunities for early intervention treatments and other new approaches to compliance.
- Test and analyze the effectiveness of various treatments on taxpayer and preparer compliance and burden.
- Share insights from compliance efforts and testing across operating divisions for continuous improvement of issue routing.
Taxpayer Digital Communication (TDC) Program
The IRS launched the TDC program in 2017 to test the use of secure digital messaging. TDC enables taxpayers and tax professionals to interact with the IRS electronically, enabling the immediate exchange of information in place of more time-intensive mail correspondence.
The modern, digital communication channel will enable IRS employees to resolve taxpayer issues more efficiently-lowering communication costs, providing more transparency and certainty, reducing operational tasks, and increasing taxpayer satisfaction.
- Share data and coordinate on cases within and across relevant business units.
- Expand the Cyber Crimes Unit in response to the ongoing threat of virtual financial crimes.
- Raise public awareness of the outcomes of IRS criminal investigations.
Time to Start Compliance Resolution - This measures the percentage of total instances where IRS compliance enforcement divisions contact a noncompliant taxpayer within one year of receiving a taxpayer's return (or when a taxpayer should have filed their return, but may not have).
1. The gross tax gap is the amount of true tax liability that is not paid voluntarily and timely.
2. Caroline Bruckner, "Shortchanged: The Tax Compliance Challenges of Small Business Operators Driving the On-Demand Platform Economy, "Kogod Tax Policy Center, 23 May 2016.
4. Pew Research Center, "Record 60.6 Million Americans live in Multigenerational Household, " 11 August 2016