Information reporting is a key component in IRS compliance programs that are designed to detect and pursue noncompliant taxpayers who underreport income, overstate deductions or fail to file tax returns. IRS seeks to verify compliance by comparing information returns to tax returns to see if taxpayers have filed returns and reported all their income. Information reporting also serves to further several key initiatives in the administration of federal income taxes, such as reducing burdens associated with tax return preparation.
Congress recognized information reporting as a critical function when it recommended that the IRS consider “the creation of an advisory group of representatives from the payer community and practitioners interested in the information reporting program to discuss improvements to the system.” The Information Reporting Program Advisory Committee (IRPAC) was formed in 1991 as a result of this recommendation, which is contained in the final conference report for the Omnibus Budget Reconciliation Act of 1989.
IRPAC is now completing its 19th year of advising the IRS on information reporting matters. Over the years, IRPAC has sought to form a partnership between the IRS and the private sector with the intent of improving the information reporting program in a manner that is equitable to all stakeholders. IRPAC believes this is consistent with the vision that Congress had over 20 years ago, and that vision is still relevant today.
There has been a confluence of events and key initiatives in 2009 that have inspired a wave of new information reporting requirements that not been seen since the inception of the modern information reporting program which began almost 30 years ago. Efforts to reduce the tax gap (the difference between what taxpayers should have paid and what they actually paid), modernize systems, reduce taxpayer burden, and curtail offshore tax evasion are among the key initiatives of the day. Enhanced or additional information reporting is seen as a solution in each instance.
Among the notable events that occurred during the recent term of IRPAC were the enactment of a new information reporting regime for reporting a taxpayer’s basis and holding period of securities sold (e.g., IRC § 6045(g), et seq.), and the release of the “General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals” (the Green Book). IRPAC formed two subcommittees to advise on matters relevant to information reporting with respect to these developments. Extensive comments and recommendations are contained herein. In addition, IRPAC members met several times with key representatives from the IRS who are responsible for the implementation and development of rules in these areas.
IRPAC consists of 31 members, 23 of whom focus on matters related to information reporting. These members formed four subgroups which are called: Emerging Compliance Issues, Burden Reduction, Modernization, and Ad Hoc. Reports from each group are contained herein, and cover a variety of issues. Among the items addressed in the subgroup’s reports are:
- Reporting of payments made in settlement of payment card and third party network transactions (IRC § 6050W)
- The ability to include a logo on a payee statement
- New page on IRS.gov related to employer tax compliance for payments made to non-resident aliens
- Proposed regulations under IRC § 3402(t) related to withholding on certain payments made by government entities
- Form 5498 reporting for successor beneficiaries
- Taxpayer Identification Number (TIN) masking – The practice of masking a recipient’s TIN on their information returns to reduce the likelihood of identity theft
- Section 530 Relief
- “B” Notices – The impact of discontinuing Form SSA-7028
- Proposed enhancements to the IRS E-Services and E-Channel programs
- Improving Form 1098 reporting (Mortgage Interest)
- Information reporting associated with Build America Bonds and Widely Held Fixed Investment Trusts (WHFITs)
- Recommendations for administering backup withholding with respect to the Barter Industry
- Suggested improvements for Form 5500 reporting
- Reporting an employee’s personal use of a cell phone
The breadth of subject matter contained in these reports is impressive. I would like to thank the members of the Committee for the generous contributions they made in terms of time and effort. It has been a pleasure serving as your Chair in 2009. Your enthusiasm, willingness, and expertise have made IRPAC 2009 successful and thoroughly enjoyable.
IRPAC operates under the direction of the Office of the National Public Liaison (NPL). The administrative support that NPL provides is essential to IRPAC. On behalf of IRPAC, I would like to extend our thanks to the members of NPL who have provided outstanding support during 2009 and welcomed us to their offices in Washington DC for our committee meetings. We would like to recognize Candice Cromling (Director of NPL), Caryl Grant (IRPAC Program Manager), and Mark Kirbabas (Branch Chief and Designated Federal Officer) for their support over the years. We would also like to recognize and thank our liaisons from NPL – Anjali Garg, Velancia Matthews, Jerry Ruelle, and Michael Singleton for their support.
Information reporting is growing in terms of importance and complexity. There is much more work to be done. IRPAC is well-positioned to make significant contributions to our nation’s information reporting program. Best wishes to IRPAC 2010.
/s/ Jon Lakritz
2009 IRPAC Chair