The Information Reporting Program Advisory Committee (IRPAC) was established in 1991. This was in response to a recommendation contained in the final Conference Report of the Omnibus Budget Reconciliation Act of 1989 that the Internal Revenue Service (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.”
Congress believed that in order to fully implement and enforce the mandates of information reporting in a fair and equitable manner, members of the taxpayer community, practitioners and the government must have ongoing dialogue. It is only in this manner that we can be assured that the interests of all parties are fairly served.
Perhaps never before has there been such urgency and tension not only between the government and the taxpayer community but also within each group. At the 2006 Public Meeting, then Deputy Commissioner Mark Matthews said to me, “Be prepared! Compliance, and therefore, information reporting has everyone’s attention as the means to close the Tax Gap. IRPAC is uniquely situated to advise all parties to insure that changes are implemented equitably and efficiently.”
IRPAC barely had a chance to have its January organizational meeting when the Administration's Fiscal Year 2008 Revenue Proposals were released in February 2007. In a situation which is virtually unprecedented in recent memory, the proposals contain seven significant information reporting proposals. These proposals are designed to expand information reporting, improve compliance by businesses, strengthen tax administration and expand various tax failure penalties. In short, they are aimed at raising revenue by improving voluntary compliance. These proposals, if enacted, will significantly increase information reporting responsibilities for a wide variety of taxpayers, as well as for the IRS.
In order for IRPAC to tackle the challenge, it was clear from the beginning that in addition to the significant issues which needed to be covered in each of the four primary IRS divisions – Large & Mid-Size Business, Small Business/Self-Employed, Wage and Investment and Tax Exempt and Government Entities – IRPAC members would have to squeeze in an additional subgroup to address the broad reach of the budget proposals. As such, you will see a report this year from the Strategic Subgroup for Legislative Proposals. Moreover, the Committee felt the need to address in some manner the rising problem of identity theft. To this end, a second subgroup was formed – the TIN Masking Subgroup – to investigate whether identity theft can be reduced. I thank and commend the members of these two subgroups who worked “in their spare time” (meaning early morning and lunch hours) during the regularly scheduled meetings as well as between formal meetings through conference calls to prepare the reports you see and hear today.
Prior to the public meeting on October 24, 2007, the IRPAC met four times in Washington, DC. In addition to the issues mentioned above, there were several other matters discussed, reviewed and resolved. Several recommendations were formulated. Details of these items may be found later in this report.
Early in 2007, The IRPAC Chair and Vice-Chair met with members of the Senate Finance Committee staff to discuss issues related to the information reporting proposals set forth in the Administration’s budget. The main theme espoused by IRPAC both then and now is that any new legislation must carefully balance the benefits to be gained from additional reporting with the burdens on the reporting community. At a minimum, there needs to be clear guidance in the form of regulations and issuance of any new or modified tax forms well ahead of any effective date. Virtually every change will require significant systems modifications and personnel training.
On two occasions (once in person), IRPAC met with Michael Desmond, Tax Legislative Counsel, Office of Tax Policy, U.S. Treasury Department to discuss concerns related to a rush to enact new reporting proposals. On two other occasions, members of the Government Accountability Office met with IRPAC. In each instance, they were specifically concerned with understanding the burdens and mechanics of different aspects of any new legislation. Again, significant emphasis was placed on proper guidance and lead time before any new or expanded reporting is implemented. Without this time, the information produced will not be of much use to anyone. In addition, if penalties are assessed for inaccurate reporting, compliant taxpayers would be penalized for something which is beyond their control. As such, penalty abatement or waiver during a transition period would be vital.
IRPAC has now been under the direction of the Office of the National Public Liaison (NPL) within the IRS for seven years. The administrative support provided by NPL is vital to the continued functioning of IRPAC. All of the IRPAC members wish to recognize the excellent service and support received from NPL. Our special thanks go to Candice Cromling, Director of NPL, Cynthia Vanderpool, Branch Chief and Designated Federal Officer, and Caryl Grant, IRPAC Program Manager, and their respective staffs for the tremendous jobs they have done for us on IRPAC.
We also want to thank all of the IRS liaison personnel to the different subcommittees. Without their help and guidance in setting agendas and finding the right people for us to meet with, we could not have made the progress we have made.
Finally, I want to thank each and every one of my Committee members. They have generously taken time from their jobs, practices, lives and families to help improve the tax system. Their eagerness, enthusiasm, openness and willingness to work made the effort not only successful but also enjoyable. Thank you for your dedication and hard work.
But, the work has only just begun. I conclude this report by reiterating and reinforcing the words of Deputy Commissioner Mark Matthews with which I started this report: “Be prepared! Compliance, and therefore information reporting, has everyone’s attention as the means to close the Tax Gap. IRPAC is uniquely situated to advise all parties to insure that changes are implemented equitably and efficiently.” The 2008 IRPAC group has an opportunity to make a real difference. Good Luck!
/s/ Paul Heller
Paul Heller, 2007 IRPAC Chair