The Internal Revenue Service’s Tax Exempt and Government Entities division is making plans for next fiscal year in hopes that Congress will provide more funding.
The TE/GE division released a list of its priorities Thursday in a letter from TE/GE commissioner Sunita Lough and deputy commissioner Edward Killen, who also talked to reporters during a conference call. TE/GE administers tax law requirements for small local community organizations, major universities, foundations, tax-exempt hospitals, large pension funds, small business retirement plans, local and state governments, participants in complex tax-exempt bond transactions and Indian tribal governments and tribal associations.
Among the priorities outlined in the letter are strengthening compliance activities, including examinations of high-income taxpayers, especially those who have private foundations and retirement plans, as well as focusing on syndicated conservation easements, abusive charitable remainder trusts, and abusive COVID-related employer credits. The division also plans to improve operational efficiencies with its new enterprise case management system, maintain a taxpayer-focused organization by collaborating with the IRS’s recently established Taxpayer Experience Office, and promote the electronic filing of Forms 1024 and 8038-CP. It also aims to ensure greater awareness and understanding by strengthening stakeholder partnerships and community outreach.
The IRS TE/GE division also hopes to do a better job of leveraging technology like data analytics to detect emerging tax noncompliance issues and use robotic process automation to make its processes more efficient. The division is also looking to hire more employees after the IRS lost much of its staff in recent years to budget cuts, retirement and attrition, as well as develop a recruitment strategy to retain more TE/GE employees and do more training, coaching and mentoring.
Since the start of the pandemic, many IRS employees have continued to work remotely although others have needed to return to the office to catch up with the backlog of millions of pieces of unopened mail that accumulated while facilities were closed.
“It’s been a challenging year for our employees and our taxpayers because of the pandemic,” said Lough during the press conference. “We’re still under an evacuation order, but we have provided a lot of tools and methods for our agents and our employees to communicate with taxpayers so we can continue to do our exams and continue to provide outreach. Zoom has become our next best friend.”
Despite the challenges, Lough pointed out that TE/GE hired 188 new employees in fiscal year 2020. So far in FY 2021, the division has hired 150 employees, but more employees are still in the midst of the hiring process, and Lough expects to hire “quite a few more.”
To deal with worker retirements, the IRS TE/GE unit has set up knowledge management systems and libraries to retain some of the institutional know-how of its longtime employees, even as it works to update its technology and management strategies.
“In FY 2022, we are going to continue our work to modernize our operations, monitor our internal controls and our processes to look for opportunities to improve and to drive both efficiency and effectiveness,” said Killen. “We’ve achieved a lot of efficiencies and operational improvements over the past several years in utilizing Lean Six Sigma methodology, and we will continue to do that. We’re going to continue to enhance our performance measurements to try to ensure that we are driving appropriately toward the organizational goals that we have. One of the very important efforts that we’ve had in place is around knowledge management and sharing among TE/GE employees and also other IRS employees the knowledge that is so vital to working our tax issues within TE/GE. That’s very important when you think about an aging workforce, but it’s also important as we think about the optimistic hopes that we have around the expanded hiring for FY ’22. As Sunita said, we’ve hired over 300 people over the past couple of years, and so our efforts around knowledge management will continue to be important. We’re committed to expanding the use of things like virtual libraries to ensure that our agents have the tools and knowledge necessary in order to be able to do their work.”
Accounting Today asked Lough and Killen about how the proposed tax legislation in the Biden administration’s Build Back Better Act that calls for sharing information from bank account inflows and outflows with the IRS might be used by TE/GE.
“That is still being talked about on the Hill, but the more information we have, the better it is for tax compliance,” Lough responded. “When we start getting the 1099s, we have a matching program. Our agents do balancing of books and records. Whatever is in the books, we look to see if it is showing up on their information returns or their tax returns, whether it’s a 1040, 990 or 1120. Information is always very useful to us.”
Like Lough, Killen didn’t want to offer an opinion on pending legislation on Capitol Hill, but he noted that one of TE/GE’s priorities for the coming year is leveraging technology and data analytics. “No matter what the source of data is that we have available to us, we are constantly seeking better ways to optimize that data and optimize the opportunities that come from that because it’s good tax administration,” he said. “We want to pursue issues that have the most merit. We don’t want to place a burden on taxpayers when it’s not necessary. But we also do want to be very appropriately proactive around addressing compliance issues where we see them for good enforcement. So, to that end, whenever we have data that’s available to us, it’s important that we utilize that to the best of our ability. We’re going to continue efforts to try to do better at that, constantly seeking opportunities to optimize because that’s good tax administration.”
Accounting Today also asked about the IRS’s new enterprise case management system that TE/GE piloted, which received mixed reviews about its initial usability from IRS employees in a report released last week by the Treasury Inspector General for Tax Administration.
“I’ll say from the TE/GE end, we were very excited in the beginning to be the pilot organization in our correspondence unit for enterprise case management,” Killen responded. “Thus far we’ve been very happy with where we’re at. One of the promises of ECM — certainly for us in TE/GE, but I think it’s probably illustrative of the opportunities across the Service — is we have technology that needs to be modernized and some inefficiencies that go with that, but we also have processes that need to be modernized as well. Our EO [exempt organization] correspondence workstream, for example, was a manual process, so ECM has allowed us to automate that. ECM is an extremely important priority within TE/GE and for the Service, and it’s a big lift. Whenever you have big technological initiatives, it’s important that you have solid lines of communication between the people doing the work and between the folks in IT who are implementing that. We’ve had that in TE/GE because when you roll out new technology, you’re always going to have a need to refine and build upon that initial deployment. That’s what we’ve done here. I want to give a lot of compliments to our ECM program office, who have been great partners for us, and also our IT organization as well. We’ve been very happy about that, but there are always things that you have to work through, and there won’t be any exception to that as we go forward. But I think when you look at where you’re at, compared to where you were, at the end of a big deployment, I think we’re in a much better place at TE/GE due to the ECM.”