Reimagining the Implementation of Tax Provisions

The Internal Revenue Service’s Efforts in Implementing Tax Provisions

A new report reveals that the Internal Revenue Service (IRS) has been diligently working to implement the numerous tax provisions outlined in the Inflation Reduction Act of last year. The report, released by the Treasury Inspector General for Tax Administration (TIGTA) on Thursday, highlights the IRS’s efforts to enhance taxpayer services, modernize computer systems, and strengthen compliance and enforcement actions for taxpayers with complex issues and tax returns.

Tax Provisions and the IRS’s Responsibilities

The Inflation Reduction Act consists of 36 tax provisions affecting individual and business taxpayers, along with two provisions related to IRS funding. This legislation also mandates 20 tax provisions that necessitated changes in tax return processing for this year. To adhere to these provisions, the IRS had to create or revise tax forms, instructions, and publications. Additionally, the agency had to update computer programs to handle tax returns impacted by these changes and provide guidance to taxpayers and tax professionals regarding the new tax laws.

The IRS’s Approach to Implementing Tax Provisions

TIGTA’s report reveals that the IRS adopted various strategies to swiftly track and implement the 36 tax provisions. Among these methods were the establishment of an implementation oversight office responsible for ensuring the smooth execution of these provisions throughout the agency. Additionally, the IRS created the IRA 2022 Tax Provision Implementation Office, which played a pivotal role in overseeing these implementation efforts.

Concerns and Corrective Measures

Out of the 36 tax provisions impacting tax return filings this year, the IRS has successfully created or revised 71 tax products related to these provisions as of May 12, 2023. However, TIGTA’s review found one area of concern – the instructions for Form 720, known as the “Quarterly Federal Excise Tax Return,” contained incorrect manufacturer tax rates.

Regarding electronic filing business rules, the IRS had to create or modify 78 rules to align with the tax provisions affecting this year. TIGTA’s review identified three issues linked to Form 8974, the “Qualified Small Business Payroll Tax Credit for Increasing Research Activities,” resulting in the rejection of certain tax returns. Unfortunately, the specific reasons for rejection were redacted from the report.

Future Implementation Efforts

The report states, “As of June 16, 2023, the IRS has identified 68 tax products affected for future processing years under these provisions, encompassing 25 tax forms, 41 instructions, and two publications.” The IRS is actively working to implement processing controls for clean vehicle credits and elective payments for energy property and electricity generated from specific renewable resources.

Continued Monitoring and Recommendations

TIGTA plans to monitor the implementation of these provisions in the coming years. As part of their recommendations, TIGTA suggests that the IRS update its computer programming for the three business rules associated with Form 8974. The IRS has accepted this recommendation and has requested programming updates for the 2024 filing season.

In response to the report, Sharyn Fisk, the project director of the IRS’s Tax Provision Implementation Office, acknowledged the progress made thus far. However, she emphasized the need for ongoing efforts to prepare for Processing Year 2024 and beyond. The IRS has already identified 82 tax products affected by future provisions, including 42 tax forms, 39 instructions, and one publication. The agency is actively working on implementing processing controls for clean vehicle credits and elective payments for energy property and renewable resources.

Read More of this Story at www.accountingtoday.com – 2023-10-05 16:39:00

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