According to the IRS Strategic Plan FY 2018 to 2020, these are the major Trends and Challenges going forward:
SERVING AN INCREASINGLY COMPLEX TAX BASE
The U.S. tax base is becoming more complex. Economic and demographic changes in our society have fundamentally changed the way citizens earn money and the way we live. U.S. workers earning income through contracting or freelancing is projected to increase as more workers pursue flexible arrangements or earn income through digital platforms and app-based businesses (the “gig economy”).
This shift in income sources requires the IRS to adapt its outreach and enforcement efforts. According to one assessment, in the gig economy, nearly one-third of those earning money through app-based platforms were unaware of their tax status as small business owners. This likely affects the rate of voluntary tax compliance. In addition to changes in employment trends, family structures and living habits are shifting. A record number of Americans live in multigenerational households, a dynamic that could affect a taxpayer’s ability to claim deductions and credits accurately. This highlights the growing need for IRS to communicate eligibility requirements and verify compliance.
MANAGING GLOBAL TAX COOPERATION
The IRS faces a business environment that is becoming more
global, dynamic and digital. Complexity and change in the
international environment require that the IRS collaborate with
tax administrations in foreign countries to enforce compliance.
As the passage of agreements with other countries shows,
there is a desire to cooperate through a reciprocal approach
to sharing information and enforcing international tax law.
Continued IRS leadership in international efforts focused on
global tax cooperation and tax administration practices can
prevent and resolve disputes among countries and increase
certainty for taxpayers.
IMPLEMENTING CHANGES IN TAX LEGISLATION
The IRS recognizes that the legal and regulatory environment continues to evolve, given legislative developments around tax reform and the complex nature of tax policy. Implementing the Tax Cuts and Jobs Act (Public Law 115-97), the most significant revision of the U.S. tax code in more than 30 years, is the IRS’s highest
We established the Tax Reform Implementation Office to help navigate the changes associated with tax reform. In conjunction with the Department, we will provide timely guidance for the new law and any future legislation to assist taxpayers in addressing their new tax compliance obligations seamlessly. IRS will implement the new law in a way that serves taxpayers, facilitates tax compliance, and protects sensitive data. IRS will focus initially on the following areas:
• Creating new and revised taxpayer forms, instructions and publications.
• Providing technical support to taxpayers on issues involving interpretations of the law
and of related published guidance.
• Training IRS employees on the new law and helping the public, tax professionals and
other industry partners understand how the law applies to them by issuing timely guidance.
• Reprogramming information technology systems, with special focus on return
processing and compliance systems (the backbone of the tax system).
SUPPORTING AN EVOLVING WORKFORCE
A large portion of the IRS workforce is nearing retirement, with 27 percent eligible to retire by the end of FY18. Moreover, the group that represents our next generation — those aged 25 or younger — makes up less than half of one percent of our workforce. Succession planning and knowledge transfer are critical to passing on the
leadership skills and institutional knowledge necessary for continued effective tax administration.
In addition to preventing knowledge gaps, we must also develop a workforce capable of responding to the demands of the future. This means attracting, developing and retaining employees with advanced skill sets. Developing leaders from our current workforce will make this evolution successful. We must also train and equip
employees with the skills and tools necessary to operate in an increasingly digital and data-enabled world.
MEETING EXPECTATIONS OF TAXPAYERS
Our taxpayers increasingly expect high-quality service akin to what they receive in the private sector. This also applies to corporations, trusts, estates, exempt entities and others that have a responsibility to file with the IRS. As a direct service provider, the IRS remains attuned to taxpayer preferences and needs. The IRS is updating its
service approach with innovative, multi-channel offerings (e.g., online web pages, mobile applications, face-to-face assistance, phone, mail correspondence, etc.).
In addition to offering taxpayers more choices in how they interact with us, the IRS’s multi-channel strategy has the potential to increase overall levels of service. Updates to IRS digital services may reduce the number of simple, informational interactions on the phone or in person for many taxpayers, allowing us additional time to serve taxpayers with more complex service needs.
ADDRESSING CYBER THREATS
Many taxpayers use multiple devices to connect to the internet, making identity verification and protection more complex. At the same time, cybercriminals are more sophisticated than ever. As the IRS expands its digital efforts, it requires investment in robust security systems to enable secure access to digital services.
There are millions of cyber threats against the government each year. Between FY2006 and FY2015, the number of reported information security incidents increased 1,303 percent.8
For the IRS, the cyber risk is exacerbated by aging infrastructure and the complexity of our technology networks. Effective collaboration between partners in the tax ecosystem — the Security Summit, for instance — can strengthen defenses
through the sharing of technology and intelligence.
KEEPING PACE WITH RAPID TECHNOLOGICAL CHANGE
The IRS must take full advantage of technology to improve decision-making. New technologies continue to change the way organizations in the private and public sectors deliver their mission, products and services. Government executives believe digital technologies are critical to improving financial services, such as revenue collection, audits, cash management and claims management.
The IRS must respond to other changes (e.g., process robotics, blockchain and artificial intelligence) and integrate technologies that enable more efficient mission delivery. For instance, the IRS has applied data and analytics to refine identity theft detection models, filters and business rule sets designed to detect refund fraud and noncompliance. By continuously monitoring their performance, the IRS has ensured a cycle of improvement in detecting and preventing identity theft.