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IRS AND NEWFANGLED COMMUNICATIONS

January 26, 2006

Reader "Brian" makes an interesting comment in an earlier post:

They should cut back on phone service in favor of electronic communications. Remember your discussion of accrual-to-cash method changes for S-corp banks? That's a bad case of asymetrical information.

Can you imagine if designated IRS personnel were allowed to interact with practitioners online? For example, what if IRS agents could comment on ABA-Tax, misc.taxes.moderated, or one of the other tax forums? What if regulation projects were blogged instead of being subject to the antiquated notice-and-comment procedures?

INTERACTION WITH IRS PERSONNEL: IT'S ALWAYS 1985.

Brian puts into words some things that have been bugging me about dealing with the IRS. At the examination level, you can't just exchange e-mails with scanned attachments. You have to exchange paper, or if the agent is a cutting-edge kind of guy, faxes. You can't email a spreadsheet; you have print it on paper and drop it in the mail. I don't think I have any clients that do business that way.

Another example: the IRS now has a system where you can get client information via the internet, but it requires an on-file power of attorney, which slows the process down immensely. Clients share their deepest financial secrets with us so we can prepare the return, but if we want to see whether the IRS has processed the returns, we're treated like Nigerian identity thieves. If the taxpayer authorizes us to discuss return items with IRS on the signature line, that authorization should allow preparers to also view taxpayer account information for that year.

RULEMAKING FOR THE STONE AGE

Brian is dead-on in criticizing the stone-age regulation comment process. Of course the Treasury has to go by the book to ensure that taxpayers are treated fairly, but that's no excuse for the current comment system. It seems like there are two obvious ways to improve and open up the comment process for proposed rules:

1. Immediately post on the web all comments on proposed regulations as they are received. Yes, they can be accessed at the IRS reading room (this is an actual room somewhere, not a web page), and Tax Analysts does post them for its subscribers, but in this day and age, that's lame.

2. Open an electronic comment board for each open regulation project and maybe for proposed published rulings. This could include a comment section analogous to blog comments for each posted comment on the proposed rules. An open comment board would attract comments from a much broader audience. Treasury rulemakers would monitor the comment board to ward off trolls, follow the discussion, follow up with their own responses, and maybe to even post possible wording modifications to the proposed rules. A comment board with commenters and regulation writers responding to each other would accelarate and improve the current glacial "one round of written comments" system. The give and take of a comment board would be much more likely than the current system to both identify problems and suggest solutions.

Is there any reason why the IRS and Treasury shouldn't go this route?

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