Between 2007 and 2008, taxable income decreased 5.1% to $5.6 trillion; total income tax decreased by 6.2% to $1 trillion; and total tax liability fell by 6% to just less than $1.1 trillion, according to the IRS's Winter 2010 "Statistics of Income Bulletin." Adjusted gross income also declined between 2007 and 2008, falling by 3.7% to $8.2 trillion. This was the first time since 2002 that AGI decreased from the previous year.
More than 60% of taxpayers go to tax professionals to get their returns prepared. Almost 9 out of 10 individual taxpayers use tax preparers or third-party software to complete their federal tax returns. To gain insight into this monumental effort by the IRS, CPA Magazine talked with the man in charge of the IRS Division that affects more Americans than any other.
Richard J. Byrd Jr. is the IRS commissioner responsible for the Wage and Investment Division. He began his career with the IRS in 1975 in the Inspection Service, where he worked on criminal investigations involving misconduct, such as people attempting to bribe the IRS. He went on to work in the Internal Audit Function. As commissioner for the Wage and Investment Division, he serves more than 120 million taxpayers, filing 94 million returns. If it's a 1040 return, Commissioner Byrd is in charge.
CPA Magazine: Describe your position and how it affects practitioners.
Richard J. Byrd Jr.: I like to refer to Wage and Investment as the face of the IRS. If CPAs have tax questions, they have options. They can go to www.irs.gov. I am responsible for making sure the site works well and that the content is up-to-date.
One option for the CPA or taxpayer is to go to a Taxpayer Assistance Center (TAC). I am responsible for the 401 TACs. In Accounts Management, 15,000 employees are available to answer tax law or account questions from taxpayers or practitioners. The CPA with a power of attorney (POA) can call the practitioner priority line for expedited service. Or, a practitioner can call the IRS automated collection system (ACS) about a collection matter. If the issue involves a wage earner, it's possible I will be responsible for resolving it.
CPA Magazine: What is your biggest challenge?
Richard J. Byrd Jr.: There are a few I would like to share with CPAs. I would like CPAs to know we are happy to take their calls; however, our calls are going up, and our resources are not. So, patience is a virtue. The same 15,000 employees who respond to calls also are dealing with correspondence. Our office was able to get all the stimulus checks out; and with ARRA, we were responsible for many new or revised credits and deductions, including the First-Time Homebuyer Credit and the Making Work Pay Credit. We need to make sure taxpayers receive all they have coming to them.
CPA Magazine: How can CPAs help?
Richard J. Byrd Jr.: For the homebuyer credit, for example, CPAs can make sure the 1040X is filled out correctly. We will be issuing a form to fill out [for this tax year].
CPA Magazine: How do you measure the success of the VITA prep centers?
Richard J. Byrd Jr.: We ensure the quality and compliance of the three million returns volunteer organizations provide for low-income taxpayers. We have a test and a quality assurance review the organizations must pass.
We provide [the organization] with the rules and procedures. We provide the software and how we want the returns prepared. Wage and Investment can then go unannounced and review these organizations. If we find they are not doing it correctly, we train them.
We don't prepare any Schedule Cs or complicated returns at the VITA centers. These volunteer organizations have a much broader mission to help the low-income taxpayer. Their services include financial advice and job training.
CPA Magazine: Are there other dispute resolution forums in addition to the Tax Forums?
Richard J. Byrd Jr.: There are five locations for Solution Saturdays, during which taxpayers can call us to get their issues resolved. As I sit here on Friday, we already have solved 233,000 problems. We have 611 appointments and expect walk-up clients. We will have revenue agents and revenue officers, tax preparers and tax advocate employees there.
Any issue can be brought up. Some might need to be taken care of in later weeks.
We ask that the practitioner come in with one case.
During the filing season, we have Super Saturdays. Low-income taxpayers can come in to have their returns prepared for at least one Saturday in March.
We are providing the service for taxpayers to resolve issues. One interesting thing we put in place this year, for example, is if a taxpayer owes us $10,000, and he/she misses a payment, we contact him/her to check if everything is OK. If we get a chance to talk with the taxpayer, we can put the case on hold. If a taxpayer has lost his/her job, we might be able to allow a payment to be skipped. We want to know the challenges the taxpayers are facing and work with them to become compliant.
CPA Magazine: How is the hiring and training process for new IRS auditors and staff going?
Richard J. Byrd Jr.: We hired a thousand tax examiners and collection representatives to work on the tax challenges we face concerning enforcement. The correspondence audits for individual taxpayers are my responsibility. For the audit process, part of what I want CPAs to know is, if their client gets a letter from us, the CPA should read the letter and send the documents we request. The CPA should also remember to have a POA on file. When I speak with the AICPA or CPA groups, some CPAs have said we do not associate the mail with the response. We are working hard to do this:
For example, your client is being examined for charitable contributions, and you have mailed documentation to Austin, but the exam is taking place in Atlanta. We are allowing the exams to take more time so taxpayers can get their mail to them.
Two years ago, if we were examining a return, the CPA would call looking for the exact examiner. Now, we have the information on the computer so any person can respond, eliminating telephone tag.
The major question is, did the taxpayer receive the information the IRS sent and make a decision about what to do? We are questioning [your client's] charitable deductions, and we are going to go by the church office to get the documentation, so maybe you can wait.
CPA Magazine: The IRS five-year Strategic Plan calls for strengthening the partnership with practitioners. How do you see this working?
Richard J. Byrd Jr.: We know practitioners are critical to taxpayers complying with tax laws, so it's important that we get the practitioners form changes. We want to provide services to CPAs to get answers. We, at the IRS, know CPAs are trying to help their clients file or pay on time. We know CPAs are staying current, so we want to partner with them to do a good job.
Wage and Investment takes serving taxpayers seriously, both directly and through CPAs. We hope we have done well but are not through yet. We are looking aggressively at how we can continue to serve them.
On the Solution Saturday of Nov. 7, the IRS served almost 900 people at five locations and was able to help nearly 250 people who called ahead. Providing taxpayers the opportunity to make appointments helped minimize waiting in long lines. Additionally, more than 500 taxpayers took advantage of education booths staffed by the IRS, which provided information about EITC, credits and deductions made available through the American Recovery and Reinvestment Act and other initiatives.