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Tax Blawg

Tax Talk for Tax Pros

Introduction

Welcome to TaxBlawg, a resource for news and analysis of current legal issues facing tax practitioners. Although blawg.com identifies nearly 1,400 active “blawgs,” including 20+ blawgs related to taxation and estate planning, the needs of tax professionals have received surprisingly little attention. The Wall Street Journal's Tax Blog gives “tips and advice for filers,” and Paul Caron’s legendary TaxProf Blog is an excellent clearinghouse for academic and policy-oriented news. Yet, tax practitioners still lack a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.

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Voluntary Compliance: Will it be more difficult to come clean?
The IRS allows employers that determine that they are not in compliance with various employment and income tax laws to step forward and be accountable by entering into an agreement with  the IRS.  Generally, the agreements are structured so that the taxpayer is better off than if the IRS had identified the issue on exam.   While this assists the IRS in improving compliance without using scarce resources to uncover noncompliance, a recent  report by the Treasury Inspector General for Tax Administration ( TIGTA  ) found that the program lacked controls resulting in inconsistencies, inaccuracies and potential taxpayer rights violations. The weak internal controls increase the risk of error, fraud, or abuse. 
 
TIGTA recommended  several steps,  and the IRS agreed to strengthen  its controls. To that end, the IRS will develop guidance on how to process, review, and monitor agreements, follow up on taxpayers whose rights were potentially violated, research claims and take action to ensure future claims are worked properly; improve inventory and case management controls; and develop guidance on how to negotiate the terms and conditions of the agreement.
 
The TIGTA report on voluntary compliance,  coupled with the July 7, 2011 announcement that the IRS will initiate more employment tax examinations, should cause concern among  all employers.  With the knowledge that voluntary compliance will get more challenging  while more comprehensive employment tax exams are on the horizon, employers must make business decisions to  "get it right "  now or play the increased odds of the audit lottery all the while knowing that the audits will be more aggressive than in the past.  The time is ripe for mock internal audits to identify weaknesses and quantify potential exposure.  Strategies to mitigate exposure should be seriously considered.
 
Because of the complex and changing nature of the voluntary compliance program and the increase in the number of comprehensive employment tax exams, it is recommended that companies seek tax counsel assistance on these matters before they proceed .
 
Categories: Employment Tax