Current Modifications At The Internal Revenue Service Isn't Just ...

While doing some research for a different blog topic, I found a couple of fascinating changes going on at the Internal Revenue Service and thought I would share many of them with you. This info can be discovered on the IRS website if you dig a little and you can call the IRS as I did to find even more data. The IRS phone number is 1-800-829-1040.(1)

1) Six Sigma

The IRS new direction to adopt the Lean Six Sigma methodology is designed to increase effectiveness and keep down expenses. Lean is a time and valued-based process improvement strategy engineered to ensure continuing flow and eliminate waste and non-value-added activities. Six Sigma is a business process improvement method that uses info and facts to supply quantifiable results thru a reduction in process variation. The IRS created the Lean Six Sigma organization to effectively manage the Lean Six Sigma program and projects being initiated at the agency.

2) National Research Program

The IRS did change the Taxpayer Compliance Measurement Program that analyzes many aspects of an IRS tax filing. It had been dormant for over 10 years due to fears that the program was too intrusive. The Taxpayer Compliance Measurement Program has been replaced by the National Research Program. National Research Program information are used to develop processes to better identify tax returns for audit and at last audit. By picking returns with a higher possibility of change, the IRS can use resources more successfully and not burden compliant taxpayers that file federal taxes. This should supply the most significant cost benefits for the IRS since the initiation of tax efiling.

3) Discriminant Index Function

These functions/formulas figure out what IRS tax filing will be verified. Updated Discriminant Index Function formulas were introduced in 2009. The combined revenue agent and tax compliance officer results show Discriminant Index Function-initiated examinations are generating higher counseled taxes, both on an hourly and per return basis, and are generating more extensive examination agreement rates. Stats also show the share of no-change audits (IRS audits resulting in no change in the amount of taxes due to the IRS) has been reduced since the updated Discriminant Index Function formulas were introduced.

4) The Tax Gap

The tax gap is the variation between taxes that are actually due and taxes that are paid on time ?one class of people targeted are non-filers.

Individual repeat non-filers remain as a real challenge. During Tax Years 1996 through 2005, 47% of the 38.9 million tax payers identified by the IRS that didn?t file federal taxes failed to file timely for a few years. The High Income Repeat Non-Filer (defined as individuals with 3rd party documents reporting revenue of $100,000 or higher) category is very discouraging. Between Tax Years 2002 and 2005, these taxpayers accounted for only between 4% and 6% of known non-filers. Yet, this group of taxpayers accounted for between 59% and 66% of the calculated balance owed from the ones that did not file federal taxes.

And lastly?

5) IRS Software Development ? CMM (tax programs et al)

The Capability Maturity Model for Software (CMM) is a framework that describes the major elements of a good software work flow. The CMM delineate an evolutionary improvement trail from an ad-hoc, immature process to a fully developed, disciplined system.

The CMM covers practices for organization, engineering, and dealing with software engineering and upkeep. When exicuted, these important practices improve the capability of associations to reach targets for cost, schedule, functionality, and product quality.

The CMM establishes a yardstick against which it?s possible to judge, in a repeatable way, the maturity of an organization?s software process and compare it to the state of the practice of the industry [Kitson92]. The CMM may also be used by an establishment to plan enhancements to its software process.

In October, 2011 Douglas H. Shulman Commissioner of Internal Revenue said ?in. September 2010, an independent third party revealed that the IRS lately reached Capability Maturity Model Level 2 ? a key measure of the maturity of our internal programme development organizations?.

He went on to point out, ?Achieving this level allows standardised project management practices across projects. This can improve our agility and quality in delivering software in addition to reduce the cost of developing and maintaining products, and improve the cost of engineering services. These achievements may not grab all of the headlines but are important to our program?s health and accomplishments?.

It appears clear that without CMM the IRS wouldn't have been able to require preparers to efile taxes to the extent they currently do. It has additionally made a contribution to the rate at which an IRS tax refund is processed. This is a program that has actually benefited the tax payer as well as the IRS.

(1) All info and quotes are from the IRS website and documents provided by the IRS.

Written by David Bishop, CPA, Industry Director ? Accounting & Tax for UsersUnite.com. David writes ablog that discusses the news and topics related to software in the public accounting and tax preparation industries. If you have got a subject that youwould like to see David write about please send him an e-mail with the details at david.bishopusersunite.com.

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