The IRS Information Reporting Program Advisory Committee (IRPAC) recently published its 2014 Public Report. In it, the committee detailed various recommendations it has for the IRS to improve tax information reporting.
IRPAC was created in 1991. It serves as a public forum for discussing reporting issues, and each year, the committee submits a report to note improvements it believes the IRS should make. Various members of the tax reporting industry sit on the committee, including Convey Compliance’s own Paul Banker, vice president of global accounts.
Expanding TIN matching and updating forms
The overall report is split into various sections, beginning with the general report. This initial section focused on recommendations for the tax identification number (TIN) matching program, which is available to authorized payors who have filed certain 1099 forms with the IRS within the past two years. IRPAC suggested the IRS expand the program. Under the change, the program would encompass all filers of non-wage information returns liable for incorrect TIN penalties per sections 6721 and 6722 of the Internal Revenue Code (IRC).
“This will (1) reduce IRS administrative costs; (2) increase the amount of valid data available for IRS tax return fraud prevention, identification of underreporters, and discovery of identity theft; and (3) eliminate a significant burden on information return filers who have been barred from performing TIN validation prior to IRS filing,” the report read.
Furthermore, IRPAC noted the agency should issue a notice stating the aforementioned penalties do not apply for incorrect TINs if the details are for tax information returns that cannot be validated through the TIN matching program.
The committee also said the IRS should amend forms W-9 and W-4P. It called for a new checkbox to be added to the forms to indicate the payee has given the payor permission to submit his or her information to the IRS for validation via the TIN matching program.
Saving the IRS and filers time and money
Another new measure suggested by IRPAC would, in certain cases, give payors the ability to check a payee’s TIN against the TIN matching program after the documents are filed. This allowance could lessen the penalties incurred by the filer and IRS administrative costs.
“IRPAC recommends that the IRS amend Revenue Procedure 2003-9 to provide that after filing an information return other than those types potentially subject to backup withholding, the filer may check the TIN furnished by the payee (or other recipient) against the name/TIN combination contained in the IRS TIN Matching database and receive TIN validation information,” the report read.
In addition to recommending the IRS facilitate faster TIN matching via updated procedures, IRPAC said the agency should implement a premium version of the program. For an enrollment fee, payors could process bulk files.
Other recommendations from the IRPAC report
The committee also included several subgroup reports. Here is a list of the reports and one recommendation from each:
- Burden reduction subgroup report: IRPAC said the IRS should establish a $50 de minimis threshold for corrections to original information returns and recipient statements.
- Emerging compliance issues subgroup report: The agency should update Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, to include separate boxes for market discount, disallowed loss and to indicate if gross proceeds result from the sale of collectibles.
- Employee benefits and payroll subgroup report: The committee wants further collaboration regarding third-party sick pay reporting matters.
- International reporting and and withholding subgroup report: For this report, IRPAC recommended the the IRS and Treasury Department update regulatory language regarding payments made “with respect to an offshore obligation.” The revision would be aimed at clearly defining that these regulations are limited to financial entities and a start date for this limit.
