The Electronic Tax Administration Advisory Committee (ETAAC) has filed its annual report to Congress. The 2011 report notes improvement in the e-filing rate, and, among other things, recommends a new push for e-filing of employment tax returns. It also cautions Congress to consider the impact of any new information reporting requirements on businesses, urges Code simplification, and criticizes Congress for its pattern of late-passed legislation.
Following are highlights of ETAAC's findings and suggestions:
... Back in’98, the IRS Restructuring and Reform Act of’98 (P.L. 105-206, 7/22/98) gave IRS a goal of having 80% of tax returns filed electronically by 2007. ETAAC reports that IRS actually is getting closer to achieving that goal. For 2011, it estimates a 65.8% e-file rate for all major return types, mostly driven by a 77.31% e-file rate for individuals. However, ETAAC critiqued IRS for its 15-20% e-file reject rate and called on it to enhance its collaborative efforts with the tax preparation industry to reduce the number of e-file rejections next filing season.
... IRS will achieve an 80% e-filing rate only if it manages to boost the e-filing rate for employment tax returns (Forms 940 and 941), which currently stands at about 24%. ETAAC's detailed recommendations include finding ways to simplify the e-filing process; developing incentives for tax filers, software developers, and services providers to adopt, promote, or increase the e-filing rate; and establishing an e-filing portal on IRS's website to enable employers to file Forms 940 and 941 without charge.
... ETAAC observes that Congress has legislatively reversed its expansion of certain 1099 reporting obligations because of the increased business burden. It recommends that any future consideration of expanded or accelerated information reporting fully evaluate the impact of acceleration on both taxpayers and businesses, especially small businesses that have limited resources. Consideration must also be given to IRS's readiness and the investment required to handle any significant increase or acceleration in electronically filed information returns.
... ETAAC renewed its call for “real tax reform and simplification,” such as simplifying the Code by consolidating the credits and deductions affecting low and middle income individuals and families. ETAAC also criticized Congress for its pattern of late passed tax legislation, which creates taxpayer anxiety and can prevent them from receiving their refunds as planned. It said that late legislation also adversely impacts states, and restricts the amount of time that both IRS and software developers have to program and test their systems.