Scott Michel Talks to Tax Notes on Nominee to Head IRS

IRS commissioner nominee Charles Rettig may enjoy a once-in-a-generation opportunity to rebuild the agency’s relationship with Congress and restore its reputation, which has been battered by years of bad news.

“One person in [the IRS commissioner’s] position can make a significant overall difference,” said tax controversy specialist Scott D. Michel of Caplin & Drysdale.

Michel and other longtime observers of the tax community — including acquaintances of Rettig — said it appears that Congress’s long siege of the IRS budget has paused, if not ended, and that a new IRS commissioner may get a chance to implement substantial internal improvements as well as administrative reforms in pending congressional legislation.

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Filing Season First

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Michel said he expects that Rettig will take special interest in improving services for low-income, unrepresented taxpayers, saying Rettig “believes that if agents invest time with these taxpayers, they will better understand them and earn greater respect from this taxpayer population.”

“There’s also a vast inconsistency in how the Service interacts with practitioners,” Gary said. Michel said reductions in the long wait times, even on the IRS’s practitioner priority hotline, combined with better-trained assistors, would increase both Rettig’s and the agency’s reputations.

More authority should be granted to IRS assistors on the practitioner priority hotline, Michel said, adding that assistors direct taxpayers to other individuals within the agency to resolve routine errors like misrouted payments to the IRS.

The new commissioner should also give more settlement authority to the IRS Office of Appeals, Michel suggested. Establishing an alternative dispute resolution process with the office might be useful, he said.

Enforcement Priorities

Rettig will have to address the agency’s deteriorating performance on enforcement activities, tax professionals agreed.

“Chuck is passionate about restoring a visible, credible enforcement presence at the IRS,” Michel said.

The new commissioner will have his work cut out for him. The tax agency officially audits just 0.7 percent of tax returns — the lowest rate in more than a decade, though the Taxpayer Advocate Service maintains that the “unreal” audit rate, counting automated and arm’s-length taxpayer encounters, is above 6 percent. “The IRS still audits and still does criminal investigations, but the numbers don’t lie,” Michel said.

Michel said Rettig would be particularly supportive of IRS field personnel, and of tax practitioners, as levers to improve overall tax compliance. Moreover, “practitioners who fail in their responsibilities will not find him to be a friend,” Michel said. Rettig didn’t express a preference regarding tax return preparer regulation during his confirmation hearing.

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Michel compared the IRS’s enforcement posture to a pendulum that swings largely in response to congressional moods. After the irate-taxpayer hearings of the mid-1990s resulted in the Internal Revenue Service Restructuring and Reform Act of 1998, the pendulum swung toward customer service and away from enforcement, he said.

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Catch as Catch Can

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“When the police cars are not on the side of the highway to deter speeders, the drivers go faster,” Michel noted. Now maybe the IRS’s enforcement pendulum — and the budget to move it — is swinging back, he said.

For the full article, please visit Tax Notes' website (subscription required).

Excerpt taken from the article “Guidance, Service Top Tax Pros' To-Do List for Rettig” by William Hoffman for Tax Notes.