Independent Contractor Compliance Blog

WASHINGTON-The IRS National Taxpayer Advocate, Nina E. Olson, released her July report to Congress that identifies the important issues to the IRS during the coming fiscal year. The report expresses concern about IRS funding, particularly:

• IRS funding for taxpayer education and assistance,
• IRS funding to implement health care reform,
• IRS funding for the new information reporting (Form 1099) for corporations,
• IRS funding for collection practices.

By law the IRS Taxpayer Advocate submits two reports per year to the House Committee on Ways and Means and the Senate Committee on Finance.

1. The mid-year report identifies the objectives of the Office of the Taxpayer Advocate for the next fiscal year.
2. The December 31 report identifies:
   1. The most serious problems encountered by taxpayers,
   2. The most frequently litigated issues in the courts,
   3. Makes administrative and legislative recommendations.

The report says the previous increases in IRS funding went exclusively for compliance activities and there are plans for more compliance funding.

The report states, “…(in recent years) funding for IRS enforcement activities has risen by 17.9 percent while spending for taxpayer service programs has declined by 6.8 percent…(even though) many noncompliant taxpayers are baffled by complex rules…”

The report also states that the current administration’s FY 2011 budget proposal reduces taxpayer services by another 7.2 percent, while increasing enforcement by an additional 13.7 percent.

The report also voices concerns with the IRS’s ability to deliver on its heath care responsibilities.

“I have no doubt the IRS is capable of administering social programs, including health care,” Ms. Olson said. “But Congress must provide sufficient funding and the IRS itself must recognize that the skills and training required to administer social benefit programs are very different from the skills and training that employees of an enforcement agency typically possess. While some enforcement measures are required to prevent inappropriate claims, the overriding objective of agencies that administer social benefit programs is to help as many eligible persons qualify for the benefits as possible.”

This report shows how serious the IRS is about Compliance-you should be too.

IRS funding for compliance is climbing while its funding for education and assistance is dropping. The IRS employs accountants, CPAs, IT experts, criminal investigators, attorneys and others to audit taxpayers, to close loopholes and to identify and prosecute violators. These are full-time experts focused only on one task-compliance.

A part-time IC Compliance effort by a Weekend Warrior isn’t enough to protect you when the IRS knocks on your door and asks you to prove you properly classified your consultants.