The Internal Revenue Service should update tax returns to enhance security and fight fraud and ID theft, update the current list of Modernized e-File reject codes and explanations, and promote greater information sharing between the agency, states and industry partners, according to its own Electronic Tax Administration Advisory Committee.
The IRS should also build on efforts to transition taxpayers to digital interactions, according to ETAAC’s latest annual report, which made 10 recommendations to the IRS and four to Congress.
“Increasing digital transactions is one of the Internal Revenue Service’s key goals,” said new IRS Commissioner Billy Long in a statement. “I appreciate the significant effort the committee put into this report, and I look forward to reviewing its recommendations.”
The recommendations to Congress included tax simplification when implementing tax policy goals; authority for the IRS to regulate non-credentialed tax preparers; predictable funding of the agency; and effective taxpayer service and prioritization of technology modernization.
ETAAC also urged simplification as expiration of many provisions of the Tax Cuts and Jobs Act looms, including minimizing nonessential modifications when considering Internal Revenue Code changes; use of previously interpreted and understood language to understand application of IRC provisions; minimizing of expiring provisions and complicated exceptions and elections; and avoiding retroactivity of new provisions.
“We suggest that Congress enact new tax legislation well in advance of the TCJA’s expiration to provide the IRS direction to stakeholders and the tax industry with sufficient time to adapt,” the report adds. “Legislation should be in place several months before the expiration date to avoid disruptions to tax season.”
(The report was released before the Trump administration’s One Big Beautiful Bill had passed the Senate.)
The ETAAC operates under the rules of the Federal Advisory Committee Act. It works with the Security Summit, and members represent various segments of the tax community, including individual and business taxpayers, tax pros and preparers, tax software developers, payroll service providers, the financial industry and state and local governments.
