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Last updated 11 hours ago | Thursday, October 21, 2010
The United States Information Reporting Program Advisory Committee (IRPAC) has released its 2010 annual report that includes recommendations on a wide range of tax administration issues.
IRPAC, which is administered by the National Public Liaison Office of the Internal Revenue Service (IRS), provides recommendations to IRS leadership on a wide range of information reporting and administration issues. It draws its members from the tax professional community, and presents an annual report to the IRS commissioner each year at a public meeting.
In her 2010 report letter, its Chair, Lisa M. Chavez, stressed that the importance of IRPAC?s role continues to grow as laws requiring more complex and voluminous information returns stretch the resources of both IRS and the information reporting community. She said that ?IRPAC has worked in partnership with the IRS to improve the information reporting program in a manner that facilitates the gathering of information useful to the IRS while balancing the burden placed on the parties required to provide it.?
Based on its findings and discussions during the past year, it was disclosed that IRPAC reviewed 30 issues and made recommendations on a broad array of issues and concerns. However, Chavez pointed to four key initiatives in recent years, aimed at raising revenue and increasing voluntary compliance, that will result in an exponential increase in the volume and complexity of information returns required to be filed in the very near future.
Firstly, there will be a great expansion of Form 1099 additional income reporting. A provision in the Patient Protection and Affordable Care Act of 2010 added a new information reporting requirement that will require all businesses to issue Form 1099 for goods purchased after 2011. Under prior law, reporting was required for the purchase of services but was not required for the purchase of goods, and payments to corporate vendors were exempt from reporting.
IRPAC has met with the IRS to discuss the challenges presented by these changes in law and issued two comment letters providing extensive analysis of the implications of these changes on the IRS and offering recommendations for the reduction of burdens on the IRS and the information reporting community.
Secondly, in late 2008, legislation was passed mandating the reporting by financial institutions of customer cost basis in securities transactions. IRPAC was engaged early in cost basis discussions and continued to meet with IRS executives in 2010 to discuss the challenges of implementing the cost basis reporting rules. IRPAC published four comment letters this year offering comprehensive comments and recommendations.
Thirdly, also in 2008, a section was added to the Internal Revenue Code, requiring reporting of payments made in settlement of payment card and third party network transactions. IRPAC was also engaged early in these discussions and continued to meet with the IRS in 2010. It issued a comment letter in early January 2010 relating to the proposed regulations.
Lastly, IRPAC has also looked at the requirements of the Foreign Account Tax Compliance Act (FATCA). Expansive new withholding and tax information reporting rules impacting payments of US source income to foreign financial institutions and non-financial foreign entities became law in March 2010.
IRPAC began reviewing earlier versions of this legislation in 2009, and continued discussions with the IRS and Treasury in 2010. IRPAC intends to issue a formal written comment letter relating to FATCA guidance.
?IRPAC is generally supportive of the federal government?s efforts to combat tax avoidance and close the tax gap,? Chavez concluded, ?and agrees that tax information reporting plays an important role in these efforts. We also recognize that laws requiring more information reporting must be implemented in a manner that carefully balances the benefits to be gained with the burdens on both the IRS and the information reporting community; and this is particularly important when multiple new requirements, such as those highlighted above, impact the same institutions and have overlapping implementation time frames.?
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