Budget Requests $12.97 Billion for IRS

Feb 16, 2010

As part of the fiscal year (FY) 2011 budget request, the administration has asked for more than $12.97 billion for the Internal Revenue Service (IRS) to implement programs to meet their key strategic goals.

The IRS budget request—an increase over President Barack Obama's fiscal 2010 request for $12.147 billion—includes an allocation increase of $293 million to IRS's enforcement program to continue work to close the tax gap, which is estimated at $345 billion. The budget estimates that the enforcement allocation will generate almost $2 billion in additional annual enforcement revenue once the initiatives reach full maturity in fiscal 2013.

The administration's budget proposes an increase of more than $43 million to IRS's taxpayer services account, to provide more resources for "high-quality phone service" and technological enhancements that aim to boost electronic filing capabilities by making more electronic forms available. Additionally, the budget supports the agency's new tax return preparer strategy, which claims it will ensure that taxpayers get the best possible service and value when they opt to use paid return preparation services.

In an effort to further close the tax gap, the administration proposed expanded information reporting mandates, including requiring reporting on: payments to corporations; rental property expense payments; and private separate accounts of life insurance companies.

The White House also proposed requiring a certified taxpayer identification number (TIN) from contractors and greater information reporting for certain government payments for property and services.

Additionally, the administration proposed increasing certainty around worker classification by allowing the IRS to require prospective reclassification of workers who are currently misclassified and whose reclassification has been prohibited under standing law. The proposal retains the reduced penalties for misclassification, except that lower penalties would only apply if the service recipient reclassifies its workers voluntarily before the IRS or another enforcement agency contacts it and if the service recipient had filed all required information returns reporting payments to independent contractors.

The Department of Treasury and IRS would be permitted to issue guidance on the proper classification of workers, enabling service recipients to conduct such classification with significantly less concern about future IRS examinations.

Furthermore, Treasury and IRS "would be directed to issue guidance interpreting common law in a neutral manner recognizing that many workers are, in fact, not employees." The guidance would provide safe harbors and/or rebuttable presumptions, both of which would be narrowly defined, according to the Greenbook. The guidance would generally be specific to a job or an industry in order to make it more useful to service recipients. 

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