Read Part 1 of this series here.
Everyone wants to make tax time easier – the public, the government and those of us in the tax prep industry. I recently participated in a panel discussion at the National Tax Association’s Spring Symposium to discuss how the Internal Revenue Service and the private sector can continue to work together and use technology to improve the experience. Here are some of my thoughts.
The private sector already plays a well-established, integral role in administering the nation’s tax system, both internally and externally. For example, private sector companies, nonprofit organizations and the IRS work together to administer the Free File and Volunteer Income Tax Assistance programs, helping to reduce the burden and expense of tax compliance and filing for millions of Americans annually. The IRS partners with numerous companies to build and maintain its information systems infrastructure – and it actively engages with many external groups to improve the quality of tax administration.
In fact, the private sector and the IRS have a number of shared interests and goals during tax time. Both want to decrease taxpayer burden, reduce complexity in the system, and ensure appropriate compliance. Importantly, both the private sector and government want to create easier access to benefits for those who qualify.
My proposal to accomplish these goals is simple: leverage private sector innovation and technology through public-private partnerships. Here are three specific reasons the IRS should turn to private sector expertise:
- Innovation: Maintaining records for millions of Americans and handling the nation’s tax revenue is a big task. As such, the IRS must act carefully and sometimes slowly to minimize risk. While this doesn’t lend itself to great innovation, it’s an important safeguard for an agency entrusted with the tax records of hundreds of millions of people. The private sector, on the other hand, doesn’t have the same scale and, therefore, has greater room to experiment and test new ideas. Let’s let the IRS take advantage of the lessons learned and of new private sector innovations through the right kinds of partnerships and within the right framework. More on that later.
- Cost: New technology and innovations aren’t free. But companies that are already investing in areas where public and private interests overlap can bring expertise that can help government economically achieve its mission. With every federal agency under budget pressure – few more than the IRS – it makes sense to consider where the private sector could shoulder investments for the benefit of the taxpayer.
- Effectiveness: The tax time moment is a critical opportunity for effectuating social policy beyond tax. It is often the one time throughout the year when Americans think about their whole financial picture. It’s also the time when many taxpayers see their biggest paycheck of the year in the form of a tax refund. This creates a prime opportunity to increase effectiveness of government benefits or to encourage saving. Industry can be a channel for communication to taxpayers – a relationship that can be used for broader social policy goals.
The private sector’s incentives won’t always align with government’s priorities, but partnership makes sense when they do share some objectives.
A set of guiding principles can and should help structure public-private engagements.
These principles include:
- Clearly definable desired outcomes.
- Clearly definable roles for both the private sector and IRS.
- Clear metrics for tracking progress and outcomes.
- Ongoing review and adjustment.
Guideposts such as these will help set a much-needed path to help the IRS and private sector work together in the future.
The truth is that there are many ways the IRS and the private sector can continue to work together. Leveraging private sector expertise, particularly in technology, is one of the biggest opportunities we have to make tax time better for everyone.