Will I Get Audited?

WEBVTT
1
00:00:00.160 --> 00:00:03.720
Lots of disruption going on in the federal government, and
2
00:00:03.839 --> 00:00:07.519
nowhere more than at the Internal Revenue Service, where we
3
00:00:07.599 --> 00:00:11.199
have up to twenty thousand employees leaving over the next
4
00:00:11.199 --> 00:00:14.279
few months, and a lot of them senior employees. And
5
00:00:14.759 --> 00:00:17.120
how is that going to affect you? How's that going
6
00:00:17.120 --> 00:00:19.920
to affect your tax compliance? How's that going to affect
7
00:00:19.960 --> 00:00:23.280
your risk of being audited. We're going to discuss all
8
00:00:23.320 --> 00:00:27.039
of that today because this has a potential huge impact
9
00:00:27.480 --> 00:00:32.039
on the entrepreneur, the investor, and in it I think
10
00:00:32.159 --> 00:00:34.960
a different way than maybe you might have thought of.
11
00:00:35.479 --> 00:00:38.119
And so today we have my friend Garrett Watson from
12
00:00:38.159 --> 00:00:41.759
the Tax Foundation. Garrett, welcome back. Always good to have
13
00:00:41.840 --> 00:00:43.200
you on the Wealth Ability Show.
14
00:00:43.880 --> 00:00:45.600
Thanks for having me. It's an exciting time.
15
00:00:46.759 --> 00:00:51.159
So let's get right into it. Garrett. I think people know.
16
00:00:51.200 --> 00:00:57.200
You're you're watching this probably at least as closely as
17
00:00:57.240 --> 00:01:02.560
I'm watching it, and you know that three years ago
18
00:01:03.240 --> 00:01:06.439
there was a big tax a big bill that was
19
00:01:06.480 --> 00:01:10.400
going to increase the IRS by as many as eighty
20
00:01:10.480 --> 00:01:15.439
thousand employees. And now not only are those employees not
21
00:01:15.519 --> 00:01:20.920
being hired, we're seeing a reduction of really a really
22
00:01:21.000 --> 00:01:25.040
nice offer. Frankly, by the government to let them retire early.
23
00:01:25.239 --> 00:01:28.560
Is effectively what's going on as their early retirement. And
24
00:01:28.719 --> 00:01:32.640
you've got twenty thousand people who rather than wait for
25
00:01:32.760 --> 00:01:37.400
five or or six years to retire or retiring this year. So,
26
00:01:37.760 --> 00:01:42.000
first of all, what's going on and how do you
27
00:01:42.120 --> 00:01:44.120
see this in the short run, and then we'll talk
28
00:01:44.120 --> 00:01:44.959
about the long run.
29
00:01:46.560 --> 00:01:48.159
Yeah, So it is definitely a time of change of
30
00:01:48.200 --> 00:01:51.480
the IRS, and of course it is culminating after five
31
00:01:51.560 --> 00:01:55.120
plus years of a lot of change, both due to
32
00:01:55.120 --> 00:01:57.439
the pandemic and because of the infusion of funds that
33
00:01:57.439 --> 00:02:00.480
we saw under the Biden administration that was an effort
34
00:02:00.480 --> 00:02:04.560
to try to both expand the IRS's auditing capabilities and
35
00:02:04.599 --> 00:02:07.680
to some extent, their taxpayer service. They're bulking up both
36
00:02:07.680 --> 00:02:09.400
the resources and the number of folks who.
37
00:02:09.280 --> 00:02:10.719
They have on staff.
38
00:02:11.120 --> 00:02:13.639
And what you've seen since January twentieth, when the new
39
00:02:13.639 --> 00:02:17.360
administration came in, is a big sort of bet in
40
00:02:17.400 --> 00:02:20.479
the opposite direction, a vision of a more streamlined IRS
41
00:02:20.680 --> 00:02:25.120
that is putting more emphasis on technology and streamlining processes
42
00:02:25.520 --> 00:02:30.599
and less so on staffing and greater material resources. And
43
00:02:30.639 --> 00:02:32.639
it really represents, you know, I think a very different
44
00:02:32.719 --> 00:02:36.360
vision and framework we're thinking about what success looks like
45
00:02:36.400 --> 00:02:41.120
at the IRS right, thinking about the relative emphasis on
46
00:02:41.960 --> 00:02:45.879
taxpayer service versus auditing and the role of individual sort
47
00:02:45.919 --> 00:02:48.719
of staff in that process too. And it comes with,
48
00:02:48.719 --> 00:02:50.719
i think, both with opportunities and risks that we'll get into.
49
00:02:51.120 --> 00:02:53.520
The big short term sort of question, of course, was
50
00:02:54.719 --> 00:02:57.520
heading into this year and into the spring, was how
51
00:02:57.599 --> 00:03:01.439
that would affect the filing season to what extent. Even
52
00:03:01.439 --> 00:03:03.199
if a lot of these transitions and changes are good
53
00:03:03.199 --> 00:03:06.919
in the long run, could that affect taxpayer experience or
54
00:03:06.960 --> 00:03:11.280
IRS revenue collection in the short run. Generally speaking, the
55
00:03:11.319 --> 00:03:14.159
good news has been that this season has generally been
56
00:03:14.199 --> 00:03:16.919
running as we'd expect. There hasn't been a lot of
57
00:03:16.960 --> 00:03:22.360
reporting of problems from customer service experience, and revenue collections
58
00:03:22.400 --> 00:03:24.000
have been running at or ahead of where they were
59
00:03:24.080 --> 00:03:26.960
last year. There was some reporting, you know, early on
60
00:03:27.039 --> 00:03:29.360
in the spring, that maybe revenue collection was down for
61
00:03:29.400 --> 00:03:32.039
a few different reasons. That seems to not be the case,
62
00:03:32.280 --> 00:03:36.080
So let's go for federal government dealing with a debt
63
00:03:36.080 --> 00:03:40.439
limit issue in Congress, it's also good news for taxpayers.
64
00:03:40.479 --> 00:03:43.639
The big question moving forward is how long will that last?
65
00:03:43.719 --> 00:03:46.319
Will we start seeing some of these eruptions, both from
66
00:03:46.479 --> 00:03:50.039
some of the initial severance that was given in separations
67
00:03:50.039 --> 00:03:52.800
for probationary employees earlier on in the spring, and now
68
00:03:52.840 --> 00:03:56.280
for this next wave of twenty thousand folks where we're
69
00:03:56.280 --> 00:03:59.599
seeing upwards of a third of the IRS's staff leave.
70
00:04:01.159 --> 00:04:03.039
It's possible that they are going to be very smart
71
00:04:03.039 --> 00:04:06.039
about changing sort of the work distribution so that that
72
00:04:06.120 --> 00:04:10.120
minimizes effects on taxpayers, but the sheer scale of that
73
00:04:10.240 --> 00:04:13.680
change may mean there will be some disruptions. The question
74
00:04:13.840 --> 00:04:16.639
is on which taxpayers and how severe for how long?
75
00:04:17.000 --> 00:04:18.120
I think it's a question.
76
00:04:18.560 --> 00:04:22.360
Well, I think it's kind of I kind of smile
77
00:04:22.399 --> 00:04:24.519
a little bit about this because in the first place,
78
00:04:25.439 --> 00:04:29.079
IRS has had not had good customer service for twenty years.
79
00:04:29.519 --> 00:04:33.720
Okay, I mean we still we have refunds that have
80
00:04:33.759 --> 00:04:35.560
been waiting. We've been waiting on for three years.
81
00:04:36.600 --> 00:04:39.519
Three years to wait for a refund that is that
82
00:04:39.600 --> 00:04:44.399
is just crazy, ridiculous type of stuff. And so you know,
83
00:04:44.439 --> 00:04:47.600
then the question is, okay, so does this mean that
84
00:04:47.639 --> 00:04:48.079
there's just.
85
00:04:48.000 --> 00:04:49.319
Gonna be a lot fewer audits.
86
00:04:49.639 --> 00:04:52.920
They've disbanded some of the audit groups, they disbanded the
87
00:04:52.959 --> 00:04:56.319
Captive group, They disbanded the high the high net worth group,
88
00:04:56.680 --> 00:04:58.920
so that a lot of these people they had to
89
00:04:58.959 --> 00:05:03.079
disband because were leaving, so they just weren't they and
90
00:05:03.279 --> 00:05:04.959
and they've just disbanded these groups.
91
00:05:06.279 --> 00:05:06.680
Uh.
92
00:05:06.800 --> 00:05:11.720
Fundamentally, do you think it means, Okay.
93
00:05:11.439 --> 00:05:15.680
We're gonna get some temporary disruption in service? Do you
94
00:05:15.680 --> 00:05:19.800
think necessarily though it means fewer audits. I suspect it
95
00:05:19.839 --> 00:05:23.360
does not. I suspect it does not mean fewer audits.
96
00:05:23.399 --> 00:05:26.600
It just means that there won't be these tax on
97
00:05:26.720 --> 00:05:28.839
specific groups of taxpayers.
98
00:05:29.879 --> 00:05:32.680
I think you're generally right, right, especially when you know
99
00:05:32.720 --> 00:05:36.160
it comes to yeh, having folks who specialize in very
100
00:05:36.160 --> 00:05:39.399
specific and be very complicated tax situations. That requires of
101
00:05:39.439 --> 00:05:42.279
course a lot of resources both in time and uh
102
00:05:42.319 --> 00:05:45.879
and money and staffing expertise. That might be something that's
103
00:05:46.120 --> 00:05:47.439
we're seeing that a little bit with some of these
104
00:05:47.439 --> 00:05:51.000
more specialized groups being disbanded or downsized. But that, yeah,
105
00:05:51.040 --> 00:05:54.560
that doesn't necessarily mean that overall audit levels will will fall,
106
00:05:54.680 --> 00:05:57.800
especially when you're thinking about either correspondence or audit associated
107
00:05:57.839 --> 00:06:00.160
with you know, the average instead of tax payer.
108
00:06:00.279 --> 00:06:01.399
I think we have.
109
00:06:01.399 --> 00:06:04.319
Seen that change over time, but it's unclear if that
110
00:06:04.399 --> 00:06:06.399
will unless there's a deliberate effort on the part of
111
00:06:06.439 --> 00:06:08.439
the irs and treasuries and move those audit rates in
112
00:06:08.480 --> 00:06:12.199
a certain direction that I think that's far from matured,
113
00:06:12.920 --> 00:06:14.879
and I think that's always that's been the challenge the
114
00:06:15.040 --> 00:06:16.879
RS up up to this point, I think will still
115
00:06:16.879 --> 00:06:19.560
be the case now, which is, how do they think
116
00:06:19.600 --> 00:06:24.199
about the balance of resourcing between upfront proactive taxpayer experience
117
00:06:24.240 --> 00:06:26.319
and proving the you know, solving the problems you just
118
00:06:26.360 --> 00:06:29.240
mentioned that have been long standing aggravated during the pandemic,
119
00:06:29.600 --> 00:06:32.279
and then also thinking about auditing and you know, making
120
00:06:32.279 --> 00:06:36.319
sure folks are keeping up voluntary compliance. That is a
121
00:06:36.360 --> 00:06:38.759
delicate balance, both politically and in terms of just efficient
122
00:06:38.800 --> 00:06:42.399
operation of the agency. The one thing that I hope
123
00:06:42.399 --> 00:06:44.600
to see at some point, and this might be optimistic,
124
00:06:44.680 --> 00:06:48.480
right or sort of pollyannish, is I think stability for
125
00:06:48.560 --> 00:06:49.480
the agency in terms.
126
00:06:49.360 --> 00:06:51.240
Of direction and leadership would be really helpful.
127
00:06:51.560 --> 00:06:53.839
That's been one thing, both from external events and just
128
00:06:53.879 --> 00:06:56.920
changes in the political situation that we haven't had. And
129
00:06:56.959 --> 00:06:58.639
that does make it hard, right, because you do have
130
00:06:58.639 --> 00:07:01.639
a shifting political target. We obviously have had a lot
131
00:07:01.639 --> 00:07:04.879
of transition in leadership, both the political leadership and the
132
00:07:04.959 --> 00:07:09.120
underlying sort of civil staff, and that can also just
133
00:07:09.160 --> 00:07:11.399
make it hard by any organization go undergoing that kind
134
00:07:11.439 --> 00:07:15.040
of transition over years to deliver, and so I think
135
00:07:15.040 --> 00:07:18.040
that's something that that's very hard to do because there's
136
00:07:18.160 --> 00:07:21.800
just sharp political and policy disagreement on the direction of
137
00:07:21.839 --> 00:07:24.279
the agency, and we're seeing that a lot in just
138
00:07:24.399 --> 00:07:26.759
the general policy environment right now. But that would be
139
00:07:26.800 --> 00:07:28.720
helpful too, I think, to get some stability and say, Okay,
140
00:07:28.720 --> 00:07:30.199
we are going to go on this more lean version
141
00:07:30.199 --> 00:07:33.000
of the IRS that's emphasizing tax payer experience and taking
142
00:07:33.000 --> 00:07:35.279
advantage of AI where we can, and let's just roll
143
00:07:35.279 --> 00:07:38.240
with that, and hopefully if we do see administrative changes
144
00:07:38.319 --> 00:07:40.639
or changes in control in the coming years, that they
145
00:07:40.680 --> 00:07:42.879
take that into account that some stability here would be helpful.
146
00:07:43.360 --> 00:07:46.560
So I think it was a conversation you and I
147
00:07:46.680 --> 00:07:49.600
had on the same podcast a year ago where we
148
00:07:49.720 --> 00:07:56.800
talked about one party actually proposing to raise taxes and
149
00:07:56.279 --> 00:07:59.800
that in fact, there had been parties proposed to raise
150
00:07:59.800 --> 00:08:02.519
tax in the past and they had never won, and
151
00:08:02.600 --> 00:08:05.399
once again they didn't win. So I actually think that's
152
00:08:05.519 --> 00:08:08.920
a good sign because what I think what it signifies
153
00:08:09.000 --> 00:08:12.040
is the American public does not want increase taxes.
154
00:08:12.120 --> 00:08:13.199
They just do not.
155
00:08:13.480 --> 00:08:15.839
And I think the whole you know, I don't want
156
00:08:15.839 --> 00:08:19.439
to talk about tariffs right now. That's subject for another time.
157
00:08:19.720 --> 00:08:22.759
But terrorists are a tax increase. And then we have
158
00:08:22.839 --> 00:08:25.839
the new bill, which is a tax decrease, which is
159
00:08:25.879 --> 00:08:28.600
a logical offset. If you're gonna have an increase, you've
160
00:08:28.600 --> 00:08:29.959
got to have a decreased offset.
161
00:08:30.360 --> 00:08:31.360
Is you're gonna have.
162
00:08:31.480 --> 00:08:38.320
Real problems with the economy. But here's my real question is,
163
00:08:38.799 --> 00:08:43.320
so I've been an advocate for since before twenty twenty two,
164
00:08:43.759 --> 00:08:47.120
that the money. I'm not saying that IRIS doesn't need
165
00:08:47.159 --> 00:08:50.120
more money. I'm saying they don't need it in auditing.
166
00:08:50.159 --> 00:08:52.840
Because what's happened over the years, and you've watched this
167
00:08:52.919 --> 00:08:55.480
even more than I have, but you know, I've got
168
00:08:55.519 --> 00:08:58.440
forty five years in this business, and what it seems
169
00:08:58.480 --> 00:09:00.759
to happen is is that, oh, we're going to do
170
00:09:00.879 --> 00:09:02.000
the technology and.
171
00:09:01.919 --> 00:09:03.279
Then we'll let people go.
172
00:09:04.200 --> 00:09:07.039
But the technology never comes because you have an easy
173
00:09:07.080 --> 00:09:09.240
way out by just hiring more people. And that was
174
00:09:09.279 --> 00:09:13.399
the Biden administrations. You go to, well, we're just going
175
00:09:13.440 --> 00:09:16.360
to hire more people. Where we're in a world where
176
00:09:16.559 --> 00:09:21.159
hiring more people makes no sense to anybody except the
177
00:09:21.200 --> 00:09:24.879
Biden administration, because in the rest of the world, we're
178
00:09:24.960 --> 00:09:29.360
using AI, we're using technology, and I know that, Danny,
179
00:09:31.519 --> 00:09:35.840
We're full The former IRS commissioner was actually moving on
180
00:09:35.960 --> 00:09:39.960
the technology, but they'd allocated such a small percentage of
181
00:09:40.000 --> 00:09:43.720
that budget increase to technology and so much to administration
182
00:09:44.279 --> 00:09:47.679
and people that it seemed like, well, we got our
183
00:09:47.679 --> 00:09:53.480
emphasis wrong. Do you think that perhaps that this let's
184
00:09:53.519 --> 00:09:58.039
reduce the workforce first and it will force us to
185
00:09:58.240 --> 00:10:02.440
actually use technology. Do you think that is a possibility
186
00:10:02.480 --> 00:10:06.360
that will actually get technology replacing so we'll actually get
187
00:10:06.360 --> 00:10:10.279
more efficient audits, more effective audits rather than fewer audits.
188
00:10:11.720 --> 00:10:15.080
Yeah, I think it's a definite possibility because the sort of,
189
00:10:15.120 --> 00:10:17.320
you know, the logic of sort of these types of bureaucracies,
190
00:10:17.320 --> 00:10:19.600
both the IRS and elsewhere, is folks are going to
191
00:10:19.639 --> 00:10:23.960
be more even implicitly or unconsciously oppositional or skeptical of
192
00:10:24.320 --> 00:10:26.679
processes that can put themselves out of a job.
193
00:10:26.799 --> 00:10:26.960
Right.
194
00:10:27.000 --> 00:10:28.480
It's sort of a cynical take, but it's something we
195
00:10:28.519 --> 00:10:30.600
see in a lot of bureaucracies, not just in the
196
00:10:30.600 --> 00:10:33.039
federal government but elsewhere, and that may play a big
197
00:10:33.120 --> 00:10:36.399
role in why we've seen such disappointing results in modernization
198
00:10:36.440 --> 00:10:39.080
efforts and investments in technology the IRS in the past,
199
00:10:40.360 --> 00:10:43.440
because it's very hard to sort of motivate them to
200
00:10:43.679 --> 00:10:46.399
do that and to implement that moving forward. You could say,
201
00:10:46.440 --> 00:10:49.559
you know, in the Bidomstrician's defense, maybe short term after
202
00:10:49.559 --> 00:10:51.200
the pandemic, that was a way to catch up, right,
203
00:10:51.240 --> 00:10:52.559
that was the easiest way to catch up in the
204
00:10:52.559 --> 00:10:56.120
short term. It just as a sort of a way
205
00:10:56.159 --> 00:10:57.919
to get them back on track. Right, That might be
206
00:10:58.080 --> 00:11:00.200
your best sort of defense of that approach in the
207
00:11:00.200 --> 00:11:02.919
short run, But that's not really a way to get
208
00:11:02.919 --> 00:11:05.519
you to the vision that you're talking about, right, which
209
00:11:05.559 --> 00:11:08.559
is a leaner IRS that is emphasizing more and relying
210
00:11:08.559 --> 00:11:10.320
more on technology and AI.
211
00:11:10.759 --> 00:11:12.080
And then the question is how do you get there?
212
00:11:12.240 --> 00:11:14.879
It's unlikely to be getting there in a world where
213
00:11:14.879 --> 00:11:18.039
you have a larger staff that may be resistant to it.
214
00:11:18.320 --> 00:11:20.639
And so but it is very much a bet because
215
00:11:20.639 --> 00:11:23.000
you are betting that you're sort of forcing the situation
216
00:11:23.039 --> 00:11:24.879
that they go ahead and take advantage of that technology.
217
00:11:25.279 --> 00:11:28.279
The downside risk the possibility and it's unclear at this
218
00:11:28.320 --> 00:11:30.600
point what that you know, probability is is that they
219
00:11:30.639 --> 00:11:32.200
falter in that and you just end up with worse
220
00:11:32.240 --> 00:11:33.600
sort of outcomes across the board.
221
00:11:33.840 --> 00:11:34.960
So I think that's the risk. Right.
222
00:11:35.039 --> 00:11:36.759
So this is the thing we're seeing this across the
223
00:11:36.759 --> 00:11:40.159
board with efforts at that Doge and elsewhere, right, which is, hey,
224
00:11:40.200 --> 00:11:43.399
we can spur you need something to spur some change
225
00:11:43.480 --> 00:11:45.600
that can really take us from what is a very
226
00:11:45.600 --> 00:11:49.480
disappointing status quo that may involve some risks, and then
227
00:11:49.519 --> 00:11:51.759
the question becomes, you know, very sort of un sexy
228
00:11:52.360 --> 00:11:55.120
questions of how do you administratively do that? What is
229
00:11:55.120 --> 00:11:59.039
the plan in practice to actually do this modernization and
230
00:11:59.120 --> 00:12:01.480
leverage AI because we can get into I think there's
231
00:12:01.480 --> 00:12:04.200
some really interesting questions on both the opportunities and there
232
00:12:04.200 --> 00:12:06.480
in the specific risks with stuff like AI in a
233
00:12:06.519 --> 00:12:08.440
taxpayer context, which could be interesting.
234
00:12:08.600 --> 00:12:10.279
Yeah, there's no question. It's a big bet.
235
00:12:10.720 --> 00:12:14.240
I mean, and nobody's nobody's gonna accuse Trump of not
236
00:12:14.399 --> 00:12:16.000
being willing to make a big bet.
237
00:12:16.360 --> 00:12:19.320
I mean, the terifts are a big bet. Uh, those
238
00:12:19.480 --> 00:12:21.120
is a big bet. I mean, this it's it's all
239
00:12:21.159 --> 00:12:24.480
a big bet. But let's talk about technology.
240
00:12:24.519 --> 00:12:27.639
Because you watch not just the federal government, but you
241
00:12:27.679 --> 00:12:31.240
watch state governments, and there are state governments that have
242
00:12:31.279 --> 00:12:36.399
been effectively using technology for years and years. I'm reminded
243
00:12:36.519 --> 00:12:41.600
of h of New York State that actually looks at
244
00:12:41.720 --> 00:12:46.399
a convenience store and how many lottery tickets they sell,
245
00:12:47.159 --> 00:12:49.559
and and they actually base an audit.
246
00:12:49.399 --> 00:12:52.519
On if you sold this many the lottery tickets, you should.
247
00:12:52.320 --> 00:12:56.120
Have had this much in in convenience store sales, and
248
00:12:56.240 --> 00:12:59.039
you didn't report this much in convenience store sales. So
249
00:12:59.159 --> 00:13:01.960
therefore we're just going to assess you prove that, prove
250
00:13:02.080 --> 00:13:02.759
that we're wrong.
251
00:13:03.320 --> 00:13:07.360
And I think that there's an opportunity there. For example,
252
00:13:08.279 --> 00:13:11.320
U there was a study that showed in.
253
00:13:11.279 --> 00:13:16.840
Twenty twenty there were two hundred and fifty thousand S
254
00:13:16.919 --> 00:13:21.159
corporations with over one hundred thousand dollars of net income
255
00:13:21.519 --> 00:13:25.480
and no salary, which goes which you're.
256
00:13:24.960 --> 00:13:26.120
Losing all that.
257
00:13:27.759 --> 00:13:31.840
Employment tax, right, all that Social Security, all those employment taxes,
258
00:13:32.039 --> 00:13:36.440
because there's no employment tax on S corporation income unless
259
00:13:36.679 --> 00:13:40.440
it's paid out in salary. So how do you think,
260
00:13:41.519 --> 00:13:44.360
how do you think that could be used in order
261
00:13:44.440 --> 00:13:49.440
to automate and actually make the process not just more
262
00:13:49.559 --> 00:13:50.240
effective for.
263
00:13:50.279 --> 00:13:52.240
The government in other words, bringing in more.
264
00:13:52.080 --> 00:13:57.240
Money, but actually making it easier for the taxpayer because
265
00:13:57.320 --> 00:14:00.759
right now, ha doly not it takes anywhere from six
266
00:14:00.799 --> 00:14:03.639
months to two and a half years, and it's a
267
00:14:03.759 --> 00:14:05.039
very big expense.
268
00:14:04.679 --> 00:14:07.480
For the tax payer and and a lot of stress.
269
00:14:07.720 --> 00:14:10.639
Frankly, right, yeah, I mean, on your first point of
270
00:14:10.879 --> 00:14:12.480
the state experience, I think there is a lot more
271
00:14:12.559 --> 00:14:14.200
learning that could be done by the part of the
272
00:14:14.240 --> 00:14:17.799
IRS and Treasury on what states are doing well. Obviously,
273
00:14:17.799 --> 00:14:20.519
like state revenue collection looks a little bit different, different
274
00:14:20.559 --> 00:14:22.600
revenue sources. They obviously they are a little more a
275
00:14:22.600 --> 00:14:24.600
little smaller in context, and of course there's a lot
276
00:14:24.600 --> 00:14:27.360
of diversity in departments of revenue how well they're doing
277
00:14:27.399 --> 00:14:29.600
things across the states. But the ones that are doing
278
00:14:29.600 --> 00:14:31.159
sort of the best job, I think are at the
279
00:14:31.200 --> 00:14:34.840
forefront of trying to improve tax payer experience and collecting
280
00:14:34.840 --> 00:14:38.799
revenue efficiently, and that's something hopefully not super familiar with
281
00:14:38.799 --> 00:14:40.519
whether or not they actually are adopting some of those
282
00:14:40.559 --> 00:14:43.200
best practices. That's one advantage of our federal system is
283
00:14:43.240 --> 00:14:45.600
you can learn from both, you know, the states and
284
00:14:46.039 --> 00:14:49.000
vice versa on best practices. So I think that is
285
00:14:49.000 --> 00:14:51.200
something that's probably underleverage and I talked about much in
286
00:14:51.240 --> 00:14:54.519
this in this space outside of you know, specialist groups
287
00:14:54.639 --> 00:14:57.360
doing this kind of work, and then on the AI
288
00:14:57.480 --> 00:15:01.360
side and the tech sort of opportunity, I think there
289
00:15:01.399 --> 00:15:04.000
is a lot of opportunity both on the taxpayer experience
290
00:15:04.039 --> 00:15:06.720
and for the irs itself. Obviously, the leading edge of
291
00:15:06.759 --> 00:15:11.200
this is sort of AI machine learning algorithms of various types, right,
292
00:15:11.279 --> 00:15:14.399
which both from a sort of proactive sort of do
293
00:15:14.399 --> 00:15:16.600
the numbers at up or there any discrepancies relative to
294
00:15:16.639 --> 00:15:19.200
what may be owed? And from a more sort of
295
00:15:19.480 --> 00:15:22.159
you know, enforcement or correspondence or auditing situation.
296
00:15:22.679 --> 00:15:24.360
There's a lot of opportunities for that both.
297
00:15:25.279 --> 00:15:27.360
You know, if you have sort of setting aside questions
298
00:15:27.399 --> 00:15:28.519
of how do you get to the training data and
299
00:15:28.519 --> 00:15:30.399
actually set these things up, which has its own set
300
00:15:30.399 --> 00:15:33.919
of questions and challenges once you get there. Of course,
301
00:15:34.600 --> 00:15:39.159
AI machine learning specializes in finding patterns in data, either
302
00:15:39.200 --> 00:15:42.639
individual cases or more broadly that even you know, experts
303
00:15:42.679 --> 00:15:44.559
may find challenging. We see this and of course the
304
00:15:44.799 --> 00:15:48.919
commonly discussed example is in radiology, right in medicine, where
305
00:15:48.919 --> 00:15:51.799
it can match or exceed the performance of trained experts
306
00:15:52.000 --> 00:15:56.120
looking at you know, issues related to cancer could.
307
00:15:55.960 --> 00:15:57.080
Be applied here as well.
308
00:15:57.639 --> 00:15:59.600
The one of the big challenge among many, of course,
309
00:15:59.799 --> 00:16:02.159
is it does make you know if something is flagged
310
00:16:02.159 --> 00:16:05.240
as a discrepancy, we'd be really deliberate about trying to
311
00:16:05.279 --> 00:16:08.240
get from the from the algorithm or from the AI
312
00:16:08.879 --> 00:16:12.440
why is it that this has been flagged as a discrepancy,
313
00:16:12.679 --> 00:16:14.840
Because we're not just talking about, you know, a false
314
00:16:15.440 --> 00:16:17.240
positive or cancer, which is bad enough, and we're not
315
00:16:17.240 --> 00:16:20.159
talking about the risk of correspondence or audit or at
316
00:16:20.159 --> 00:16:23.039
the very minimum, right upsetting or scaring a taxpayer.
317
00:16:22.679 --> 00:16:24.559
Who may not have done anything wrong on.
318
00:16:24.519 --> 00:16:26.519
The basis of an algorithm that may not may or
319
00:16:26.519 --> 00:16:28.440
may not be able to explain why it's flagging a
320
00:16:28.440 --> 00:16:31.559
particular return for a closer look. So I think that's
321
00:16:31.720 --> 00:16:33.440
you know, that's something we're already dealing with in other
322
00:16:33.480 --> 00:16:35.559
domains where this technology is being deployed in a more
323
00:16:35.600 --> 00:16:38.720
mature way. But you can see how this overlays with
324
00:16:38.759 --> 00:16:41.559
the sort of the privacy and concerns and concerns about
325
00:16:42.159 --> 00:16:46.679
dealing with how people think about interacting with the irs
326
00:16:46.679 --> 00:16:49.000
in this context, right, And so I think that's going
327
00:16:49.080 --> 00:16:52.120
to be something maybe leaning more on the proactive side
328
00:16:52.159 --> 00:16:54.360
of the taxpayer experience rather than on the auditing first
329
00:16:54.480 --> 00:16:56.919
makes more sense because it's very different to say, hey,
330
00:16:57.440 --> 00:17:00.279
you know, you submitted this, there might be something off here.
331
00:17:00.919 --> 00:17:03.039
Maybe not check again, you know, before you resubmit if
332
00:17:03.039 --> 00:17:06.039
it's rejected, versus, hey, we're gonna lead lead on the
333
00:17:06.039 --> 00:17:10.279
auditing side with AI and it develops all sorts of problems,
334
00:17:10.319 --> 00:17:13.720
both for internal folks and for taxpayers. We're not even
335
00:17:13.759 --> 00:17:15.480
assuming that the algorithm is wrong, it's just if it
336
00:17:15.480 --> 00:17:18.440
cannot be explained in a way that makes sense to
337
00:17:18.680 --> 00:17:21.880
auditors or to the taxpayer, that can be a challenge.
338
00:17:21.880 --> 00:17:23.880
Sometimes it can depends on how it's being deployed. But
339
00:17:24.039 --> 00:17:25.319
that's the first thing that sort of comes to my
340
00:17:25.319 --> 00:17:27.200
mind that we're already seeing in other domains.
341
00:17:27.599 --> 00:17:29.319
That can be a challenge.
342
00:17:30.079 --> 00:17:33.680
No question that it depends on how it's deployed. But
343
00:17:34.720 --> 00:17:38.839
number one, what technology is really good at now and
344
00:17:38.920 --> 00:17:42.319
the IRIS has not been able to do because their
345
00:17:42.359 --> 00:17:45.799
technology is so poor, is identifying where there might be
346
00:17:45.839 --> 00:17:49.319
a challenge. Okay, so I mean we all we've all
347
00:17:49.359 --> 00:17:51.720
gotten those notices in the mail where hey, your W
348
00:17:51.880 --> 00:17:55.359
two didn't match your tax return. Okay, that is simply
349
00:17:55.400 --> 00:17:58.720
what we're talking about. We're talking about a matching matching up.
350
00:17:58.920 --> 00:18:01.759
Does it make sense. It's just that with AI you
351
00:18:01.799 --> 00:18:04.559
can get a lot more, you can put a lot
352
00:18:04.599 --> 00:18:07.599
finer point on it, right, because it's got there's so
353
00:18:07.799 --> 00:18:11.319
much data that it can use. So it's not just
354
00:18:11.400 --> 00:18:16.000
matching W two's, but it also could be matching K ones.
355
00:18:16.240 --> 00:18:21.160
It could also be matching behavior. For example, there's a
356
00:18:22.880 --> 00:18:27.000
there there's there's something going on in the social media
357
00:18:27.079 --> 00:18:29.720
right now about hey, you don't have to pay income tax.
358
00:18:30.920 --> 00:18:32.079
You know this. We've heard this.
359
00:18:32.079 --> 00:18:34.759
Before, Garrett, We've seen it before where people say, hey,
360
00:18:34.759 --> 00:18:36.200
the sixteenth Amendment.
361
00:18:35.880 --> 00:18:37.599
Wasn't properly ratified.
362
00:18:37.960 --> 00:18:41.039
And of course these people don't understand that the Supreme
363
00:18:41.119 --> 00:18:44.839
Court says it was ratified, therefore it was ratified. Supreme
364
00:18:44.839 --> 00:18:47.160
Court is the law of the land. The Constitution is
365
00:18:47.200 --> 00:18:48.839
not the law of the land. It's the Supreme Court.
366
00:18:48.839 --> 00:18:51.039
That's the law of land. And Supreme Court holds that
367
00:18:51.079 --> 00:18:54.480
it's ratified, it's ratified. But when you take something like
368
00:18:54.519 --> 00:18:57.039
that and you go okay, So, like I was telling
369
00:18:57.119 --> 00:19:01.079
somebody yesterday, said he you know, somebody says I haven't
370
00:19:01.079 --> 00:19:02.960
paid taxes in three or four years. I don't have
371
00:19:03.039 --> 00:19:06.160
to pay taxes and he's got a business and he's
372
00:19:06.160 --> 00:19:06.640
got all that.
373
00:19:06.759 --> 00:19:08.559
Well, a I would identify that right.
374
00:19:08.599 --> 00:19:11.359
AI would be able to go out and say, hey,
375
00:19:11.359 --> 00:19:14.559
wait a minute, here's your lifestyle, here's what's going on,
376
00:19:16.160 --> 00:19:17.279
how are you paying for that?
377
00:19:17.720 --> 00:19:19.839
And you know, we're asking questions.
378
00:19:19.960 --> 00:19:21.640
I think that's a really good point though, And I
379
00:19:21.640 --> 00:19:24.839
think this is something that I think the IRIS has
380
00:19:24.839 --> 00:19:29.279
missed for many, many years, is that customer service is
381
00:19:29.319 --> 00:19:32.000
more important than auditing.
382
00:19:32.640 --> 00:19:35.200
Because if you if you you know.
383
00:19:35.200 --> 00:19:40.480
George hw Bush, he wanted a kinder, gentler IRS.
384
00:19:40.799 --> 00:19:42.680
And we actually moved towards that.
385
00:19:42.839 --> 00:19:46.680
We I mean in the profession and the tax profession,
386
00:19:46.720 --> 00:19:50.119
we saw a definite move towards the IRIS was not
387
00:19:50.200 --> 00:19:53.720
so harsh, they weren't angry. We've seen that go the
388
00:19:53.799 --> 00:19:56.640
other direction in the last five to ten years. I
389
00:19:56.680 --> 00:19:59.799
mean it is definitely the taxpayer has become which the
390
00:20:00.000 --> 00:20:03.920
taxpayer is the customer, right, the taxpayers become the enemy.
391
00:20:03.960 --> 00:20:05.920
It's like your customer is your enemy. How does that
392
00:20:06.039 --> 00:20:06.839
work for you?
393
00:20:07.359 --> 00:20:10.200
Right? But if you make the customer experience really easy,
394
00:20:10.400 --> 00:20:12.680
I mean there are some things the IRS has done right.
395
00:20:12.759 --> 00:20:16.720
I mean you can go in and check on your
396
00:20:16.519 --> 00:20:19.640
on the irs website, you can see, okay, have they
397
00:20:19.640 --> 00:20:23.000
got my payments right? How you know they process my
398
00:20:23.119 --> 00:20:26.000
return that you can see that. And the more that
399
00:20:26.039 --> 00:20:30.319
we can do customer experience. You know, every business knows,
400
00:20:30.599 --> 00:20:33.640
the better the experience, the happier the customers, and the
401
00:20:33.680 --> 00:20:34.440
more likely.
402
00:20:34.240 --> 00:20:35.559
They're going to give you their money.
403
00:20:36.240 --> 00:20:40.160
This is like, this is marketing business one oh one,
404
00:20:40.720 --> 00:20:43.920
and it's it's nice to actually have some business people
405
00:20:44.039 --> 00:20:47.880
looking at this as opposed to government people who think, hey,
406
00:20:47.960 --> 00:20:52.160
you're you're you're bad because you're a taxpayer, so you're bad.
407
00:20:52.279 --> 00:20:53.480
You're you're the enemy.
408
00:20:53.920 --> 00:20:56.359
And it just seems like we could do it in
409
00:20:56.400 --> 00:20:58.960
such a way where we first, I think you're right,
410
00:20:59.079 --> 00:21:00.599
we first drive custom service.
411
00:21:00.960 --> 00:21:02.920
But then you know, I.
412
00:21:03.319 --> 00:21:05.640
Think we need to ask a question. Okay, well how
413
00:21:05.680 --> 00:21:07.799
come you didn't pay any you know, you could say
414
00:21:08.039 --> 00:21:10.319
as easy as you know your your option. Let's take
415
00:21:10.359 --> 00:21:13.240
the S corporation, right, So this is a flow through
416
00:21:13.400 --> 00:21:17.200
entity right where the tax is paid by the owner.
417
00:21:17.839 --> 00:21:21.720
And normally you would expect, you know, fifty percent or
418
00:21:21.759 --> 00:21:23.799
so of the net income to be paid in salary
419
00:21:23.799 --> 00:21:26.400
and fifty percent to be paid in distribution something like that.
420
00:21:27.559 --> 00:21:32.039
So why not ask the question, well, what's going on here?
421
00:21:32.400 --> 00:21:36.359
You know, can you justify this? Because remember the rule
422
00:21:36.519 --> 00:21:40.759
is all income is taxbule. Everything's taxable.
423
00:21:40.799 --> 00:21:44.240
You have to prove it's not okay, so you don't
424
00:21:44.279 --> 00:21:46.799
have to you don't the government doesn't have to prove
425
00:21:46.839 --> 00:21:49.160
it's taxbule, and they don't have to prove that you
426
00:21:49.160 --> 00:21:50.000
don't get a deduction.
427
00:21:50.039 --> 00:21:53.160
You have to prove you get a deduction. So that's
428
00:21:53.200 --> 00:21:54.720
the way the tax law is set up.
429
00:21:55.160 --> 00:21:57.680
And so why not ask that question, why not go
430
00:21:57.799 --> 00:22:02.519
through these technology steps that, yes, you're asked in question,
431
00:22:02.680 --> 00:22:05.720
there may be a perfectly good answer, but do it
432
00:22:05.799 --> 00:22:08.920
in such a way that is actually a customer service. Hey,
433
00:22:09.319 --> 00:22:13.599
we're checking, make sure thing's okay. We'll help us understand
434
00:22:13.640 --> 00:22:14.559
what's going on here.
435
00:22:16.160 --> 00:22:17.240
Yeah, I think that's right.
436
00:22:17.319 --> 00:22:19.559
Starting there sort of with the basics of making sure
437
00:22:19.559 --> 00:22:22.680
the matching is working properly, that they're obviously discrepancies that
438
00:22:22.720 --> 00:22:25.160
often are explained by just mistakes on the taxpayer's part.
439
00:22:25.200 --> 00:22:29.240
When they're finally our return, there's just an innocuous mistake
440
00:22:29.599 --> 00:22:31.119
is a good way to start here, and that can
441
00:22:31.160 --> 00:22:34.319
be leveraged both by just more fully deploying tools that
442
00:22:34.440 --> 00:22:37.319
the IRS already has and by you know, taking the
443
00:22:37.319 --> 00:22:39.880
next step and moving toward your more sophisticated AI tools.
444
00:22:40.839 --> 00:22:43.440
And I think it's exactly right that customer service needs
445
00:22:43.480 --> 00:22:47.319
to be the sort of the front of this effort
446
00:22:47.640 --> 00:22:50.599
moving forward, especially because I think it also sort of
447
00:22:50.799 --> 00:22:52.640
sends a signal for folks when you think about from
448
00:22:52.640 --> 00:22:55.759
an enforcement perspective or returning folks, you know, from trying
449
00:22:55.759 --> 00:22:58.680
to evade taxes when they see an IRS that is
450
00:22:59.000 --> 00:23:02.119
not just you know, potentially hostile to taxpayers in the
451
00:23:02.119 --> 00:23:06.079
worst case, but also it's shymbolic and it's customer service interactions.
452
00:23:06.799 --> 00:23:09.640
People rightly assume that, well, they're probably a shambolic on
453
00:23:09.720 --> 00:23:11.400
enforcement as well, so I can get away with just
454
00:23:12.599 --> 00:23:14.839
filing right or evading or you're changing some of the numbers,
455
00:23:14.839 --> 00:23:16.839
because if they're so bad at this, I doubt they're
456
00:23:16.839 --> 00:23:21.279
going to be sophisticated on the on detecting avoidance or invasion.
457
00:23:21.400 --> 00:23:24.079
And so if we were to modernize the front phase
458
00:23:24.119 --> 00:23:26.000
to make it to send a signal that hate agency
459
00:23:26.039 --> 00:23:28.359
is taking all this seriously and is competent, I think
460
00:23:28.359 --> 00:23:30.839
that would also help with uh, you know, the tax
461
00:23:30.920 --> 00:23:36.359
gap and with reducing non payment of liability that's legitimately owed.
462
00:23:36.759 --> 00:23:38.960
So you know, there's a lot of synergies here between
463
00:23:38.960 --> 00:23:39.440
these two things.
464
00:23:39.559 --> 00:23:41.759
Yeah, And the reality is you don't need more people
465
00:23:42.079 --> 00:23:45.519
for the customer service. There is there is good AI
466
00:23:45.799 --> 00:23:49.319
right now that businesses are using to do sales calls.
467
00:23:49.799 --> 00:23:50.279
That's right.
468
00:23:50.319 --> 00:23:55.160
You cannot literally, you cannot tell, I've I've listened to
469
00:23:55.200 --> 00:23:59.079
it in action. You cannot tell it's not a person. Okay,
470
00:23:59.240 --> 00:24:02.400
And we want we want a personal experience, that's what
471
00:24:02.440 --> 00:24:04.039
we want. We don't want to be put on hold for.
472
00:24:03.960 --> 00:24:07.599
Two hours, which is currently I mean, and it's been
473
00:24:07.599 --> 00:24:08.400
this way for years.
474
00:24:08.400 --> 00:24:10.759
And the irsays, well, we've got we answer eighty five
475
00:24:10.799 --> 00:24:13.799
percent of the calls. Well, okay, if they answered eighty
476
00:24:13.799 --> 00:24:17.319
five percent of the calls, the answer was hang up
477
00:24:17.400 --> 00:24:18.119
and try again.
478
00:24:18.599 --> 00:24:21.519
That was that in their mind, was answering the call.
479
00:24:21.359 --> 00:24:22.559
Because I was a number.
480
00:24:22.880 --> 00:24:23.920
I guarantee you.
481
00:24:25.599 --> 00:24:29.559
That is no tax professionals experience that eighty five percent
482
00:24:29.599 --> 00:24:33.039
of the calls are being answered. And on top of that,
483
00:24:33.400 --> 00:24:36.079
I mean, you think about it, So, how many people
484
00:24:36.119 --> 00:24:38.880
do you need. You might need twenty five thousand people
485
00:24:39.319 --> 00:24:42.519
to answer twenty five thousand calls right.
486
00:24:44.680 --> 00:24:48.160
Every half hour, But if you have AI.
487
00:24:48.000 --> 00:24:52.519
Doing it, it takes it takes one minute to answer
488
00:24:52.559 --> 00:24:53.960
twenty five thousand calls.
489
00:24:54.200 --> 00:24:56.960
You can answer infinite. You can answered two hundred and.
490
00:24:56.920 --> 00:24:59.960
Fifty thousand, two point five million, twenty five million, can
491
00:25:00.160 --> 00:25:02.000
answer all those calls immediately.
492
00:25:02.279 --> 00:25:05.200
You'd call, you'd get, you'd get the phone would pick up.
493
00:25:05.440 --> 00:25:07.759
There would be no waiting at all, and you and
494
00:25:07.799 --> 00:25:09.279
you'd be able to ask you a question and you'd
495
00:25:09.319 --> 00:25:11.839
get an answer or a direction as to where to
496
00:25:11.920 --> 00:25:15.119
go to get your answer. And so to me, it
497
00:25:15.160 --> 00:25:18.599
seems like, wow, you could do a lot with a little.
498
00:25:18.640 --> 00:25:22.920
Now here's here's where the rover meets the road, Garrett,
499
00:25:23.599 --> 00:25:27.519
are they putting you know, they actually let Are they
500
00:25:27.519 --> 00:25:29.839
putting money into this? Because they actually let a lot
501
00:25:29.880 --> 00:25:32.359
of the people who were working on the technology, they
502
00:25:32.480 --> 00:25:34.400
let them go, right, So.
503
00:25:34.599 --> 00:25:36.319
Are they putting money back.
504
00:25:36.279 --> 00:25:39.200
Into the technology?
505
00:25:39.200 --> 00:25:42.119
Are they going to bring that back or are we
506
00:25:42.160 --> 00:25:44.480
gonna have a gut at I R S. Yeah.
507
00:25:44.599 --> 00:25:46.759
I think that is the single orders concern that I have,
508
00:25:46.880 --> 00:25:48.720
which is there is a there's a right way to
509
00:25:48.799 --> 00:25:50.839
do this in a not so great way, and I think.
510
00:25:50.720 --> 00:25:53.480
A lot of possibility is they do.
511
00:25:54.960 --> 00:25:57.640
Either let go or you know, folks who are more
512
00:25:58.160 --> 00:26:00.599
who we command you know, higher oper higherries and great
513
00:26:00.599 --> 00:26:02.519
opportunities in the private sector, who see sort of all
514
00:26:02.519 --> 00:26:04.480
has change and decide to leave, and you sort of
515
00:26:04.640 --> 00:26:06.640
brain drain of the best folks who should stay and
516
00:26:06.680 --> 00:26:09.079
be motivated to help with this effort, and then you
517
00:26:09.200 --> 00:26:11.279
end up in that in that world where you have
518
00:26:11.440 --> 00:26:14.200
a leaner I r S. That isn't using these tools
519
00:26:14.359 --> 00:26:17.559
in the in the best way possible, and that the
520
00:26:17.759 --> 00:26:21.359
bigger risks long term is that could possibly invalidate in
521
00:26:21.400 --> 00:26:24.240
the eyes of taxpayers and voters this approach, which would
522
00:26:24.240 --> 00:26:26.559
be a big miss opportunity, right, because then folks who
523
00:26:26.559 --> 00:26:28.279
are sort of advocates of the alternative vision of no,
524
00:26:28.400 --> 00:26:30.480
let's just throw as much money in people as possible
525
00:26:30.519 --> 00:26:34.359
at this and not try this technology modernization effort may
526
00:26:34.440 --> 00:26:36.799
end up back in the driver's seat. So I think it, Yeah,
527
00:26:36.839 --> 00:26:39.119
this is a big back to that bet language, right,
528
00:26:39.880 --> 00:26:42.200
an opportunity here to do this right. But it does
529
00:26:42.279 --> 00:26:45.279
require you know, a sensitivity and appreciation for the fact
530
00:26:45.319 --> 00:26:46.599
that you do need good talent to be able to
531
00:26:46.640 --> 00:26:48.599
deploy this stuff and to be able to maintain it
532
00:26:48.720 --> 00:26:50.759
right and to bugget because it's likely to be iterative, right,
533
00:26:50.759 --> 00:26:52.359
the first version of a lot of these tools does
534
00:26:52.440 --> 00:26:56.759
need sort of experience behind it to get them deployed correctly.
535
00:26:57.279 --> 00:27:00.240
Is there somebody at the at the I r US
536
00:27:00.359 --> 00:27:03.880
right now who's working on technology?
537
00:27:04.000 --> 00:27:05.839
They didn't? Did they get all of it?
538
00:27:06.400 --> 00:27:10.640
Or are there people working on are Is there somebody
539
00:27:10.759 --> 00:27:14.400
going hey, yes, this is what we're gonna do. Yeah.
540
00:27:14.440 --> 00:27:16.599
My understanding is that there are, and especially was developed
541
00:27:16.599 --> 00:27:19.680
and matured a bit under Nanny werfol you know both
542
00:27:20.119 --> 00:27:21.960
you know, individual staff members and teams that are that
543
00:27:22.000 --> 00:27:25.279
are working specifically on tech modernization. Back to our earlier point, right,
544
00:27:25.319 --> 00:27:26.960
a lot of this has existed for a long time.
545
00:27:27.119 --> 00:27:29.039
So that's not to say that these folks are like
546
00:27:29.240 --> 00:27:30.759
without any additional motivation.
547
00:27:30.519 --> 00:27:32.359
Or change the ones, We're going to get it all done.
548
00:27:33.079 --> 00:27:34.519
But I think I think the risk right now is
549
00:27:34.599 --> 00:27:36.079
and what we don't know is how many of those
550
00:27:36.079 --> 00:27:38.519
folks are going to participate in the broader you know,
551
00:27:38.559 --> 00:27:43.839
severance sort of resignation plan right or leave thereafter, depending
552
00:27:43.880 --> 00:27:44.720
on how disruptive it is.
553
00:27:44.759 --> 00:27:45.680
I think that's the question.
554
00:27:46.160 --> 00:27:48.440
And so you know, I r S leadership, Treasury all
555
00:27:48.440 --> 00:27:49.839
the way up to the White House needs to really
556
00:27:49.880 --> 00:27:52.160
sort of lean in and make sure that talent is retained,
557
00:27:53.279 --> 00:27:54.799
because it's gonna be hard to either bring them back
558
00:27:54.880 --> 00:27:57.480
or entice them back if if they.
559
00:27:57.440 --> 00:27:59.240
End up leaving. So I think that's going to be
560
00:27:59.759 --> 00:28:00.559
a part of it.
561
00:28:00.599 --> 00:28:02.440
The other part, of course, is all the nitty gritty
562
00:28:02.480 --> 00:28:04.319
of sourcing of new technology.
563
00:28:04.400 --> 00:28:04.640
Right.
564
00:28:05.000 --> 00:28:06.480
One thing we've talked about a lot to day, but
565
00:28:06.519 --> 00:28:09.000
will be a political concern is the privacy side. Right,
566
00:28:09.039 --> 00:28:10.519
how do you do all of this if you're going
567
00:28:10.559 --> 00:28:12.200
to And that's been something that's slowed stuff down for
568
00:28:12.240 --> 00:28:15.599
a long time is dealing with you know, taxpayer return information.
569
00:28:15.880 --> 00:28:19.160
To even do something as basic as providing uh information
570
00:28:19.200 --> 00:28:22.319
on tax returns, you know, electronically on the RS website
571
00:28:22.400 --> 00:28:26.759
has been a challenge. Identifying folks through you know, I
572
00:28:26.880 --> 00:28:29.680
D dot me and other tools that have at best
573
00:28:29.759 --> 00:28:33.000
mixed reception on the part of taxpayers. Is another just
574
00:28:33.039 --> 00:28:35.279
whole other sort of side of this that can be
575
00:28:36.200 --> 00:28:37.400
present some unique challenges.
576
00:28:37.920 --> 00:28:42.000
Interesting. So I'm curious what you think about.
577
00:28:42.319 --> 00:28:46.440
Are we we've had five acting I R S commissioners
578
00:28:46.920 --> 00:28:49.359
in the last three months.
579
00:28:50.000 --> 00:28:52.039
Are we going to get an I R S commissioner?
580
00:28:53.119 --> 00:28:54.920
Will it be Billy Long or is it going to
581
00:28:54.920 --> 00:28:57.039
be somebody else, what what what's going to happen there?
582
00:28:57.079 --> 00:29:00.359
Because that you're you were talking about leadership, leaders is
583
00:29:00.400 --> 00:29:03.359
important in order to move things forward.
584
00:29:03.680 --> 00:29:05.599
What do you see from a leadership standpoint?
585
00:29:06.880 --> 00:29:08.039
Yeah, I think it is.
586
00:29:07.680 --> 00:29:09.359
You know, it is to say, really important that they
587
00:29:09.400 --> 00:29:13.079
get you know, a confirmed IRIS commissioner in the driver's seat.
588
00:29:13.559 --> 00:29:15.839
It's trying to prognosticate on exactly when and how that
589
00:29:15.880 --> 00:29:17.759
will happen. It does sound like it was just mostly
590
00:29:17.759 --> 00:29:21.559
a matter of getting that hearing confirmation hearing scheduled for
591
00:29:22.240 --> 00:29:24.720
Billy Long to get get him going. I know there's
592
00:29:24.720 --> 00:29:26.519
been a lot of other hearings and activity on the
593
00:29:26.559 --> 00:29:28.960
Hill that have may have delayed that, but I think
594
00:29:28.960 --> 00:29:31.440
that's going to be important because part of PI was
595
00:29:31.519 --> 00:29:34.920
driving a lot of this uh you know, transition of leadership,
596
00:29:34.960 --> 00:29:38.960
and the introm has been folks who either maybe have
597
00:29:38.960 --> 00:29:40.799
a difference of vision on various things the IRIS is
598
00:29:40.839 --> 00:29:43.960
not getting involved with, like, for example, dealing with immigration enforcement,
599
00:29:44.720 --> 00:29:46.480
or who don't want to be you know, tip of
600
00:29:46.519 --> 00:29:47.799
the spear on that don't want to be the name
601
00:29:47.839 --> 00:29:50.920
associated with that stuff a confirmed political point e. That's
602
00:29:50.960 --> 00:29:53.000
part of why we have them, right is they're supposed
603
00:29:53.039 --> 00:29:56.319
to take that heat, that exposure and drive that forward
604
00:29:56.359 --> 00:30:00.039
and that allows the other folks who to focus on
605
00:30:00.240 --> 00:30:02.279
the internal operation of the agency, and that's how it
606
00:30:02.279 --> 00:30:03.960
should be. So I think that is something that could
607
00:30:03.960 --> 00:30:06.839
help stabilize things, if anything, just to divide those really
608
00:30:07.240 --> 00:30:10.640
both important rolls up a bit as designed in the system.
609
00:30:11.119 --> 00:30:13.319
And so I think it's a matter of you know,
610
00:30:13.480 --> 00:30:15.559
pressing on Congress, Hey, this is an important role.
611
00:30:15.839 --> 00:30:17.160
We want to hit this done.
612
00:30:16.960 --> 00:30:19.680
So there isn't further because that's the problem is the
613
00:30:19.680 --> 00:30:23.279
morale is a cascading thingisitions right, that this can spiral
614
00:30:23.319 --> 00:30:25.400
downward and that's going to take more time to rebuild,
615
00:30:25.839 --> 00:30:27.279
all while we're trying to do this other stuff at
616
00:30:27.279 --> 00:30:28.599
the same time on tech modernization.
617
00:30:29.039 --> 00:30:31.079
So I think that's going to be you know, that's
618
00:30:31.079 --> 00:30:31.960
sort of common sense.
619
00:30:32.000 --> 00:30:34.960
But Congress isn't acting like that, right, We're not seeing
620
00:30:35.000 --> 00:30:36.880
that that intivation. They're trying to deal with a lot
621
00:30:36.920 --> 00:30:38.920
of other stuff, including of course the big tax package.
622
00:30:38.960 --> 00:30:41.440
But getting the seat field will be important.
623
00:30:42.359 --> 00:30:44.119
So let's talk about the tax package.
624
00:30:44.359 --> 00:30:49.000
Just from the standpoint of all right, so you've you've
625
00:30:49.000 --> 00:30:52.319
eliminated twenty thousand employees, from the I R S.
626
00:30:53.200 --> 00:30:55.240
How does that tax package get implemented?
627
00:30:56.880 --> 00:30:58.960
So I think that details here will matter a lot, because,
628
00:30:59.000 --> 00:31:00.480
of course, a big part of it is going to
629
00:31:00.519 --> 00:31:02.839
be sort of potentially extension or permanence for a lot
630
00:31:02.839 --> 00:31:05.200
of the expiring individual provisions of t c JA. A
631
00:31:05.240 --> 00:31:07.160
lot of that won't require a lot of additional work
632
00:31:07.319 --> 00:31:10.880
right in the I R S, which would be good.
633
00:31:11.039 --> 00:31:12.680
So then it comes down to what are the new
634
00:31:12.680 --> 00:31:14.519
things that are being adjusted that they're going to have
635
00:31:14.559 --> 00:31:17.440
to take take on board. Uh, you know, the biggest
636
00:31:17.440 --> 00:31:18.799
things that sort of on my right are, of course,
637
00:31:18.880 --> 00:31:22.640
are any of the new Trump tax cuts associated with uh,
638
00:31:22.680 --> 00:31:25.720
you know, tax exemptions for tips over time, maybe something
639
00:31:25.720 --> 00:31:28.240
for seniors or social security, depending on what passes the Senate.
640
00:31:29.079 --> 00:31:31.000
A lot of that, you know, I could depend on
641
00:31:31.039 --> 00:31:32.880
the legislative language, but a lot of the sort of
642
00:31:32.920 --> 00:31:37.279
you know, avoidance anti avoidance measures, other administrative concerns might
643
00:31:37.319 --> 00:31:39.799
be punted to I R S and Treasury, and that's
644
00:31:39.839 --> 00:31:42.119
where they're going to take that on on top of
645
00:31:42.200 --> 00:31:44.599
a lot of these other new efforts that are led
646
00:31:44.599 --> 00:31:47.200
by the AD the administration, So that that that's one
647
00:31:47.720 --> 00:31:50.279
sort area of work that they may have to deal
648
00:31:50.319 --> 00:31:50.960
with and.
649
00:31:50.960 --> 00:31:54.119
Yet punting to the I R S is also problematic
650
00:31:54.200 --> 00:31:57.480
under the local Bright decision, right where Okay, can they
651
00:31:57.519 --> 00:31:58.559
can they actually do that?
652
00:31:59.839 --> 00:32:00.759
Can the IRS?
653
00:32:00.799 --> 00:32:03.000
You know, the IRIS is a under scrutiny like all
654
00:32:03.039 --> 00:32:09.160
the other UH departments. Does this regulation really meet the
655
00:32:09.240 --> 00:32:14.400
requirement of of this is actually the law and it's
656
00:32:14.480 --> 00:32:15.960
not creating law?
657
00:32:16.720 --> 00:32:18.480
Right? Yeah, so they're gonna deal with that.
658
00:32:18.480 --> 00:32:22.079
That's a new hurdle, uh and UH, and then on
659
00:32:22.119 --> 00:32:24.160
top of that, there's there may be additional revenue raisers
660
00:32:24.200 --> 00:32:26.279
that come out of here. Right, we're hearing reporting on
661
00:32:26.799 --> 00:32:31.079
changes to UH once cq M, which which disallows reductions
662
00:32:31.119 --> 00:32:35.240
for highly paid executives for CEA corporations. There may be
663
00:32:35.279 --> 00:32:38.839
other you know, changes to business salts that could obviously
664
00:32:38.880 --> 00:32:42.319
not just require RAGS or implementation. But then you know, uh,
665
00:32:42.319 --> 00:32:45.960
going back into enforcement, you know, new sort of efforts there.
666
00:32:46.000 --> 00:32:48.359
There's and then on the TI the customer service side,
667
00:32:48.599 --> 00:32:50.880
tax version needs to know what's going on with all
668
00:32:50.920 --> 00:32:55.079
of this new stuff. So you're sitting out resources explainers, FAQs,
669
00:32:55.160 --> 00:32:59.319
more detailed instructions, UH, new forms or adjustments to forms
670
00:32:59.319 --> 00:33:01.680
that already exist. UH, that's all going to be thrown
671
00:33:01.680 --> 00:33:04.799
on top of them as well. TJA produced over a
672
00:33:04.839 --> 00:33:08.640
thousand pages of you know, news or finalized regulation and
673
00:33:08.720 --> 00:33:11.480
I was in IRA produced a lot a bunch as well,
674
00:33:11.839 --> 00:33:14.119
and so I expected that maybe not quite that size,
675
00:33:14.160 --> 00:33:16.519
but we still could see uh, their work cut out
676
00:33:16.559 --> 00:33:18.519
for them over the next couple of years.
677
00:33:19.240 --> 00:33:21.559
Yeah, So it's, uh, it's interesting times we're in.
678
00:33:22.440 --> 00:33:24.160
We're we're looking at a big new tax bill, but
679
00:33:24.240 --> 00:33:27.759
like you said, Garrett, the big new tax bill is
680
00:33:28.039 --> 00:33:31.599
mostly not new. There are certain things we've got to
681
00:33:31.599 --> 00:33:34.000
pay attention to, like you know, how they're going to
682
00:33:34.039 --> 00:33:37.240
monitor whether you qualify for the tips exemption, whether you
683
00:33:37.319 --> 00:33:39.759
qualify for the overtime exemption. That's where the regulations I
684
00:33:39.759 --> 00:33:42.119
think are going to come in. And uh and and
685
00:33:42.160 --> 00:33:45.279
we're gonna have to watch this very carefully. In the meantime, though,
686
00:33:46.680 --> 00:33:50.799
you know, the good news is most taxpayers are still
687
00:33:50.920 --> 00:33:54.599
complying and there's there's not been that big disruption, So
688
00:33:54.640 --> 00:33:59.200
that's really good. Uh, Garrett, You guys tax menation write
689
00:33:59.200 --> 00:34:03.880
a lot about what's going on, and uh your where
690
00:34:03.880 --> 00:34:07.119
can we go to get more of more from your
691
00:34:07.200 --> 00:34:09.960
studies in your research so.
692
00:34:09.840 --> 00:34:12.000
You can find more on tax data and real time
693
00:34:12.039 --> 00:34:14.480
analysis on everything that's going on federally in the States
694
00:34:14.480 --> 00:34:17.440
and tax policy at tax Foundation dot org.
695
00:34:18.360 --> 00:34:21.480
Awesome, So thank you Garrett, Thanks everybody for listening. I
696
00:34:21.519 --> 00:34:25.719
know talking about the i r S is nobody's favorite subject,
697
00:34:26.719 --> 00:34:30.239
still a very critical part, and we like Garrett you say,
698
00:34:30.280 --> 00:34:32.239
I think you really summarized it well when you said,
699
00:34:32.519 --> 00:34:35.800
we have an enormous opportunity here, and actually the Trump
700
00:34:35.840 --> 00:34:41.559
administration has created an enormous opportunity to significantly streamline and
701
00:34:41.639 --> 00:34:44.280
improve the I r S, improve data collection, and most
702
00:34:44.280 --> 00:34:48.800
of all, improve customer service. When we follow this, when
703
00:34:48.840 --> 00:34:52.880
we understand what's going on, and when we understand the
704
00:34:52.920 --> 00:34:58.480
tax law, remember, actually what happens is are we always
705
00:34:58.480 --> 00:35:01.239
make more money and we pay less tax when we
706
00:35:01.360 --> 00:35:03.639
actually know what we're doing. Thanks everyone, We'll see you
707
00:35:03.639 --> 00:35:05.079
next time on The Waltability Show.
708
00:35:05.639 --> 00:35:08.960
This podcast is a presentation of Rich Dad Media Network.