Is 2018 the Busiest Tax Year Ever?

If you thought tax reform was tough on your team, just imagine how the IRS feels.

Earlier this month, representatives from the tax agency made a guest appearance at the American Payroll Association’s annual summit in Washington D.C. In addition to detailing how the agency  was handling this year’s historic changes, the representatives previewed the rest of their 2018 docket.

Picking Up the Pieces from Tax Reform

“It’s been a very interesting six months,” Ken Corbin, Director of Return Integrity and Compliance, told the audience of payroll professionals. Those in attendance knew exactly how to interpret the remark. Tax reform came at an inopportune time for the agency, with funding having decreased nearly 20 percent since 2010.

In response to the Tax Cuts and Jobs Act, the IRS recently created a division called the Tax Reform Implementation Office (TRIO). The group’s tallest order is updating all of the government systems with the law’s new rules. In total, over 140 IT systems need an overhaul. Another sobering stat? According to Corbin, 492 forms and processes need to change as well.

There’s also the very practical need of getting support staff up to speed with the law, which is over 1,000 pages long. The IRS expects a record number of phone calls from employers and individual taxpayers next filing season, meaning those fielding questions on the phone need to be familiar with the law front-to-back.

A New, New Form W-4 and Withholdings Calculator

Going into 2018, the IRS had envisioned launching a totally redesigned Form W-4 and tax withholding calculator. Then tax reform happened—and the IRS scrambled to put out updated versions immediately, with little time to think through user experience. That version of the Form W-4 is available in Namely’s free onboarding toolkit.

“We kind of hacked it,” Corbin admitted. But even so, he reassured the audience that a thoughtful redesign of the form and its accompanying calculator was still in the works for the 2019 filing year.

Corbin also previewed the new “Paycheck Checkup” campaign, which encourages employees to proactively review their withholdings in light of tax reform. Because of all the changes, there’s a good chance that many employees are underpaying for the first time this year. Corbin asked the payroll professionals in the room to help spread the word.

Combating Fraud

Next to grappling with tax reform, the agency’s top priority is tackling fraud. In 2017, the IRS received over 242,000 identity theft claims. In cases like these, criminals use stolen social security numbers to file and collect someone else’s return. Usually, victims only discover the fraud once they try to submit their real returns and get a duplicate filing error.

To help address the issue, the agency has doubled-down on its verification code pilot program. Working with participating payroll service providers, the IRS has added a new, experimental field to the Form W-2 that includes a 16-digit verification code unique to each taxpayer. The codes create an added layer of security and could feature on over 60 million W-2s this year.

While the agency has made headway, problems remain. Nina Olsen, who leads the Office of the Taxpayer Advocate, a division of the IRS, shared some of those issues with the audience. Many of the filters the agency uses to detect fraud have a false-positive rate of 60 to 90 percent, leading to far too many legitimate returns being denied. The agency will continue to focus on lowering these rates without sacrificing security.

Citing the year’s many challenges, at one point Corbin jokingly offered that he’d be “available for hugs” later in the day. There’s little doubt that 2018 will prove a monumental test for payroll and HR professionals alike.

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