Reinventing the IRS.

Patricia B. Bissell, CPA, sole practitioner, Potomac, Maryland.

One thing is definite: The Internal Revenue Service needs to upgrade its computer system, taking advantage of the technology that's now available. Such a move would streamline its operation immensely.

I must say, however, the service is much better now than it used to be. The people are much friendlier. Even their letters are not as threatening as they used to be. But the IRS still has a long way to go. I get very irritated when I must call a few times about the same tax problem and can't speak to the same person twice. As a result, I have to explain the whole problem from the beginning. It wastes my time and the IRS staffs time.

The problem, I believe, is poor training--especially in the case of the service center staff. Sometimes the staff people aren't even up on the new laws or regulations. Many of them don't sound very professional. From my observation, many are not accountants or even business majors, for that matter. That makes it very frustrating when you try to discuss technical subjects with them.

The IRS also needs to improve the way it responds to correspondence. Too often when I send a letter, I get a form letter that says the IRS will reply in 30 days. I recognize they have to deal with many letters, but they simply must find a way to be more responsive especially to practitioners.

The other area that needs improvement is the tax form. We hear a lot of talk about simplification, but I've yet to see it accomplished. The other day I took a class on preparing the new tax forms. We added up the time it takes to do a return based on the IRS's estimate. We all concluded that, because of the amount of time it takes to complete a complex return, it's going to be hard for tax practitioners to be competitive.

One schedule is going to be murder: 6251--the alternative minimum tax schedule. It's an absolute horror. It has one line that makes you recalculate every single thing on the return, and I don't know of any computer program that is going to do it. Form 2210, Payment of Estimated Tax, has six schedules. When you get the 1040 package, much of it contains worksheets. There are more worksheets than there are forms.

The IRS has its work cut out for it.

Isabelle V. Curtis, CPA, PFS, sole practitioner, Middlebury, Connecticut.

If there was one thing the IRS could do better, it would be to work with taxpayers' CPAs more closely. Much of what the IRS does today is highly technical. Contacting a client directly often only confuses the issue. Instead, the IRS should deal one-on-one with CPAs, who can communicate on their level.

In the pension area such communication is vital. I handle a great number of retirement plan audits and the local district office I deal with has gotten to know me and my expertise. I try to have all such audits transferred to that office. Many times I invite the IRS auditor to work in my office rather than the client's, asking him or her to give me a list of what's needed up front so I can provide it.

Improved communication also is vital in the case of criminal investigations. IRS correspondence notifying clients they are the subjects of such investigations can cause a great deal of stress and trigger costly professional fees, not to mention the possibility of additional taxes and even jail. I am particularly concerned when an innocent party is involved. Take a partnership, for example. One partner may have committed a criminal offense, yet the investigation extends to other partners who may not have been informed someone else is the real target.

In most cases, a criminal investigation is handled by the district office while the local service center handles possible changes to the client's tax return. Yet the two offices don't seem to communicate. I recently attended a forum with 40 other practitioners who had had similar experiences. The IRS's computer system should be set up to allow a service center's case to be put on hold until a criminal investigation has been completed, a determination has been made and the innocent party has been contacted. As it is now, service centers send penalty notices before either the CPA or the taxpayer knows what it's all about. The key for the IRS is communication and coordination.

Along the same lines, the IRS has a tendency to reach conclusions before it has all the facts. It assumes a set of circumstances and sends the client a strong letter assessing additional taxes, interest and penalties. The IRS's emphasis should be on making an inquiry before assessing penalties.

Robert M. Rosen, CPA, national director of tax quality control, Ernst & Young, Washington, D.C.

Changing procedures so final regulations are issued sooner obviously should be a priority. The IRS has several projects under way involving proposed regulations that have not been finalized. Tax returns, of course, can be filed based on proposed regulations. However, if the IRS modifies these rules or their effective dates subsequently, it creates hardships in terms of extra administrative costs and a great deal of inconvenience, especially for corporate taxpayers who must amend their returns to conform to the final regulations.

The problem is compounded by substantial delays. Take, for example, the proposed regulations for consolidated returns. The IRS is working on three major projects in this area concurrently--all involving pending regulations that have not been adopted. Taxpayers filing returns don't know what position to take because at least some of these proposed rules are likely to be modified.

To preclude lengthy delays, once the IRS proposes regulations in a given area, it should finish the project before initiating another one for which still more regulations will be proposed. It should follow a basic rule: first in, first out.

Richard Goodman, CPA, tax partner, Altschuler, Melvoin & Glasser, Chicago.

I'd like the IRS to withdraw one of the proposals in its reorganization program. The IRS plans to merge the Appeals Division into the Chief Counsel's Office. The proposed merger probably will reduce the number of staff members who can hear appeals. More important, the merger will make the IRS appeals process seem like legal proceedings, leading the public to believe legal representation is required in any appeals process. I also think the objectivity of the Chief Counsel's Office could be compromised.

In addition, there is a change I'd like to see made in the area of taxpayer communications. After a taxpayer receives his or her first collection notice, all subsequent notices begin with "balance due" without explaining the components of that balance, such as taxes owed, interest and penalties. As a result, taxpayers or practitioners who don't receive a first collection notice will have no idea what the balance due represents.