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Fred Goldberg: shaping a more responsive IRS.

When Fred T. Goldberg, Jr., speaks of his position as commissioner of the Internal Revenue Service, he often remarks, "I love this job." That's understandable, because he apparently developed an affinity for the service early in his career. When he was sworn in as commissioner on July 5, 1989, it marked the third time that the Yale-educated tax layer had taken a position with the agency.

Goldberg looks upon his chief mission as making the tax system more "workable"--more responsive to taxpayer needs. He says, "A key factor in our program has nothing to do with how we administer the tax laws. It's how we deal with people, how we get administrative hassles off the backs of the taxpayers. We should not be asking our citizens to do something we can't do ourselves. If, for example, we ask a taxpayer to do something for us in 30 days, we owe him or her something back in 30 days. That's the type of mind-set we are looking for."

He adds, "One of the big challenges I face is to find ways to set our folks free to do right by the taxpayer." He stresses that "the image of a faceless, insensitives IRS bureaucrat is usually not deserved. Many times I get out into the field and find that our people are frustrated because they can't fix problems quickly enough. But I think we've built up the momentum to make it easier for the taxpayer."


Much of that momentum has come from Goldberg's administrative program to simplify IRS procedures. His attempts to streamline the system began almost with his first day in office, and he now believes his efforts are beginning to bear fruit. Success, he says, has come on several levels. Most important is a change in the staff's attitude. Now, he notes, "you can't have a conversation around here on rulings, regulations or administrative procedures without a meaningful discussion on what it means to the taxpayer. And that is real progress." Before he instituted his program, the only consideration was the theoretical "right" answer which, in Goldberg's view, inevitably leads to "a system that doesn't work."

Also successful, adds Goldberg, are moves the IRS has decided not to make because they could have further complicated the system. He compares himself to a baseball general manager whose best trades were the ones he didn't make.

Reaction to the simplification program has been very favorable from both business and individuals. Specifically, Goldberg points to the employee business expense substantiation rules. Rather than "creating some brave new world of documentation that could have brought business to a halt," he notes that the IRS now says, in essence, "If a business has rules in place for recording advances and getting receipts, that's fine with us. We won't ask that business for changes."

He is particularly proud of the flat $.26 per mile expense deduction for business use of an automobile, which replaced a complicated sliding-rate system designed to reflect costs. "What could be more simple or logical?" he asks with a grin. Goldberg recalls that his own payroll and exmination people were uncertain about how they should apply the old rules. "When our own people can't work with our rules, it's time to go to a simpler rule," he says.

He also points to a favorable reaction on simplifying discrimination rules on pensions and to "considerable success" with simpler like-kind exchange rules. He admits that new loss disallowance rules have been controversial and believes that, while the basic concept behind them is sound, some refinements might be necessary to make these rules fairer.

In the international area, allowing the use by business of spot currency rates has simplified foreign currency conversions without revenue losses.

Goldberg stresses, however, that simplification is an ongoing process. "You build a building a brick at a time. There's no magic wand that we can wave to achieve simplification. We've made a great deal of progress, but we won't stop there. We intend to make further gains in the future."


Goldberg's vision is of a tax system in which voluntary compliance is the norm and enforcement can be kept to a minimum. He believes that the key to voluntary compliance is the cooperation of tax professionals. While acknowledging that the IRS and tax professionals are sometimes adversaries, he strongly believes the tax system works "because the professionals make it work."

He is particularly with a joint task force on communications, composed of representatives of the American Institute of CPAs and other professional organizations who met with IRS officials to review IRS correspondence and make it more readable and understandable. The taks force submitted its recommendations to Goldberg on April 30, 1990. Prior to the creation of the task force, the IRS had been studying correspondence for over a decade. Goldberg calls the task force results "great stuff" and says he has "nothing but the highest praise" for the group. In his first year as commissioner, Goldberg's main goal was to raise accuracy rates on IRS answers to taxpayer questions. Having achieved that (accuracy rates went from 63% to 78% in 1990), he has made clearer correspondence his principal goal for this year. Specifically, he speaks of "things like more readable letters, containing the name and number of a real human being at the IRS for the affected taxpayer to call."



Goldberg is also grateful for the support of the AICPA in his drive for a modernized IRS computer system. The most visible measure of the progress being made is the spread of electronic filing. He notes that while faster refunds spark most of the interest in electronic filing, they have a much more important benefit for the IRS. The combined error rate from taxpayers and the IRS on paper-filed returns is 15%, but it is only 4% on electronically filed returns. Goldberg calls this a "staggering" difference. If the 4 million returns filed electronically last year had been filed in the traditional manner, they would have produced another 440,000 errors. Correcting those errors, no matter how small, would have required additional time and expense by both the taxpayer and the IRS.

Another promising development of computer modernization is called on-line entity. Under the old system, whenever a taxpayer moved, married or divorced, the files had to be located and updated manually. Since circumstances change for millions of taxpayers each year, problems often developed in the recordkeeping. With on-line entity, IRS personnel can gain access to a taxpayer's name, address and taxpayer identification number immediately, making certain that timely entries are made to taxpayer accounts.


Goldberg also offered comments ont he current status of several IRS developments that are of professional concern to CPAs and could affect the manner in which they conduct their practices or handle their corporate responsibilities.

* Coordinated examination program. A new executive committee report on recommendations to improve the coordinated examination program for the 1,500 largest corporations in the United States has caused some concern because of a vague reference to a possible future request for accountants' workpapers in these cases.

Goldberg was firm in his statement that a request for accountants' workpapers was not being considered and would not be considered during his term as IRS commissioner. "It's not only been tabled," he said, "it's off the table."

* Amnesty program. Goldberg believes that a general amnesty to encourage the colleciton of back taxes would be "a disaster." He states, however, that if Congress were to consider a targeted penalty relief program, he would listen. A targeted penalty relief program would involve a waiver or reduction in penalties for a small number of taxpayers beset by special circumstances. He would be particularly interested if it were part of a package designed to improve the long-term performance of the IRS, including compliance legislation, increased audit capabilities and improved collection potential.

* Penalties roundtable. The commissioner states that the IRS has gotten good input from the penalties roundtables. The roundtables are organized by the AICPA and include representatives from the IRS, the Treasury and various organizations of tax professionals. The discussions involve issues relevant to the task of translating last year's legislation on tax penalties into IRS regulations. He admits that they face a difficult chore because "they need to implement the spirit of last year's penalty reform legislation. Penalties should not be a revenue raiser--they should be an inducement to compliance."

* Audit time and place rules. Proposed regulations for the time and place of IRS audits mandated by the Taxpayer Bill of Rights have presented problems for some taxpayers because the IRS sets the time and place of an audit at its discretion. Common complaints include audits scheduled on religious holidays or in the midst of a taxpayer's busiest season. Goldberg says the agency intends to take another took at the rules. He adds, "The package that's out there now is not perfect. Will we listen to suggestions for change? Absolutely."


Goldberg freely admits that "we've gotten an awful lot of help, which is what we need, from the private sector in efforts to simplify and humanize the tax system. Now, with Congress joining in, progress from here on in might be swifter. We're a long way from perfect, but we're saying that out tax system needs to be more responsive and more attuned to taxpayer needs. That, I think, is the key."
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Article Details
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Author:Berrett, Gene R.
Publication:Journal of Accountancy
Article Type:Interview
Date:Oct 1, 1990
Previous Article:Finally, guidance on like-kind exchanges.
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