David Sullivan, Rhode Island’s tax administrator and chief of the R.I. Division of Taxation, serves on the board of directors of the Federation of Tax Administrators and is treasurer of the North Eastern States Tax Officials Association.
And he has a special distinction: He is one of 14 people nationwide serving on the Electronic Tax Administration Advisory Committee.
That committee advises the Internal Revenue Service on its strategic plan for electronic tax administration, including electronic filing of tax returns. Last month, the committee released its annual report to Congress.
Sullivan recently answered five questions about the committee’s activities and his involvement.
PBN: How did you come to be a member of the Electronic Tax Administration Advisory Committee, and what is its purpose?
SULLIVAN: Each year the Internal Revenue Service conducts a national search for members of the Electronic Tax Administration Advisory Committee. Given that the states, specifically Rhode Island, are so dependent on the IRS relating to electronic tax administration, I felt it was important for the states to have a representative on committee. After applying, the IRS performed interviews and I was selected last November.
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PBN: It appears the committee files an annual report to Congress. In the past, have these reports and their recommendations led to real changes?
SULLIVAN: The committee has made several recommendations over the years that have assisted the IRS in moving forward with electronic tax administration, including: continued support for Form 1040 Modernized e-File and the e-file mandate. According to an IRS news release issued on June 9, the IRS e-file reached a major milestone as it passed the one-billion mark for individual tax returns processed safely and securely since 1986. The IRS implemented this recommendation during the 2011 filing season. To date, e-file returns from preparers are up 12 percent – significant progress.
PBN: One of the recommendations of this report is that Congress should fully fund MeF and the IRS should complete its implementation. Can you briefly explain MeF and why it’s important?
SULLIVAN: Modernized e-File, or MeF, is a Web-based system that allows electronic filing of individual, corporate, partnership, exempt organization and excise tax returns through the Internet. MeF uses the widely accepted Extensible Markup Language, or XML, format. The MeF system expands the amount of information that can be filed electronically. Some additional benefits are below:
The IRS invested over three years designing and implementing this system. During the 2012 filing season the IRS will implement the final phase of MeF for individual income tax returns. The IRS receives more than100 million individual income tax returns electronically each year and it is extremely important to have a smooth transition of these returns. To date, fourteen states, including Rhode Island, have implemented MeF and during next filing season the remaining states will implement MeF.
PBN: One of the conclusions is that the future tax environment will be more challenging for the IRS. How so? And why should we as taxpayers care about the IRS facing challenges?
SULLIVAN: Over the next few fiscal years the IRS, like most state tax agencies, will be under great pressure to reduce their budget. An important part of their success will depend on technology. During the next few years committee’s role will become increasingly important as the IRS explores more innovative technology solutions.
During the past few years, the IRS has been tasked with many additional responsibilities (new homeowner credit program, assistance in the administration of the federal health care law, etc.). Implementing these additional responsibilities while maintaining current service levels is extremely challenging. The committee can assist the IRS in establishing a road map in implementing new responsibilities using technology.
PBN: What would you identify as the crucial finding in this year’s report?
SULLIVAN: Although I feel all of the 2011 recommendations are important, the two crucial findings relate to MeF and e-filing employer tax returns. As mentioned earlier, during the next filing season the IRS will implement the final parts of the MeF individual income tax returns. Continued funding for this project is critical for the IRS success.
Besides individual income taxes, the employer tax returns have the most growth potential for electronic filing. During our committee analysis this year, we discovered that many employers did not realize that the IRS had a comprehensive electronic filing system for employer tax returns. committee recommend that the IRS focus on increasing the percentage of employer tax returns filed electronically. One simple step is to better market the current system and promote the benefits of this program.
