Kathy Petronchak

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Small Business/Self-Employed DivisionCurrent
Developments Strategic Priorities
Kathy Petronchak Commissioner, SB/SE Division
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Challenges

• Balanced Approach
• to Services Enforcement
• Addressing voluntary compliance levels
• Legislation to reduce evasion opportunities and
  to simplify the law
• Taxpayer service to avoid unintentional errors
• Leveraging practitioner relationships
• E-Services

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SB/SE FY08/09 Strategic Plan

• Address Nonfiling tax gap
• Address Underpayment tax gap
• Address Underreporting tax gap
• Improve service to our customers improve
  business processes and systems reduce burden
  enhance stakeholder relations
• Develop human capital to address strategies
  promote productivity improve employee engagement

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SB/SE FY 2008 DIRECTION

• Supporting Enforcement Focus

• Corporate Nonfiler Plan
• Implement Employment Tax Plan
• Comprehensive e-strategy
• National Research Program
• Effective penalty program
• Appropriate coverage in areas of greatest risk
  ATAT, High Income, Off-shore

• Return Preparer Program
• Improve process for securing concurrent payment
  of assessments and penalties
• Improve effectiveness of notice process
• Enforcement to reduce pyramiding
• Protect sensitive data / computer security

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Enforcement Revenue Continues to Rise
Enforcement revenue provides a direct return on
the total IRS budget of greater than 4-to-1.
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Nonfiling and Underpayment Enforcement Activities
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Offer in Compromise Program

• New Allowable Living Expense standards effective
  10/1/07
• Customer feedback mechanisms
• Policy and procedural changes
• Research analysis
• Training
• Program oversight

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Selected IRS Coverage Rates - FY06 and FY07
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Enforcement Performance Small Business
Corporate
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Tax Gap

• Total 345 billion (Tax Year 2001)

44 from underreporting by small businesses
(unreported income overstated expenses)
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Partnering with Tax Professionals

• 44 of Tax Gap from small business underreporting
• 80 of small businesses use paid preparers
• SB/SE needs your partnership support

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Customer Service Outreach

• Practitioner liaison meetings, small business
  forums
• Phone forums
• Educational messages
• IMRS
• E-News for Tax Professionals/Small Businesses
• Tax Talk Today
• Tax Gap Fact Sheets
• Practitioner Priority Service

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Industry Practitioner Outreach Education

• Outreach and education is primarily delivered
  through stakeholder relationships with
  practitioner and industry partner organizations.

OVER 1,500 organizations 2,700 events 175,700
participants In FY07
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Partnering with Tax Professionals

• Strengthen partnership to achieve high levels of
  integrity
• Communicate clear standards of conduct
• Maintain a vigorous, targeted system of
  professional oversight
• Administer a fair, diligent system of sanctions

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Customer Satisfaction

• Tax Professionals Customer Base Surveys
• 9 Transactional Surveys

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Return Preparer Compliance

• Investigate allegations
• Lead Development Center
• Assert civil penalties
• Small Business Work Opportunity Act
• Service-wide Return Preparer Strategy
• ERO Monitoring Visits
• EITC Due Diligence Visits

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Program Action Cases

• Return preparer may be filing inaccurate
  returns
• Issues being Identified
• - Questionable Schedule C for EITC purposes
• - Overstated Schedule A /or C
• - Improper education related deductions or
  credits
• - EITC due diligence
• - ERO due diligence

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Notification of Information Losses

• Data and laptop losses
• Notification letters

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How Can You Help?

• Continued awareness of tax laws, education of
  small business clients
• Bring emerging issues to Stakeholder Liaison
• Work with us to improve programs
• Provide feedback
• Help us identify and shut down unscrupulous
  preparers
• Suggestions for partnership