FAQ What’s IRSs new real time tax system

FAQ What exactly is IRSs new real time tax system

IRS Commissioner Douglas Shulman unveiled his "real-time" tax system concept late in 2011. Since then, the IRS has had public meetings with stakeholders, such as representatives of taxpayers, government officials, tax professional associations, and numerous other people, to talk about moving the IRS away from its standard "look-back" system to a "real-time" system. As explained by Shulman, the objective of a real-time method is always to resolve problems with a taxpayer's return prior to it's processed rather than wait until right after it really is processed.

Real-time method

Today, many routine transactions, especially financial transactions, are done in "real-time." Shoppers can access their bank and other financial accounts on-line 24/7. Communicating and doing business using the IRS, however, is still very significantly slower.

Traditionally, the IRS has operated on a "look-back" system. That's, the IRS accepts returns, processes them after which contacts taxpayers about any problems on the returns. Frequently, it takes the IRS many months to contact a taxpayer about an problem having a return. A real-time tax system, as described by Shulman, would improve the return filing method by accelerating the IRS's response time.

Beneath a real-time tax method, the IRS would match info submitted on a return with third-party details at the starting of processing instead of right after the return has been processed. This "real-time" activity would give taxpayers the opportunity to right their return before the IRS completes processing the return. Problems could be resolved significantly much more swiftly, Shulman has predicted.

Forms W-2

A real-time tax technique could start with adjustments for the processing of Form W-2, Wage and Tax Statement. Requiring more electronic filing of Forms W-2 by employers could improve processing time, payroll industry representatives told the IRS in January 2012. However, a real-time tax technique would likely demand the IRS to accelerate the matching of Form W-2 data it receives from the Social Security Administration (SSA) and that could spot an further burden on the SSA.


Moving to a real-time tax method is not one thing that can take place overnight. Proponents of a real-time tax technique have advised moving up the April 15 filing date. Below present law, the deadline for filing person income tax returns is April 15 and only Congress can modify that date.

The IRS would also need to adjust its return processes. The IRS at present resolves most mismatches of return details and third-party details post-filing. Resolving these problems before a return is processed would probably require a lot more IRS personnel and would also effect several professional return preparers in the course of their busiest time in the year: the filing season.

The IRS is at present operating under really tight price range parameters. Congress decreased the IRS's funding for fiscal year (FY) 2012 and extra cuts could be made in future IRS budgets. These budgetary pressures make moving to a real-time tax method unlikely in the present. Most lately, Shulman acknowledged that a real-time tax technique is really a "long-term destination" instead of a "short-term project."

If you have any queries regarding the IRS's real-time proposal, please make contact with Doeren Mayhew, a Certified Public Accountants firm located in Troy, MI.

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