Bill Includes Money for IRS to Increase Enforcement - Financial Operations Network
The new bipartisan infrastructure bill includes a $40 billion boost to the IRS budget; will lead to increased enforcement.
IRS Form W-9, 1099 reporting, IRS Compliance, AP compliance, W-8, 1042-S
20306
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Bill Includes Money for IRS to Increase Enforcement

Bill Includes Money for IRS to Increase Enforcement

The U.S. government has a problem called the tax gap. The tax gap is the difference between total taxpayers’ liability and the actual amount of taxes paid. It is tax revenue that should be collected according to the tax code but is not. The gap comprises unfiled taxes, unreported income and underpaid taxes. The IRS can recover some of that. The net tax gap is the portion that is not recovered through enforcement or late payments.

The IRS currently reports that the gross tax gap for tax years 2011-2013 was $441 billion. (According to the IRS, “Estimating the tax gap is inherently challenging and requires assessing the merits of alternative methods, assumptions, and data sources.”) Expecting to collect $60 billion of that ultimately, the IRS projects that the net tax gap for the period would be $381 billion.

A Treasury model extrapolates from those figures to project a gross gap in 2019 of $584 billion. Supposing the IRS collects $80 billion, it leaves a net gap of $500 billion. To be clear, that’s 500,000 million! Even for Washington D.C., that’s a lot of money. The IRS wants to close that gap.

The Tax Gap and 1099s

A large part of that gap is unreported income, which is the driver behind IRS 1099 reporting. The IRS does not rely solely on taxpayers to report their income, but on paying organizations to report the income paid to taxpayers. That’s where 1099s come in. Companies report payments to employees on IRS form W-2. They must also report a variety of payments made to non-employees on various 1099s. The IRS matches up 1099s with taxpayer 1040s and other taxpayer forms to determine if the taxpayer has reported and paid taxes on all their income.

But in recent years, cuts to the IRS budget have made it more challenging for the IRS to keep up. Over the last decade, the IRS has cut personnel by 22 percent. However, the new bipartisan infrastructure bill includes a $40 billion boost to the IRS budget.

If the bill becomes law, the administration claims the $40 billion invested in the IRS will return $140 billion in new revenue for a net gain of $100 billion. The Congressional Budget Office, on the other hand, projects it will bring in $103 billion for a net gain of $63 billion. Either way, it’s well short of half a trillion dollars.

Tighten Up Payment Reporting

Be that as it may, it behooves organizations to tighten up their tax reporting. That means ensuring they gather W-9s or W-8s from vendors to certify their tax and reporting status and flag reportable vendors in the master file to ensure they issue a 1099 (or 1042-S) in compliance with IRS rules.

If you’ve gotten by with less than strict compliance in the past few years, past performance is no guarantee you will get by in the future. Expect IRS audits to increase. Of course, it won’t happen overnight. There’s some time to get things in order. But if getting complete tax information on vendors and ensuring full 1099 compliance has slipped on your priority list, it may be time to refocus.

And to learn how to easily and securely collect W-9s and W-8s to ease your payment reporting, contact us.



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Improve Productivity with a Self-Service Solution

For most organizations, deploying a technology solution is a significant investment, and like most investments, the decision point ultimately comes down to the expected return on that investment.

According to a recent benchmark study by The Accounts Payable Network, 60% of AP customer service calls are from vendors while 40% are from internal customers. Vendor issues actually make up even more of the AP call volume than the 60% identified. Many times when a vendor has an issue, the vendor contacts their buyer or purchasing representative, who in turn contacts AP. Even though the call comes from an internal customer, the question originated with the vendor.

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Easy and Economical Solution to Serve Vendors Around the World

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The key to good customer service is to provide the information that the customer wants when they want it. Whether your customer is a vendor waiting for a payment or a colleague that needs information on payment status, they want their information right away. If your organization has vendors and offices in other countries, they can be challenging and expensive to serve. But, with InvoiceInfo, your international vendors and internal customers can access the information they need when they need it.

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Enhance AP’s Role As a Strategic Partner

Learn how InvoiceInfo can help AP do more with less while continuously improving productivity and bottom-line results.

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Enhance Vendor Relationships

InvoiceInfo helps suppliers’ AR departments with simple and convenient access to invoice payment status online at a cost savings for all involved.

It may seem that the organization paying the vendor should hold all the cards in the relationship. But sometimes the opposite is true. Past-due payments and customer service perceptions can harm supplier relationships and disrupt the supply chain.

Your vendors and vendor relationship managers are living in a dynamic, fast-paced environment, so when invoice information is required, it is needed quickly and expected to be of high quality. With InvoiceInfo, your suppliers get answers to invoice inquiries real time, 24/7 with no need to leave messages and wait for responses. Studies show that confidence in data increases when suppliers access invoice and payment information themselves.

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Give Procurement and Buyers the Tool They
Need to Respond to Vendors Quickly

Not only can InvoiceInfo be used by suppliers to learn the status of invoice payments, it can also be used internally within your organization.

In addition to reducing calls from vendors regarding invoice status, you can also reduce internal emails and calls from co-workers wanting to learn the status of invoice payment, and save time and effort and boost efficiency and productivity across the organization. Studies show that 40% of AP customer service calls are from internal customers. Many of these are from requisitioners who have received calls or emails from the supplier checking on payment status. These calls are often more expensive for the company because the internal staff member has taken the call or received an email from the supplier, contacted AP for the payment status and had to return the call or email the supplier.

By providing the vendor with a convenient and credible online option to get the answers it needs regarding payment status, you can eliminate multiple calls/emails between the vendor and the requisitioner saving time and money.

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Eliminate Difficult Vendor Calls and See
Productivity and Staff Morale Soar

Reduce invoice payment inquiries and “promote” your vendor service team to more satisfying and profit-producing tasks.

By sharply reducing inbound calls and emails regarding receipt and payment status that your AP staff must handle individually, your staff can focus their efforts on more productive, cost-saving activities, learn new tasks, feel more confident and boost their careers.

According to a recent American Express survey on customer service, more than one-third of consumers have lost their temper with a customer service professional in the past year. Of those who lost their temper, three in ten “hung up the phone.” Your staff will no longer have to deal with difficult collectors who can be upsetting and disruptive. Your staff will feel that their time and talents are being put to better use and will feel better about themselves, their jobs and their organization. Reducing these calls can be a real productivity and morale booster for your AP department!

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Simplify and Streamline Vendor Onboarding

According to Price Waterhouse Coopers, the average organization spends about $20 in labor to file each paper document, approximately $120 in labor searching for each misfiled document and $220 in re-creation of a document.

Wouldn’t it be great to have all your W-9’s, W-8’s and other registration documents completed online and instantly filed online for easy access when needed? With Vendor Self-Service Onboarding Module, VendorInfo, you can onboard your new vendors in one convenient location and eliminate paperwork and hassles.

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Verify the Accuracy of Vendor Information and Stay in Compliance with IRS and Treasury Department Regulations

Government regulators are increasing the complexity of regulations and penalties associated with vendor-related non-compliance.

Penalties for incorrect 1099’s have more than doubled in recent years. Over the last several years, OFAC has levied more than $1 billion in fines against American companies or subsidiaries that did business with restricted businesses, organizations and individuals on its SDN list. In addition to fining these companies, the Treasury Department posts the names of infringing organizations along with fines paid.

VendorInfo Onboarding Module verifies the accuracy of vendor information and helps protect your organization by avoiding embarrassing penalties and fines.

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