Striving Toward Modernization
In the realm of tax administration, the Internal Revenue Service (IRS) is undergoing a significant digital transformation. Wendy Walker, solution principal at Sovos, recently shed light on the challenges and advantages that businesses face as the IRS transitions from paper-based systems to digital processes. With a complex infrastructure that includes over 40 mainframe systems and nearly 3000 vendor-supplied applications, some dating back to the 1960s, the IRS is on a mission to modernize.
The Taxpayer First Act (TFA) of 2019 marked the beginning of this modernization journey, aiming to enhance taxpayer interactions and update systems. A key component of this initiative is the Information Return Intake System (IRIS), an online platform for filing 1099 returns. Despite its introduction, IRIS is not yet equipped to handle the billions of information returns electronically, presenting a challenge for businesses with large volumes of filings.
To address this, the IRS is developing application programming interface (API) connectivity, funded by the Inflation Reduction Act. This advancement promises to streamline the business tax filing process, reduce errors, and expedite processing times. Walker highlights the significance of this shift for the industry, particularly for corporations and financial services firms that rely on enterprise accounting systems and core payment platforms.
As companies prepare for these changes, Walker suggests forming project teams to manage the operational and technological transitions. The move away from legacy systems like the FIRE network to IRIS necessitates adapting to new filing formats and procedures. With paperless initiatives remaining a top priority for the IRS, businesses must be proactive in adjusting their systems and processes to meet evolving business tax return requirements.
Ultimately, organizations must be ready to respond on their own timelines rather than being reactive to IRS mandates. The digital transformation of tax filing is not just about compliance; it’s about embracing efficiency and innovation in the way enterprises manage their business tax return obligations.
