On January 6, 2020 the IRS released its annual report on the state of IRS operations and enforcement. If you are in Accounts Payable/Tax or maybe are a CPA then you definitely want to take note. 2020 is shaping up to be a much more difficult due diligence and filing year than even 2019.

First off, as one of the IRS' newly announced strategic goals for the coming year the service has announced it's doubling down on focusing its efforts toward closing the yearly tax gap through pursuing "innovative approaches to understand, detect, and resolve potential noncompliance." To help implement that goal the IRS hired 4,702 Enforcement personnel in FY2019 and therefore substantially beefed up its ranks of field officers and other such examiners. This is a very large number of new hires. In fact, it represents one of the biggest increases in IRS enforcement capability we have seen in the past decade.

Furthermore, in FY2019 and in regards to the tax gap (the difference between what the IRS takes in and what it is owed from organizations such as the one's you work for or represent) the IRS released a new tax gap estimate of $441 billion, which covers tax years 2011, 2012 and 2013.

Note that in FY2019 alone the IRS clawed back $60 billion through enhanced enforcement measures which, if you haven't as of yet run across, you need to be aware of - as audits of mid-sized and large organizational filers have skyrocketed in recent years. This is because the IRS estimates that the largest chunk of the tax gap ($352 billion dollars in FY2019) comes from under-reporting of income to payees on forms such as 1099's. The biggest IRS initiatives toward closing this gap involve targeting off-shore compliance (involving the filing of Forms 1042/1042-S as well as Foreign Account Tax Compliance Act compliance which can involve multiple information returns). In addition, the IRS announced this week it is still targeting large businesses in an on-going campaign to better ensure Accounts Payable departments and the like are meeting their reporting and due diligence mandates under the law.

The takeaway here is that we have a combination of increased enforcement measures along with a bevy of new forms recently rolled out. This means that 2020 is going to be very busy in terms of meeting your in-year compliance and 1099 filing obligations under the law.