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Federal Tax

Deputy Treasury Secretary: Ideal Tax System Needs a ‘Common Sense’ Approach

Tim Shaw, Checkpoint News  

· 5 minute read

Tim Shaw, Checkpoint News  

· 5 minute read

The most recent acting IRS commissioner told an audience of tax data analysts that research into administrative and policy matters is needed to help the agency modernize at the fast pace expected by the Trump administration.

The IRS Office of Office of Research, Applied Analytics, and Statistics (RAAS) co-hosted its 15th annual tax research conference June 12 in partnership with the Urban-Brookings Tax Policy Center. Michael Faulkender, the deputy Treasury secretary who was temporarily manning the helm at the IRS before the arrival of newly confirmed Commissioner Billy Long, delivered opening remarks to kickoff the series of tax research presentations.

Faulkender began with touting positive metrics from the 2025 filing season before moving to updates and current goings-on at the IRS and what to expect from the Trump administration’s Treasury Department moving forward.

This will be an embrace of modern digital tools and streamlined operational workstreams, said the No. 2 Treasury official. “By taking advantage of historic investments in new technologies, we have an opportunity to reimagine how the IRS serves the American people, making it easier, faster and more transparent for taxpayers across the nation.”

He stated the administration is “building a modern IRS that will deliver for generations to come. These improvements will ensure common sense tax administration.” At the same time, Faulkender continued, “researchers have an important role to play as the IRS strives to increase tax compliance through improved service and better targeted enforcement.”

For 35 years, the IRS has been “five years away” from reaching modernization goals, so research into ongoing “tax administration issues will give us new approaches and tools” to expedite progress over the “next two to three years,” said Faulkender. Treasury hopes to have completed the “vast majority” of modernization projects in that time frame.

Faulkender believes an increased reliance on artificial intelligence should guide improvements to taxpayer access to important information and prevent “inadvertent mistakes when trying to comply with requirements of a very complex Tax Code.” Those acting in good faith and who “want to comply” voluntarily should be provided “better guidance,” which Faulkender said can be facilitated using AI.

This digital-first approach is another reason the agency is looking to cut down the amount of paper returns and filings it receives. Faulkender said the IRS spent “approximately $450 million on paper processing using modern scanning technology” last year, and the goal is to “reduce that expense to less than $20 million.”

Treasury expects to improve efficiencies while cutting costs and operating with a smaller budget and workforce. Faulkender claimed these are not in conflict with each other and can be achieved through structural realignments and culling its third-party contracts.

Through this process, Faulkender said the IRS found that “we’re actually paying for the same service multiple times.” With fewer separate data files to manage, “we are able to more prudently utilize taxpayer dollars without any impact on service.” Some professional service contracts were renegotiated, while others were scaled back or outright eliminated.

According to Faulkender, the administration has cut $2 billion from the IRS’ IT budget “without any operational disruptions.”

 

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