Rettig's Take on Tech and Taxes

Certain opportunities don’t come around every day. Just last month, I was fortunate to interview Charles “Chuck” Rettig, former IRS commissioner, about the future of technology, paperless processing, talent and much more. Needless to say, I jumped at the chance.

Chuck recently moved into the private sector and is now a board member for K1x, an automated service that seeks to simplify the K-1 process.

If you missed our talk, you can catch the recording on my page, but here are some of the main takeaways from our conversation, where we dove deep into technology and taxes.

The Role Technology Can Play in Streamlining the K-1 Process

Chuck became familiar with the K-1 during his time as IRS commissioner. When there’s a shortage of accountants, being able to streamline the K-1 process with technology is huge. Now that Chuck is at K1x, what he wants to do is help free up human resources and reduce errors in K-1 filings.

Picture having a tool that can process 90 K-1s in seconds. That's what K1x can do for accountants. Instead of having to check every point of the form for accuracy, K1x will check the items that are flagged by the program, bringing down your to-do list to only a handful of items.

Escaping the PDF Trap

One of the biggest problems with K-1 data, or any form of data for that matter, is that it’s trapped in a PDF. The problem is the same for the IRS as it is for any accounting firm. If the IRS implements a system that can file electronic documents quickly, it will help people get refunds faster and reduce the number of errors. Really, there are wins across the board.

The IRS is working in old systems, so how can they respond to these new technologies and shift their strategies?

Hope is on the horizon. In 2021, the IRS started a digitization office called Team DG. With the $80 billion in funding allocated to the IRS over a 10-year period, and increased efforts to digitize and innovate, Chuck estimates that the IRS may digitize in full by fiscal year 2024 or 2025.

You know I like talking about how there are over 1.2 septillion possible ways to file a 1040 alone. Full digitization to speed up the filing and return process would have a huge impact on the industry!

Imagine what we can be freed up to do when we’re not buried in the detail.

But Will This Replace Us?

We can talk about the benefits of technology all we want, but we also need to address concerns about technological advancements replacing skilled workers. Will this happen in our lifetime?

The short answer from Chuck is “no.” The IRS, in particular, is dealing with a staffing shortage. In the years to come, it’s likely that the focus will be upskilling from the inside and focusing on career advancement for current employees. We know that the IRS can be an “unsexy” place to work, but for tax professionals looking for a place to grow their careers, it may be the perfect fit right now.

"Technology at the core is driven by people."

Chuck reiterates that “technology at the core is driven by people.” Even when we have technology powering the work we do, we still need human checks and balances. We need humans to make meaning of what technology finds. And we need humans to continue to advance the work we do. AI can help us humanize experiences if we use it to its fullest potential.

What Does the Future Hold?

Of course, Chuck and I didn't see this in a crystal ball, so we'll all have to stay tuned for what happens at the IRS and at firms in the next year or so. Meanwhile, K1X, Inc. launched K-1 Next Gen Reader to increase scope and speed for K-1s and K-3s. Learn more at K1x’s website.