Notice & Comment

The Paperwork Reduction Act and Why You May Be Able to File Your Taxes on a Napkin in 2021

Given the Paperwork Reduction Act’s (PRA) importance, it often does not get much attention. If the Office of Information and Regulatory Affairs (OIRA) is the most important office you’ve never heard of, then the PRA may be the most important function of OIRA you’ve never heard of. In addition to creating OIRA, the PRA requires that agencies (including independent agencies) follow the PRA process for collections of information from at least ten people. The PRA generally serves to (1) report the burdens associated with collections of information and (2) create a process for minimizing the burdens associated with collections of information.

Despite this review process being an excellent avenue for the public to provide input on potential regulatory impacts, when agencies publish collections of information in the Federal Register, they rarely get comments. For instance, nobody commented on the most recent information collection request from the Internal Review Service (IRS) on its individual income-tax forms and only two people commented on the IRS’s business income-tax forms, even though the IRS estimated that the combined 582 tax forms in both requests would impact 171.3 million people/entities.

Through this post, I hope to give a short overview of the PRA review process and use the IRS’s income-tax forms as an illustrative example of the importance of the PRA process, including how it provides for the regular review of existing collections of information. Specifically, given the delay in the IRS initiating the PRA process for the 2021 income-tax season, the IRS will likely struggle to comply with the PRA’s requirements, which could allow taxpayers a much greater latitude in how they file their income-tax returns.[1]

PRA Review Process

As part of the PRA review process, agencies must conduct a three-month comment period. Specifically, an agency must request comments on the proposed collection of information through a 60-day comment period in the Federal Register. After considering public comments, the agency must concurrently (i) submit the collection of information (including the agency’s supporting statement regarding the form) to OIRA for review and (ii) publish a notice in the Federal Register that the agency sent the request to OIRA and the public has 30 days to send any comments to OIRA.

In reviewing the information collection request, OIRA will determine whether the collection of information (i) is necessary for the proper performance of the functions of the agency, including whether the information has practical utility; (ii) minimizes the Federal information collection burden, with particular emphasis on those individuals and entities most adversely affected; (iii) maximizes the practical utility of and public benefit from information collected by or for the Federal Government; and (iv) is consistent with applicable laws, regulations, and policies related to privacy, confidentiality, security, information quality, and statistical standards.

OIRA cannot approve the information collection request before the 30-day comment period expires unless the collection (i) is needed prior to the expiration of the comment period; (ii) is essential to the mission of the agency; and (iii) the agency could not reasonably comply with the PRA because (1) public harm is reasonably likely to result if normal clearance procedures are followed, (2) an unanticipated event has occurred, or (3) the use of normal clearance procedures is reasonably likely to prevent or disrupt the collection of information or is reasonably likely to cause a statutory or court ordered deadline to be missed. When requesting this emergency approval, an agency must demonstrate that it has taken all practicable steps to consult with members of the public.

Any approval must be renewed at least every three years, unless OIRA waives the comment periods through an emergency approval, which is only valid for six months. Agencies must also seek approval for any non-de minimis revisions to an existing collection of information, including going through the full three-month comment process for any substantive changes to a collection of information.

Part of the remedy for any violation of the PRA is that whenever an agency has imposed a collection of information as a means for requesting a benefit or the avoidance of a penalty, the agency may not treat a person’s failure to comply, in and of itself, as grounds for withholding the benefit or imposing the penalty. The agency shall instead permit respondents to prove or satisfy the legal conditions in any other reasonable manner.

IRS Income Tax Forms

This income-tax season, the IRS will likely struggle to comply with the PRA’s requirements, which could allow taxpayers a much greater latitude in how they file their income-tax returns.

For the information collection requests associated with both the individual and business income-tax related forms, OIRA has an agreement with the IRS that the collection of information must be submitted annually. Thus, the IRS’s current authority to use these forms expires at the end of January 2021. Additionally, given that the two information collection requests include 582 tax forms, the IRS is likely to have substantive modifications that would require the information collection request to be updated before this tax season.

As such, the IRS will need to provide a 60-day and 30-day comment period before OIRA may approve the forms for this tax season. However, the IRS will likely struggle to meet those requirements as the IRS has not yet published in the Federal Register the 60-day notice associated with either of next year’s individual or business income-tax forms.[2] Assuming the rosiest potential timeline of review: if the 60-day notice were published tomorrow, and not taking into account any additional days the IRS would use to adjust the information collection requests to account for any comments and/or the delay between submitting the 30-day notice to the Federal Register and publication, a combined 60 and 30-day comment period would place the minimum date that OIRA could approve the forms as January 28, 2021.

Even assuming an extremely rosy timeline of PRA review and OIRA approving the forms at the earliest possible date, the IRS could not meet the PRA’s requirements for tax season to begin at the same time as this year. Although the IRS has not yet announced when it will begin accepting tax returns in 2021, this year it began accepting returns on January 27, 2020.

In response to this delay, the IRS would have two options: (i) it could delay the beginning of tax season to allow for the completion of the PRA process or (ii) pending OIRA approval, the IRS could begin tax season by not specifying any reporting method and allowing tax payers to meet all their filing requirements in any reasonable manner.[3]

While OIRA could grant emergency approvals to allow the IRS to use the 2021 forms around the same time as this year, the standards for emergency approval are unlikely to be met. Specifically, an emergency approval requires that the IRS could not reasonably comply with the PRA. As OIRA’s PRA website specifies, “Internal delays are not emergencies; plan ahead for the PRA process!” Here, the IRS could have reasonably complied with the PRA’s normal clearance procedures if it had begun the process earlier. Thus, any emergency would of the IRS’s own making and likely prevent OIRA from granting emergency approval.

Even if OIRA were to grant an emergency approval, the public would likely still have an opportunity to provide input on the tax forms. An emergency approval would require the IRS to show that it has taken all practicable steps to consult with members of the public. As there are still roughly three months before tax filing season traditionally begins, the practical steps would likely need to include at least some comment period.

Conclusion

The PRA requires 90 days of comment on the 2021 income-tax forms, which the IRS has not yet begun. Even under the rosiest of timelines, this 90-day period would extend beyond the usual beginning of tax season. As such, tax payers at the beginning of this upcoming tax season may have many options on how to file their taxes in a reasonable manner. However, I will note that the title of this post is a joke, and the IRS or a reviewing court would likely not find a napkin to be a reasonable manner to provide information to the IRS.

Nevertheless, those interested in potentially improving tax forms through non-napkin alternatives and/or wishing to provide information to the IRS regarding its estimates of how long each income-tax form takes to complete, should comment during the PRA process. The PRA process is the official avenue for the combined 171.3 million people/entities impacted by income-tax forms to comment upon the forms and influence the IRS’s collection of information.

After my publication of this post, the IRS published in the Federal Register on October 30, 2020 and November 3, 2020 the 60-day notices associated with next year’s individual and business income-tax forms, respectively. The comment periods close on December 29, 2020 and January 4, 2021.


[1] For a more detailed description of the PRA process, OIRA has a PRA website describing the PRA and all its requirements.

[2] For reference, last year the Federal Register published the IRS’s notices for the 60-day comment period on September 30, 2019.

Even though the IRS has previously represented that it has periodic meetings between IRS personnel and representatives of the American Bar Association, the National Society of Public Accountants, the American Institute Certified Public Accountants, and other professional groups to discuss tax law and these tax forms, these meeting are not sufficient to meet the 60-day public comment requirements under the PRA. The PRA specifically requires an agency to seek comments through publishing a 60-day notice in the Federal Register, which the IRS has not done.

[3] Even if the IRS failed to get OIRA’s approval for its income-tax forms, taxpayers would still need to file their income-tax returns in some reporting method as the filing requirements come from statute and not the information collection requests.