IRS makes XML schema its business

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David A. Mader

Acting deputy commissioner for modernization and CIO

Fred L. Forman

Associate commissioner for modernization

James A. Williams

Deputy associate commissioner for program management

Julie A. Rushin

Deputy associate commissioner for business integration

Bob Albicker

Deputy associate commissioner for systems integration

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Sources for Inside IRS include Input of Chantilly, Va., and the IRS.

Chuck Piekarski and Pat Clarke are working to incorporate XML into electronic- filing services for the IRS.

Olivier Douliery

Extensible Markup Language is making its way into the IRS through some of the most common tax forms filed by businesses.

The tax agency's first XML product is the 94x XML, which refers to Form 940 (federal unemployment taxes), Form 941 (employers' quarterly federal taxes) and other forms in that series. The IRS released its final XML schema for those forms in January.

To expand electronic filing, IRS officials realized that they had to go beyond the forms for individual taxpayers and develop e-filing for business customers, said Pat Clarke, a senior manager in the Development Services Division of the IRS' Electronic Tax Administration.

'We realized we were going to have to do something a bit different to accommodate some of the large business returns and to also give us the flexibility to add on the features that our customers were describing that they needed,' Clarke said.

Switching to XML allows the IRS to adopt single data formats for many different types of business tax forms and schedules, said Chuck Piekarski, acting director of the Development Services Division.

A larger goal for the Modernized E-File program is converting the 1120 (corporate income taxes) and 990 (tax-exempt organizations) families of tax forms to XML. January 2004 is the agency's target start date for releasing those XML schemas, which could eventually encompass almost 100 forms and schedules, Piekarski said.

Because forms 940 and 941 are shorter than the 1120s, it was easier for the IRS to learn how to use XML with them, Clarke said.

The Form 1120 filings of small corporations are only about 10 pages long, but for large companies the page count can run into the thousands.

IRS programmers did the Form 94x development work in-house with help from the Tax Information Group for Electronic-Commerce Requirements Standardization, an interagency effort of the Federation of Tax Administrators.

Many states are considering implementing XML schemas in their own tax filing systems, which eventually would let IRS customers do one-stop filing, Clarke said.

Let fingers do the filing

The use of XML brings many new opportunities for IRS and the tax preparation software industry, Piekarski said. Paid preparers handle 85 percent to 90 percent of business tax returns, and the companies that provide tax-prep applications will be able to update their programs simply by downloading new schemas from the agency's software developer partners page on, Clarke said.

Although the end users of such software may not notice XML directly, they may reap other benefits.

For example, the IRS will be able to send back e-filing error messages in English instead of obscure numerical codes, Piekarski said.

Although the IRS has no immediate plans to translate the familiar Form 1040 for individuals into XML, many of the schedules that supplement Form 1120 and Form 1065 (partnership income) can also be attached to the 1040, Piekarski said.

Modernized E-File will accept attachments in Adobe Portable Document Format, allowing future business taxpayers to scan and attach signed documents, such as real estate and art appraisals, to their e-filings, Piekarski said.

XML advocates within the IRS are even starting to look beyond U.S. borders. One IRS official last year helped launch an effort to devise an international XML standard for exchanging tax data.

Gregory Carson, director of electronic tax administration modernization for the IRS' Wage and Investment Operating Division, organized the first meeting of the Tax XML Technical Committee last December at the XML 2002 conference in Baltimore. Carson served as the group's interim chairman until a Dutch tax official took over as permanent chairman.


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