IRS Commish Doug Shulman was on form today. In remarks to the American Payroll Association and the American Accounts Payable Association, he offered some thoughts on a topic that’s never far from my mind: the symbiosis between tax and technology.

Setting his remarks in the context of a looming massive expansion of information reporting requirements that will have a huge impact on small businesses (see my earlier post), Shulman developed his theme of “don’t worry, tech will save us” by tracing a history of tax technology back to the 1970s and the end of the punch card era. In 1971, he said, the IRS received 360 million information documents, enough to fill more than 35 boxcars. But technology advances were already on the march; 70 million of those documents were submitted on magnetic tape.

Since then, of course, the advances have been breathtaking. “The technology revolution changed information reporting for both business and the IRS and creates opportunities and challenges for both of us,” Shulman said. “The better use of technology translates into better use of data — extracting knowledge and intelligence. So, we must invest in technology to keep up with new legislation, regulations, and strategies in a more complex and interrelated global tax system.”

I’m not sure if the Commissioner intended that “we must” in that last sentence to include businesses as well as his own organization, but it doesn’t matter; the reality is that for corporations of any size today, investing in technology to cope with the demands of tax compliance does amount almost to a government mandate.

Which is why it’s impossible to share Shulman’s upbeat assessment of the situation. It’s like the ambivalence many of us feel about the software we buy around April each year to help us do our individual income tax returns. On the one hand it’s a godsend, eliminating the need to haul, if not boxcars, at least boxes full of paper down to some CPA’s office. On the other hand, we resent having to buy these programs at all, and we’re guiltily aware that by enabling us to skate over the deep complexity and sheer maddening perversity of the code, they also allow us to avoid confronting it.

Shulman did have some good news to offer small businesses about the new information reporting requirement for business purchases totaling more than $600 per year per vendor (which kicks in in 2012). The IRS plans to use its administrative authority to exempt payments made via debit or credit cards; this data will be provided by payment card processors.

Clearly, though, the pressure is on to close the tax gap, and the informational burden on companies — and their technology infrastructures — will only increase in the next few years. ###