Earlier this month, Senators Chuck Grassley and Ron Wyden introduced the Taxpayer First Act of 2019, a piece of bipartisan legislation aimed at modernizing the IRS, improving taxpayer services and strengthening taxpayer protections. A large portion of the proposed law deals with technical matters such as information technology, cybersecurity, data protection, and identity theft prevention measures. However, there are many provisions that may directly affect taxpayers.
Among the provisions of interest to taxpayers, the bill:
- Establishes an Independent Office of Appeals within the IRS and requires the IRS, if requested, to provide certain individual and business taxpayers with access to the nonprivileged portions of their case files prior to the start of any dispute resolution process;
- Requires the IRS to develop and submit to Congress a comprehensive customer service strategy that includes a plan to provide assistance to taxpayers that is secure, designed to meet reasonable taxpayer expectations, and adopts appropriate best practices of customer service provided in the private sector, including online services, telephone call back services, and training of employees providing customer services, and establishes metrics and benchmarks for measuring the IRS’ success in implementing this strategy;
- Codifies the existing Free File Program (which provides low income taxpayers with free access to professional tax preparation software and electronic filing services) and requires the IRS to continue to work with private stakeholders to maintain, improve, and expand the program so as to simplify the taxpayer experience with completing and filing individual income tax returns;
- Waives the user fee and upfront, non-refundable, lump sum payment normally required in connection with an offer-in-compromise in the case of low-income taxpayers;
- Protect taxpayers against recent IRS enforcement abuses of “structuring” transactions (currency transactions that are purposely structured to avoid the reporting and recordkeeping requirements of the Bank Secrecy Act by falling below the $10,000 threshold) by (i) limiting the IRS’ seizure right in such cases to funds derived from an illegal source or structured for the purpose of concealing criminal activity, (ii)providing important procedural safeguards for individuals purportedly engaged in structuring, including a requirement that the IRS notify affected taxpayers of the seizure within 30 days and a right to a post-seizure, probable cause hearing and (iii) excluding from gross income any interest paid by the Federal government to a taxpayer in respect of funds improperly seized by the IRS based on allegations of structuring;
- Clarifies that the Tax Court has jurisdiction to review determinations related to innocent spouse relief and that any such review would be made without taking previous decisions into account and would be based on the administrative record established at the time of the determination and any newly discovered or previously unavailable evidence;
- Emphasizes, consistent with the IRS’ current policy as set forth in the IRS manual, that the IRS must narrowly tailor a John Doe summons to seek only information that relates to the failure (or potential failure) of the person or group of persons that are the subject of the summons to comply with Federal tax law and may not be used for the purposes of a “fishing expedition”;
- Creates two additional categories of taxpayers whose unpaid tax receivables accounts may not be referred by the IRS to a private collection agency: (1) taxpayers whose income is substantially derived from supplemental security income benefits or disability insurance benefit payments and (2) low-income taxpayers with an adjusted gross income of 200% of the applicable poverty level and below;
- Requires (i) the IRS to provide taxpayers with at least 45 days notice before contacting third parties, including friends, neighbors, and clients, in connection with an audit and (ii) that the IRS has an actual present intent to contact third parties at the time such notice is given;
- Prohibits the IRS from providing tax records to any person who is not an officer or employee of the IRS, unless such person requires such tax records for the sole purpose of providing expert evaluation and assistance to the IRS and ensures that only officers and employees of the IRS or Office of Chief Counsel are permitted to question a witness under oath;
- Strengthens and makes other changes to the responsibilities of the Office of the Taxpayer Advocate by (i) requiring the IRS Commissioner or Deputy Commissioner to respond to Taxpayer Advocate Directives (“TADs”) within 90 days and requiring the National Taxpayer Advocate (“NTA”) to report to Congress any TADs not timely addressed by the IRS, (ii) reducing the number of “most serious problems encountered by taxpayers” included in the NTA Annual Report to Congress to ten (from at least 20), (iii) requiring the IRS to provide statistical support to the NTA upon request to the extent practicable, and (iv) requiring the NTA to coordinate research efforts with the Treasury Inspector General for Tax Administration;
- Establishes a Community Volunteer Income Tax Assistance Matching Grant Program pursuant to which the IRC can allocate up to $30 million per year in matching grants to qualified organizations that provide free tax return filing assistance to low-income taxpayers, persons with disabilities, taxpayers with limited English proficiency, the elderly, members of the Armed Forces and their spouses and other underserved communities;
- Clarifies that IRS employees are permitted to provide taxpayers in need of representation in controversies with the IRS with information about the availability of and eligibility requirements for receiving, advice and assistance from low-income tax clinics, including the location of, and contact information for, such clinics;
- Requires the IRS (i) to provide at least 90 days public notice, including by non-electronic means, prior to the closure of a Taxpayer Assistance Center, which notice must include information on alternative forms of assistance available and the date of the proposed closure and (ii) to submit a written report to Congress notifying them of, and the reasons for, the proposed closure;
- Limits the IRS’ ability to seize a taxpayer’s property and hold a same-day auction to only property that is actually likely to perish; property that will be greatly reduced in price or value by being held by the IRS or that cannot be held by the IRS without great expense would no longer be eligible to be sold on the same day by deeming it “perishable”;
- Improves the IRS whistleblower program by (i) authorizing the IRS to exchange information with whistleblowers where doing so would be helpful to an investigation, while also protecting taxpayer privacy by prohibiting whistleblowers from disclosing publicly information they receive from the IRS under penalty of law and (ii) extending to IRS whistleblowers anti-retaliation provisions that are presently afforded to whistleblowers under other whistleblower laws;
- Requires the IRS to establish procedures for (i) taxpayers to report instances where an anticipated refund paid by electronic funds transfer was not received, (ii) identifying the account to which the erroneous transfer was made and recovering the amount transferred and (iii) delivering the refund to the correct taxpayer;
- Requires the IRS to (i) notify a taxpayer if there has or may have been an unauthorized use of a taxpayer’s identity, if an investigation has been initiated and its status, whether the investigation substantiated any unauthorized use of the taxpayer’s identity, and whether any action has been taken (such as a referral for prosecution) and (ii) establish a single point of contact within the IRS for any taxpayer who is a victim of identity theft who will be responsible for tracking the taxpayer’s case to completion and coordinating with other units to resolve the taxpayer’s issues as quickly as possible;
- Increases the monetary penalty imposed on tax return preparers for disclosing taxpayer identity information in cases where such information is used in an identity theft crime, whether or not related to any tax filing;
- Directs the IRS to develop and make available by no later than January 1, 2023, an internet portal that provides taxpayers with access to IRS resources and guidance relating to Forms 1099 and that allows taxpayers to (1) prepare and file Forms 1099,(2) prepare Forms 1099 for distribution to recipients other than the IRS, and (3) maintain a record of completed, filed, and distributed Forms 1099;
- Expands the electronic filing of returns by lowering the number of returns a tax return preparer must file in order to be required to electronically file;
- Requires all tax-exempt organizations to electronically file their returns;
- Requires the IRS to notify a tax-exempt organization after the organization’s second consecutive failure to file an information return in order to give the organization time to file an information return and prevent its tax-exempt status from being revoked; and
- Increases the minimum penalty for failing to file a return to $330 (adjusted for inflation).
The House Ways and Means Committee approved the bill on Tuesday, April 2, sending it to the full House for consideration making it more likely that it will be passed into law.
If you have any questions regarding these or any other US tax matters, please contact our office and we will be happy to help you.
