Bipartisan IRS Reform Enacted

On July 1st, President Trump signed the Taxpayer First Act, a lengthy piece of bipartisan legislation containing a variety of pro-taxpayer reforms to the IRS. Read on for a quick overview of the various items included in the bill.

Anti-Identity Theft Measures – The Taxpayer First Act requires the IRS to notify taxpayers if it detects or suspects fraudulent behavior associated with their identity. It mandates the creation of a single point of contact at the IRS for victims of identity theft. This agent is charged with tracking each case to completion, coordinating with other IRS employees, and working to resolve the situation as quickly as possible. The act also expands the identity protection personal identification number (IP PIN) program beyond people whose identities have already been stolen. Lastly, the legislation includes a number of behind-the-scenes requirements for the IRS regarding the discovery of identity theft and preventative measures for battling it.

New Protections for Taxpayers – This legislation includes a variety of items regarding protections for taxpayers, including:

  • Greater protection for innocent spouses (those whose spouse files fraudulent joint claims without their knowledge), including easier access to equitable relief and an allowance for IRS courts to review newly discovered evidence.
  • Waived initial payment and application fees for low-income taxpayers applying to the Offer-in-Compromise program.
  • A ban on using private companies to collect tax from low-income taxpayers (those with an AGI below 200% of the poverty line).

An Increase to the Penalty for Taxpayers Who Fail to File a Return – This was included to offset the costs of other provisions. The goal is for this bill to not add to the deficit.

Greater Restrictions on IRS Asset Seizures – Under the Bank Secrecy Act, the IRS has the ability to seize assets for a variety of reasons. The Taxpayer First Act calls for greater accountability, requiring that the IRS show probably cause that a taxpayer was evading financial reporting requirements and hold a hearing within 30 days of asset seizure. The act also require the establishment of an Independent Office of Appeals to manage this type of tax situation.

Greater Protection for Whistleblowers – The act bumps up IRS whistleblower provisions to match those already in existence for other government agencies. It requires that IRS internal investigators communicate with whistleblowers to keep them updated on the status of the investigation with which they are involved.

IRS Modernizations – the Taxpayer First Act requires the IRS to implement a number of modernization initiatives, includes an internet platform for Form 1099 filings, a fully automated program for disclosing taxpayer information for third-party income verification, and uniform standards and procedures for accepting electronic signatures. It also legislates that the IRS must submit a plan to Congress for modernizing technology and enhancing cybersecurity.

For more details, read the text of the Taxpayer First Act in full at www.congress.gov.