Congress Passes Legislation Reforming IRS, Improving Protections for Taxpayers

Congress passed H.R. 3151, a bipartisan bill known as the Taxpayer First Act (TFA), in June 2019. The president signed it into law on July 1. Title I of the new law, entitled “Putting Taxpayers First,” improves procedures for assisting taxpayers and handling appeals. Title II, entitled “21st Century IRS,” improves identity theft protections and directs the agency to make technological upgrades. This bill replaced an earlier version, H.R. 1957, which had been introduced in March. A series of media reports in April led to criticism of several provisions in the first bill. Those provisions were removed in the reintroduced bill.

Office of Appeals

Section 1001 establishes the Internal Revenue Service Independent Office of Appeals (IOA) to “resolve Federal tax controversies without litigation.” The TFA identifies three main goals for the office:
1. Fairness towards both taxpayers and the IRS;
2. Consistent enforcement of tax law, along with “voluntary compliance” by taxpayers; and
3. “[P]ublic confidence in the [IRS’s] integrity and efficiency.”

Taxpayers who receive a notice of deficiency can request a referral to the IOA. If the IRS denies the request, the TFA requires it to provide written notice to the taxpayer explaining the reasons for the decision and explaining the procedure for filing a protest.

Comprehensive Customer Service Strategy

Section 1102 of the TFA gives the Secretary of the Treasury one year—until July 1, 2020—to submit “a written comprehensive customer service strategy” for the IRS to Congress. The strategy should include a plan that protects the security of taxpayer information, “meet[s] reasonable taxpayer expectations,” and uses “best practices of customer service provided in the private sector.”

Identity Theft Protections

The TFA includes several provisions intended to protect taxpayers against identity theft. Section 2005 directs the IRS to establish a system for providing personal identification numbers to taxpayers upon request. The purpose of this number is to supplement other identifying information, such as a Social Security number. The law states that the program should be available nationwide within five years.

If a taxpayer experiences a delay in their tax return, or any other adverse effect due to identity theft, § 2006 states that the IRS must provide them with a “single point of contact” until their case has been fully processed. The single point of contact should consist of “a team or subset of specially trained employees” who can handle all of the aspects of processing a taxpayer case.

Free File Controversy

The earlier version of the TFA included a section that would have codified the current version of the IRS Free File Program. This program began in 2001 with a directive to provide free a free online system for preparation and filing of tax returns.

In 2002, the IRS entered into an agreement with the Free File Alliance (FFA), a nonprofit corporation composed of tax preparation software companies, to offer free access to their products to some taxpayers. The agreement prevents the IRS from developing its own online tax system. A report by ProPublica in April outlined how this provision in the TFA could harm taxpayers by requiring taxpayers to use the FFA’s complicated proprietary software.

If you have questions about a tax-related issue in California, the Enterprise Consultants Group’s tax advisors are available to answer your questions and address your concerns. Please contact us online or at (800) 575-9284 today to schedule a consultation to discuss your case.

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