Bipartisan Bill Proposes First Major IRS Overhaul Since 1998

By:
Chris Gaetano
Published Date:
Mar 27, 2018
IRS

House Ways and Means Oversight Subcommittee Chairman Lynn Jenkins (R-Kan.) and ranking member John Lewis (D-Ga.) have released draft legislation that would, if implemented, be the first major overhaul of the IRS since 1998. The bill, called the Taxpayers First Act, was described as an effort to modernize the agency and "return the IRS back to its 'service first' mission." Major provisions in this bill would: 

* Establish a new IRS Independent Office of Appeals: While the IRS had been instructed to develop an appeals process in 1998, this bill formally codifies it through creating a new office led by a new Chief of Appeals who would report directly to the IRS commissioner. The appeals process this office would oversee would be "generally available to all taxpayers," and if the IRS decides not to grant a referral to the Independent Office of Appeals, then the taxpayer must be provided with a precise and detailed reason why, and instruct them on how to protest the decision. The process would also have increased congressional oversight through an annual written report  on the number of requests for referral that were denied. Those who undertake the appeals process shall be provided with access to nonprivileged portions of their case file relevant to the dispute within 10 days of the conference (versus current law, where such information is only available through a Freedom of Information Act request). 

Lower the e-Filing mandate threshold from 250 returns to 10: this requirement would be phased in between 2021 and 2024. The provision allows for an exception for those filing in areas with limited or no Internet access. 

Strengthen the Office of the Taxpayer Advocate: the bill would require the IRS to respond to Taxpayer Advocate Directives and clarifying a time period for that response. The Taxpayer Advocate would also get a timeframe to appeal a response. Further, the Taxpayer Advocate would reduce the number of "most serious problems" in its report to Congress from 20 to 10. The IRS must also provide the Taxpayer Advocate with statistical support upon request. The Taxpayer Advocate, in turn, will be required to coordinate research efforts with the Treasury Inspector General for Tax Administration. 

Require all tax-exempt organizations to electronically file: right now, only those with assets over $10 million and those that file more than 250 returns with the IRS have to file the Form 990 electronically. Organizations could get up to two years of relief from this requirement. 

Allow any concerned taxpayer to get an Identity Protection Personal Identification Number (IP PIN): Right now, only those who have been previous victims of identity theft can request one or is at significant risk of having their identity stolen. 

Require the IRS to develop and submit a comprehensive customer service strategy within a year: it must address how the IRS intends to provide assistance to taxpayers and establish benchmarks and metrics to gauge their success. 

Other provisions in the legislation would: 

Permanently authorize matching grants to support local Volunteer Income Tax Assistance programs: these grants already exist, but this would make them part of the actual IRS structure.  

* Codify the already-existing IRS Free File Program: the IRS would also work with stakeholders on improving and promoting the program. 

Eliminate the application fee and initial payment requirement for offer-in-compromise agreements for those making under 250 percent of federal poverty level: right now, everyone has to pay these fees if they want to make an offer-in-compromise. 

Require the IRS to provide notice when they're closing a Taxpayer Assistance Center: They must do so within 90 days and include information on alternative forms of assistance available. The IRS must also notify Congress of the closure and provide reasons for doing so. 

Allow the IRS to provide information about Low Income Taxpayer Clinics: they can also provide the location and contact information. 

Require the IRS show probable cause when seizing funds that appear to have been structured for money laundering purposes: Right now, there is no such requirement and so the IRS had been seizing funds that were structured for legitimate business reasons. Interest received in actions to recover property seized by the IRS based on structuring transactions would be excluded from income tax. 

Clarify standards of review for joint liability relief. 

Narrow the definition of "perishable" to only things that are liable to perish: under current law, the IRS can seize and sell a taxpayer's property on the same day if the IRS deems it is "perishable," which is defined as that which is not only liable to perish, but also becomes greatly reduced in price or value by keeping or cannot be kept without great expense to the IRS. Declaring something perishable also allows the IRS to forgo minimum bid requirements. 

John Doe summons must be narrowly tailored to seek only information that pertains to the failure or potential failure of a person or group to comply with federal tax law. 

Prevent those making under 250 percent of the federal poverty level from being referred to private collection agencies for delinquent tax debt. 

* Require the IRS to inform taxpayers if they intend to contact third parties like friends, neighbors or clients for an audit. 

Prevent anyone other than an officer or employee of the IRS from examining books, records and witness testimony as part of an examination, other than for the sole purpose of serving as an expert: In addition, only IRS employees or the Office of the Chief Counsel are able to question a witness under oath. 

Codify recent public/private cybersecurity efforts 

* Codify the refocusing of Electron Tax Administration Advisory Committee efforts towards cybersecurity.

Establish a single point of contact within the IRS for any taxpayer who is the victim of identity theft: this person will be responsible for tracking the case to completion, and coordinating with other units to resolve the taxpayer's issue. 

* Prohibit the IRS from from providing taxpayer information to any contractors or other agents of a federal, state or local agency if they do not have identity theft safeguards in place: If a contractor does have these safeguards, then they will need to conduct on-site compliance reviews every three years. 

* Require the IRS to develop and implement an IT strategic plan: this would be centered around making sure that it can ensure adequate consideration and planning for the IRS's long-term IT needs. The IRS would also need third-party verification for the completion of its Customer Account Data Engine 2 and Enterprise Case Management system within one year of enactment. The provision also formally codifies the Chief Information officer role. 

Require the development of robust and secure online accounts for taxpayers and preparers by 2023: While the IRS already has online assistance, the bill summary said this is currently very limited.

* Require the IRS to develop an Internet portal allowing people to file Forms 1099 online: it would be modeled after the Social Security Administration system people use to file Forms W-2. 

Allow the IRS to automate processing of Income Verification Express Service requests: right now, people have to send in a fax. 

Limit return information redisclosures by the taxpayer's designee to only those to which the taxpayer has explicitly consented. 

Require the IRS to develop uniform standards for the use of electronic signatures for disclosure authorizations to and of practitioners. 

Allow the IRS to accept credit and debit card payments for taxes directly: right now, they need to go through a third party payment processor. 

* Change the name of the head of the IRS from "Commissioner" to "Administrator." 

Eliminate the IRS Oversight Board: The summary said the board has been ineffective and has lacked a quorum for years. 

Allow the IRS to develop a modernization plan and submit it to Congress prior to making any organizational changes. 

Subject Tax Court judges to the same grounds for disqualification as other federal judges. 

Replaces the non-judicial terms "report" and "decision" with "opinion" and "judgment" respectively. 

"Special trial judges" would be renamed "magistrate judges." 

Comments on the proposal to the House Ways and Means Oversight Subcommittee 
will be accepted until April 6, 2018. Please submit your comments electronically to irsreform@mail.house.gov. 

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