IRS Reform Bill Signed Into Law

Chris Gaetano
Published Date:
Jul 2, 2019

The president signed into law the Taxpayer First Act of 2019, a wide-ranging bill that aims to structurally reform and modernize the IRS, according to Accounting Today. The bill, which cleared Congress last month, will, among many other things:

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 such a process through the creation of 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 it must provide the taxpayer with a precise and detailed reason why, and instruct the taxpayer on how to protest the decision. The process would also increase congressional oversight through an annual written report on the number of requests for referral that were denied. The Office of Appeals would have to provide those who undertake the appeals process with access to nonprivileged portions of their case file relevant to the dispute within 10 days of the conference (in contrast to current law, which provides that such information is available only 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 clarify a time period for that response. The taxpayer advocate would also get a time frame 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: The strategy must address how the IRS intends to provide assistance to taxpayers and establish benchmarks and metrics to gauge their success. 

Absent from the bill was a controversial provision that enshrined into law an informal agreement between the IRS and tax software companies not to develop its own free filing option so long as the private companies did so instead. ProPublica had previously reported that this provision—combined with a previous memorandum of understanding between the IRS and the software vendors whereby the former pledged not to develop its own independent service if the latter offered these free filing services—would preclude any effort to simplify tax filing directly through the government. It also reported that that the free services offered by these private firms are underpromoted, as evidenced by the fact that only 3 percent of eligible filers use them. In addition, Pro Publica said, these companies often use the free-service programs to cross-promote paid services, and the programs leave taxpayers vulnerable to data breaches and identity theft. 

Rep. Richard Neal (D-Mass.), the chair of the House Ways and Means Committee, hailed the bill's enactment: “This signing is the culmination of a lengthy, bipartisan process undertaken by the Ways and Means Committee to implement pro-taxpayer reforms at the IRS for the first time in more than 20 years. New protections for low-income taxpayers, practical enforcement reforms, and upgraded assistance for taxpayers and small businesses will all now go into place."

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