Taxpayer First Act Signed into Law
On July 1, 2019, President Trump signed into law the Taxpayer First Act of 2019 which aims to broadly redesign the Internal Revenue Service. Generally, the legislation aims to expand and strengthen taxpayer rights and to reform the IRS into a more taxpayer friendly agency by requiring it to develop a comprehensive customer service strategy, modernize its technology and enhance its cyber security.
Highlights of the new law include:
- The bill establishes an Independent Office of Appeals and strengthens taxpayers’ right to an appeal, including full notice and protest procedures and open access to case files. The IRS will provide independent appeals to all taxpayers with legitimate claims. If a request for review is denied, the IRS must establish the reason in writing.
- It also directs the IRS to develop a training strategy for its employees to reinforce taxpayer rights and reauthorizes streamlined critical pay authority for certain technical IRS employees. (The purpose of streamlined critical pay authority is to provide the IRS a management tool to quickly recruit and retain employees with high levels of expertise in technical or professional fields critical to the success of the IRS’s restructuring efforts. While this authority was originally authorized for ten years, it was extended on two occasions and ultimately expired on September 30, 2013).
- New uniform electronic filing requirements will be set. Currently, the IRS can only require individuals filing more than 250 returns to file them electronically. This provision would eventually lower that threshold to 10 or more returns. This requirement would be phased in between the years 2019 and 2021. In the case of a partnership, the applicable number is 200 for calendar year 2018 to be phased down to 50 for calendar year 2021.
- When an IRS performs an audit, actual notice will be provided to taxpayers before the agency contacts friends, neighbors and clients.
- It will be easier for taxpayers to obtain “innocent spouse” relief from joint and several tax liability based upon the facts and circumstances.
- The IRS will implement several ID theft measures including notifying taxpayers if it detects or suspects the unauthorized use of their identity.
- New safeguards will be established on the seizure of funds believed to be structured to avoid the $10,000 financial reporting requirement. The IRS will be limited to cases involving illegal sources of funds or transactions structured to conceal criminal activity.
- Instead of using third-party processors, the IRS will accept direct tax payments from taxpayers using a credit or debit card.
- The new law also enhances the existing IRS whistleblower reward program by permitting full and open communication between the IRS Whistleblower Office and whistleblowers. In the past, it could be frustrating for the whistleblower who gets little to no information about the status of his submission to the IRS. Under the new law, whistleblowers will be able to determine if the IRS has referred the matter for exam and whether the taxpayer in question has made a payment. The change will facilitate the cooperation between whistleblowers and the IRS necessary to fully prosecute tax fraud cases.
- It protects low-income taxpayers by permanently authorizing the Volunteer Income Tax Assistance program and authorizes additional funding for it. It also codifies low-income taxpayer exceptions from fee waivers and lump sum payment associated with IRS payment plans.