IRS Reform and the Taxpayer First Act of 2019

IRS Reform and the Taxpayer First Act of 2019

April 10, 2019
IRS Reform and the Taxpayer First Act of 2019
The Internal Revenue Service (IRS) has two main statutory
has barred IRS from creating its own online system of tax
responsibilities: to collect most of the revenue needed to
filing to the detriment of some taxpayers. TFA19 would
fund the federal government and to enforce federal tax laws
also provide an exemption of certain low-income taxpayers
and regulations. In FY2017, the agency processed 245.4
from payments required to utilize the offer-in-compromise
million tax returns and other documents, collected $3.4
program (which allows a taxpayer to settle a tax debt at a
trillion in gross revenue, and had a budget of $11.2 billion.
lower amount than what the taxpayer generally owes).
While the collection and enforcement of federal taxes has
Enforcement
changed over the years (increasing e-filing, for example),
TFA19 would exempt two additional categories of
the IRS structure has largely been static over the past 20
taxpayers from referral to the private debt collection and
years—since the IRS Restructuring and Reform Act of
special compliance personnel programs. If enacted,
1998 (P.L. 105-206; RRA98). Since then, the IRS has
taxpayers with income substantially derived from the
struggled with customer service, a large and growing
supplemental security income (SSI) benefits or disability
amount of uncollected taxes, and information security, as
insurance (DI) benefit and taxpayers with adjusted gross
documented by the Taxpayer Advocate and the
income (AGI) less than or equal to 200% of the poverty
Government Accountability Office (GAO).
level would not be eligible for referral. TFA19 would also
require the IRS to notify taxpayers 45 days in advance of
The Taxpayer First Act of 2019 (H.R. 1957 and S. 928;
contacting third parties (including friends and neighbors)
TFA19) would implement various IRS reforms, including
and only if the audit team is intending to actually initiate
establishing an Independent Office of Appeals, making
contact—as opposed to the current practice in which notice
changes aimed at improving taxpayer service, reforming
is generally given in order to preserve the right to initiate
rules related to enforcement, modernizing agency structure
contact.
and technology, providing better cybersecurity and identity
protection, and achieving other objectives.
The legislation would require the IRS to show probable
cause that funds believed to have been structured to avoid
On April 9, 2019, the House passed H.R. 1957, as amended.
Bank Secrecy Act reporting requirements are derived from
TFA19 builds upon H.R. 5444 and H.R. 5445 in the 115th
an illegal source or are connected to another criminal
Congress, which both passed in the House on April 18,
activity. A post-seizure hearing would have to be held
2018, but saw no further legislative action.
within 30 days of the seizure, and any interest paid by the
government on returned funds would be exempt from tax.
The Joint Committee on Taxation has scored the TFA19 as
raising $3 million over 10 years, with 44 of the 47 scored
TFA19 would require the IRS to demonstrate that it made a
provisions having no or negligible revenue effects.
reasonable request for the needed information, prior to the
issuance of a designated summons. It would also require
This product focuses on areas of TFA19 that have been
that third-party summonses (John Doe summonses) be
historically the focus of congressional oversight. At the end
narrowly tailored.
of this product is a list of additional resources.
TFA19 also clarifies that the Tax Court has jurisdiction to
Establishment of an Independent Office of Appeals
redetermine equitable claims for relief from joint liability. It
RRA98 directed the IRS Commissioner to restructure the
also limits the access of non-IRS employees to returns and
IRS to ensure an independent appeals function within the
return information.
agency, but did not mandate how it should be
accomplished. TFA19 would codify the requirement for an
IRS Organizational Structure and Technology
independent appeals function and make access to appeals
TFA19 would require the Treasury Secretary to submit to
generally available to all taxpayers.
Congress a comprehensive written plan to redesign the
organization of the IRS by September 30, 2020. The
Taxpayer Service
comprehensive plan must consider how the IRS will
TFA19 would require the IRS to submit to Congress a
prioritize taxpayer services, streamline and simplify its
comprehensive customer service strategy within one year of
structure, better position itself to combat ongoing
its enactment. The legislation would also codify the IRS
cybersecurity and other threats, address whether the IRS
Free File Program, an agreement between the IRS and
Criminal Division should report directly to the IRS
commercial tax return preparers to provide free filing
Commissioner, and implement other priorities of TFA19.
services to low-income filers. Some object to codification
of the IRS Free File Program, which, they say, from 2002
https://crsreports.congress.gov

IRS Reform and the Taxpayer First Act of 2019
The proposal would also require the National Taxpayer
NTA, would also be required to develop and implement
Advocate (NTA) to report to Congress any Taxpayer
publicly available caseworker guidelines that reduce the
Advocate Directives not addressed by the IRS, and would
administrative burdens for IDTTRF victims, as they work
reduce the number of “most serious problems” included in
with the IRS to sort out their tax affairs.
the NTA Annual Report to Congress from “more than 20”
to 10. TFA19 would require the IRS to provide statistical
The proposal would require the IRS to notify a taxpayer if
support to the NTA, upon request, and require the NTA to
the IRS suspects a taxpayer’s identity (or that of the
coordinate research efforts with the Treasury Inspector
taxpayer’s dependents) has been compromised. TFA19
General for Tax Administration (TIGTA).
would also require the IRS to establish a single point of
contact within the IRS for any taxpayer who is a victim of
TFA19 would codify the position of the IRS’ Chief
identity theft and expand voluntary access to identity
Information Officer (CIO) and establish clear roles and
protection personal identification numbers (IP PINs) to
responsibilities for the CIO. It also would mandate that the
individuals who are not victims of identity theft nationwide
IRS develop and implement a multiyear strategic plan for
over five years.
information technology (IT). Additionally, the legislation
would require the verification and validation of two specific
Additional Resources
IT acquisitions within one year after the date of enactment
The Joint Committee on Taxation technical summary of
and require the IRS to develop an internet portal that
TFA19 is available at https://www.jct.gov/
facilitates taxpayers’ filing Forms 1099 with the IRS.
publications.html?func=startdown&id=5175.
TFA19 would authorize the IRS to develop an automated
The Joint Committee on Taxation revenue score of TFA19
system for the Income Verification Express Service (IVES),
is available at https://www.jct.gov/publications.html?func=
which currently relies on the forms being sent to the IRS
startdown&id=5177.
via secure fax.
A section-by-section summary of TFA19 prepared by the
Cybersecurity and Identity Theft
staff of the Ways and Means Committee is available at
TFA19 would formally require the IRS to work
https://waysandmeans.house.gov/sites/
collaboratively to combat identity theft and tax refund fraud
democrats.waysandmeans.house.gov/files/documents/
(IDTTRF) through the Security Summit (a public-private
Taxpayer%20First%20Act_Section%20by%20Section_0.p
partnership). It also would require the Electronic Tax
df.
Administration Advisory Committee to make
recommendations regarding methods to prevent IDTTRF.
Donald J. Marples, Specialist in Public Finance
The IRS would be encouraged to participate in an IDTTRF
information sharing and analysis center with state and
IF11176
private-sector partners. The IRS, in consultation with the

https://crsreports.congress.gov

IRS Reform and the Taxpayer First Act of 2019

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https://crsreports.congress.gov | IF11176 · VERSION 1 · NEW