The Taxpayer First Act of 2019 is redesigning how the IRS works with taxpayers, even though it may take a while for many of the provisions to take effect.
Some experts have highlighted the following aspects of the bill as especially important:
An independent appeals process. Taxpayers and small businesses will be able to challenge the IRS’ position without undertaking the cost and expenses of court. IRS Appeals will be an independent unit that grants taxpayers access to case files and allows for independent advice from IRS Chief Counsel. Taxpayers will be able to protest if denied an appeal.
Innocent spouse treatment. The new law requires the U.S. Tax Court to take a fresh look at innocent spouse cases without taking previous decisions into account.
Modification of procedures for issuance of third-party summons. This is an important protection for taxpayers, especially small-business owners. It discourages the IRS from bypassing the taxpayer and contacting third parties — such as financial institutions, customers, contractors, etc. — instead for information. The IRS should give taxpayers a meaningful opportunity to provide the information it is seeking prior to its contacting third parties. Also, the IRS will be required to provide reasonable notice at least 45 days (and not greater than one year) in advance to the taxpayer of a third party summons. In practice, the IRS should provide the taxpayer with an understanding of what the issue is, what information is being requested and how the requested information relates to the issue.
Office of the National Taxpayer Advocate. The Taxpayer First Act has taken a strong approach with the Advocate’s issuance of Taxpayer Advocate Directives, which focus on systemic problems taxpayers deal with. Once they are issued by the Advocate, the IRS should comply within 90 days. The Advocate Annual Report will identify any TAD that is not honored by the IRS.
Credit card payments. The IRS is now allowed to directly accept credit and debit card payments for taxes; the taxpayer must pay any processing fees. The Act also requires the IRS to try to minimize processing fees when entering into contracts with the credit card companies.
Whistleblower reforms. The Act provides protections from retaliation and allows for better communication with whistleblowers about the status of their claims.
Cybersecurity and identity protection. The IRS will now have to let taxpayers know whether it suspects there is evidence of identity theft. The Agency will be required to provide a single point of contact for identity theft victims and explain to taxpayers how to file a report with police and how to protect themselves against additional harm resulting from the identity theft.
Rep. Kevin Brady, R-Texas, ranking member of the Ways and Means Committee, was quoted as saying about the Act that it “levels the playing field to ensure taxpayers have the same information as the agency, better protects our taxpayers’ information, and reins in past IRS abuses to guarantee families and local businesses never have to fear having their accounts and property seized without fair and due process.”
As with many new laws, it will take some time to see what specifically the effects are. The legal provisions are complex and will require interpretation over time. We’ll be keeping an eye on the developments.