On July 1, President Trump signed into law the bipartisan IRS reform bill, the Taxpayer First Act, with plans to make overall improvements to the IRS.
With changes in management and oversight, the Act implements a host of new developments in customer service, the process of appeals, technology infrastructure and cybersecurity, among others.
Customer Service Improvements
In an effort to better meet customer expectations in the areas of online services and telephone call back services, the Act requires the IRS to develop a comprehensive customer service plan to be submitted no later than July 2, 2020 (one year after the Act’s date of enactment). Once approved, the IRS is to unveil the strategy and training materials to the public within two years of that date.
Independent Office of Appeals
The Act established the IRS Independent Office of Appeals, renamed from the IRS Office of Appeals. It codifies an independent administration appeals function with limited ability for the IRS to deny taxpayers’ access. This reorganization promotes resolution of tax controversies in a fair and unbiased approach.
Modernizing technology within the IRS will create a number of advantages for taxpayers. The Act will require the IRS to create streamlined standards for the use of electronic signatures, allow taxpayers to pay taxes and fees with debit and credit cards, strengthen limits on the use of tax information by third parties that taxpayers authorize to receive information, and reinstate critical pay authority for IT positions.
The technology upgrades also requires the IRS to build an online platform for individual taxpayers to prepare and file Forms 1099 by Jan. 1, 2023. In addition, the bill requires electronic filing for tax exempt status filing Form 990 or Form 8872.
With increased tax scams and cyberattacks, there is a heightened need to protect taxpayers from identity theft and scammers. The Act implemented a number of provisions that intend to increase taxpayer protection and prevent unauthorized use of personal identity.
Among them, the IRS is now required to establish a program to make Identity Protection Personal Identification Numbers (IP PIN) available to residents who request one. This PIN prevents the misuse of taxpayers’ Social Security Numbers. It also allows the IRS to share information and disclose specific taxpayer tax return information to the Identity Theft Tax Refund Fraud Information Sharing and Analysis Center in an effort to authenticate returns and prevent identity theft.
The Act also requires the IRS to:
- create a single point of contact for identity theft;
- notify taxpayers in cases of unauthorized use of identity;
- inform taxpayers of unauthorized access of tax information by IRS employees; and
- establish guidelines for processing refund fraud cases.
There’s a multitude of other provisions tucked into the Taxpayer First Act. For example, there is also an increase in the penalty for failure to file a tax return. Currently, if a taxpayer files a return more than 60 days after its due date, the penalty is $205 (or the amount of tax shown on the return if this is lower). The Act increased the failure-to-file penalty over 60 days to $330, effective for tax returns with due dates after December 31, 2019.
The Act puts taxpayers first by limiting certain IRS enforcement measures, such as preventing the IRS’s ability to seize assets in transactions structured to evade the $10,000 reporting threshold under the Bank Secrecy Act (BSA), as well as preventing the IRS to include interest from recovery of BSA seizures of income.
This new legislation also now allows taxpayers to receive a de novo—new administrative review—by the Tax Court regarding innocent spouse relief.
Read more details on the provisions included in the Taxpayer First Act and contact your advisor at (805) 963-7811 with questions specific to your tax situation.