Tax Law Insights

President Trump signed the “Taxpayer First Act”, H.R. 3151, into law on July 1, 2019.  The Taxpayer First Act may be one of the most significant “taxpayer rights” laws since the adoption of the Internal Revenue Service Restructuring and Reform Act of 1998.  The key feature of the new law is its requirement that, within the next 12 months, the IRS submit to Congress a “written comprehensive customer service strategy”, and within 24 months “make available the updated guidance and training materials [under the strategy] … [which will be] easily understood … and provide clear instructions” to IRS staff, and so that the strategy may be successfully implemented.  The IRS is also required to submit a plan to Congress by September 20, 2020 in order to “modernize its organizational structure”, and which would “streamline the structure of the agency including minimizing the duplication of services and responsibilities within the agency”.

In addition to the new IRS “customer service” and “organizational modernization” plans to be submitted to Congress, the Taxpayer First Act is packed with a broad range of administrative and procedure changes to the Internal Revenue Code and applicable to how the agency administers our nation’s tax laws.  These include:

• The present IRS Appeals Office will be changed to the “Internal Revenue Service Independent Office of Appeals”. The continued function of IRS Appeals will be to resolve Federal tax controversies without litigation on a fair and impartial basis to both the IRS and the taxpayer; promote consistent application and interpretation of Federal tax law, including voluntary compliance; and to enhance public confidence in the IRS.  A specific procedural change is now mandated by Congress for IRS Appeals, to take effect in 12 months, and where IRS Appeals must now provide certain taxpayers having a scheduled settlement conference before Appeals to provide taxpayers with access to the non-privileged portion of the case/audit file at least 10 days before the settlement conference.  This is a significant departure from present IRS Appeals practice, and where Appeals Officers were often reluctant to provide taxpayers with key information concerning the taxes at issue.
• New IRS seizure requirements applicable to "structuring transactions".
• Innocent Spouse Relief
• "Narrowly tailoring" information requested by the IRS in “John Doe” summons.
• Giving IRS Private Debt Collection agencies broader authority to accept longer tax payment plans from taxpayers.
• Changes to IRS Taxpayer Advocate Directives.
• Tax Whistleblower reform.
• Cybersecurity and identity theft programs and protections.
• Development of better information technology management by the IRS, including expanded use of electronic filing and other systems such as electronic signatures on documents, electronic Form 1099 filing (by January 1, 2023), and mandatory e-filing by exempt/non-profit organizations.
• Increased failure to file penalties

The budgetary effects of the new Taxpayer First Act must still be evaluated by Congress, and including the restructuring and other modernization proposals expected to be submitted by the IRS to Congress.  However, many of the new provisions are to become effective now, or in the near future, without further action.  These important changes must be considered by taxpayers and their representatives now when dealing with the IRS.