Bipartisan and Pro-Taxpayer IRS Reform Legislation Passes the House Ways and Means Committee
Legislation Would Increase Taxpayer Protections, Require IRS Accountability to Congress, and Modernize IRS Systems
Bipartisan and pro-taxpayer IRS reform legislation passes the House Ways and Means Committee on April 2, 2019. The legislation called The Tax Payer First Act of 2019 is the first comprehensive IRS reform legislation in over 20 years. The legislation is focusing on closing the trust gap between the public and the IRS. Specifically, the legislation modernizes IRS operations, institutes new IRS accountability measures and requires greater taxpayer protections and transparency. Some of the IRS’s systems date back to the 1960s.
Highlights of the Legislation Include
Modernizing the IRS. This provision requires the IRS to modernize its structure with a focus on customer service and tax administration. The IRS is required to submit the plan to Congress prior to making any organizational changes. The plan must consider how the IRS will prioritize taxpayer services, streamline and simplify its structure, and better position itself to combat ongoing cyber threats. Furthermore, the legislation requires IRS accountability for the billions of taxpayer dollars annually spent on developing and maintaining IRS information technology systems.
Customer Service Improvements and Accountability. Under this provision, the IRS is required to develop and submit to Congress a comprehensive customer service strategy. The strategy must address how the IRS intends to provide assistance to taxpayers, in part by ensuring adequate customer service training for its own employees and taking into account best practices from the private sector. The strategy must also establish metrics and benchmarks for measuring the IRS’s success in implementing this strategy.
Access to an Independent Taxpayer Appeals Process. The provision requires the creation of an independent administrative appeals function at the IRS. The provision ensures taxpayer access to an administrative review process heard by an independent decision maker.
Expansion of Free Tax Preparation Software. The IRS currently works with electronic tax preparation services to provide free tax preparation software and electronically fillable forms. This program is known as the IRS Free File program. This provision requires the IRS to continue to work with private stakeholders to maintain, improve, and expand the program. The provision also requires the IRS to continue to provide basic fillable forms to all taxpayers.
New Limits on Access to Taxpayer Information. This provision prohibits a person, other than an officer or employee of the IRS, from examining a taxpayer’s books and records as part of an examination other than for the sole purpose of serving as an expert in an examination process.
New Identify Theft Protections for Filers. The IRS issued approximately 1.2 million identity protection personal identification numbers to identity theft victims for the 2014 filing season. Still, the identity protection personal identification numbers program fails to protect victims whose identities have been stolen but have not yet had their tax account compromised. This provision requires the IRS to set up a program under which any concerned taxpayer can request an identity protection personal identification number to use in filing his or her return. The IRS has five years to implement this program nationwide. This provision codifies the position of the IRS’s Chief Information Officer and establishes clear roles and responsibilities for the officer.
Internal IRS Accountability and Transparency. A taxpayer shall be notified by the Secretary of the Treasury if any disciplinary or adverse action is taken against an IRS employee or employee of any other federal or state agency for unauthorized inspection or disclosure with respect to the taxpayer’s information.
Despite the acrimony in Washington, IRS reform is a topic that Democrats and Republicans can put their differences aside and find common ground. The legislation passed the Ways and Means Committee on April 2, 2019 by voice vote which is rare these days. I expect the legislation to pass the full House of Representatives in the coming weeks.
The Senate has not scheduled action on the legislation. However, it is foreseeable they could schedule action on the legislation this fall. IRS reform is also a popular topic with voters, and this is on the minds of politicians as they head into the 2020 general election. As always, we will keep you informed of the legislation’s progress.
Boston Private is pleased to announce a partnership with Doug Fisher, a Washington Policy expert, who will offer a series of insights into a number of reform proposals making their way through Congress in 2019. Doug is Director of Retirement Policy at the American Retirement Association. In this role, Doug works with the ARA membership to protect, advise and grow their businesses through ideation and advocacy in the benefits area. Before joining ARA, Doug led Fidelity's legislative policy and thought leadership development teams involving retirement, health and welfare benefit plans. Doug has advised many Fortune 1,000 companies on the impact of legislation and regulation on the design and delivery of benefits. Before joining Fidelity, Doug served as tax counsel to the U.S. Senate Finance Committee and was involved in writing the pension, health and insurance provisions of the Small Business Job Protection Act of 1996; the Balanced Budget Act of 1997, including the Roth IRA, Simple retirement plan, medical savings account (predecessor to the health savings account); and the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
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