The Taxpayer First Act of 2019 (TFA) was signed into law on July 1, 2019. The focus of the bill is to enact changes in the IRS’s organizational structure which includes customer service, enforcement procedures, management of information technology, and improving interactions with taxpayers.
Some of the changes have already gone into effect as of the date of the enactment of the Act, some were effective 45 days after the date of the enactment of the Act. Other changes are to be built into the new organizational plan for the agency and are applicable by December 31, 2020.
While the TFA is a comprehensive bill which includes changes for the IRS, the tax professional community and the individual taxpayer, following are some provisions which will affect the individual taxpayer:
IRS Independent Office of Appeals: An independent administrative appeals function at the IRS (these rules had been carried in the agency’s internal rules) is formalized. The IRS Office of Appeals is renamed the “IRS Independent Office of Appeals.” When a taxpayer requests an appeals hearing, the TFA requires that the administrative case file referred to the IRS Independent Office of Appeals be made available to eligible individual and small business taxpayers. Eligible taxpayers are those that, for the tax year to which the dispute relates, are: (1) individuals with adjusted gross income not exceeding $400,000, and (2) entities with gross receipts not exceeding $5 million for the tax year.
Offers-in-Compromise: Taxpayers with incomes below 250% of the Federal poverty level are not required to submit the application fee and initial payment when proposing an OIC to the IRS.
Increased Penalty for Improper Disclosure or Use of Information by Preparers of Returns: In the case of disclosure of taxpayer identity information by a return preparer where the information is used in an identity theft crime, whether or not related to the filing of a tax return, increased civil penalties will apply. The increase in penalty is to enlist the participation of all tax preparers in securing their client’s information.
Notice to Taxpayer of IRS Contact with Third Party: The IRS may not contact any person, other than the taxpayer, regarding the determination or collectability of a tax liability without providing the taxpayer with notice at least 45 days notice. This replaces the vague requirement that reasonable notice must be provided “in advance” to the taxpayer.
Misdirected Tax Refund Deposits: The IRS is to establish procedures for taxpayers to report instances where they did not receive their refund, or a refund was erroneously delivered to the wrong taxpayer. The IRS is to coordinate with financial institutions in order to (1) identify the accounts to which transfers were made, (2) recovery of the amounts transferred, and (3) facilitate the payment of the refund to the correct account of the taxpayer.
Notification of Suspected Identity Theft: If a determination is made by the agency that there has been unauthorized use of the identify of any individual or their dependents, as soon as practical they are to notify the individual of such determination, provide instructions on how to file a report with law enforcement, and offer assistance with the process of responding to the various agencies.
Identity Protection Personal Identification Numbers (IP PIN): Currently, the IP PIN program does not protect victims whose identify has been stolen but have not yet had their social security number compromised. This provision requires the IRS to establish a voluntary process under which any taxpayer can request an IP PIN to use in filing a tax return. The Act expands voluntary access to IP PINs nationwide over the next five years.
Single Point of Contact for Tax-Related Identity Theft Victims: Procedures will be developed and implemented to ensure that any taxpayer whose return has been delayed or otherwise adversely affected due to tax-related identity theft has a single point of contact at the IRS throughout the processing of the taxpayer’s case. The single point of contact shall track the taxpayer’s case to completion and coordinate with other IRS employees to resolve case issues as quickly as possible.
Payment of Taxes by Debit and Credit Cards: The TFA allows the IRS to directly accept credit and debit cards for taxes, provided the transaction fees are paid by the taxpayer. Currently, the IRS uses a third-party processor to accept debit and credit card payments. The IRS is directed to minimize the fees when entering into contracts to process credit and debit card transactions.
Modernization of Internal Revenue Service Organization Structure: A comprehensive written plan to redesign the organization of the Internal Revenue Service is to be submitted to Congress. The plan shall: (1) ensure the successful implementation of the priorities specified by Congress, (2) prioritize taxpayer services to ensure that all taxpayers easily and readily receive the assistance that they need, (3) streamline the structure of the agency which includes minimizing the duplication of services and responsibilities within the agency, (4) position the IRS to combat cybersecurity and other threats to the agency, and (5) address whether the Criminal Investigation Division (CID) should report directly to the Commissioner.