ON JULY 1, President Donald Trump signed into law the Taxpayer First Act of 2019. This piece of legislation represents the first time in 20-plus years that the Internal Revenue Service will be reformed, hopefully modernized, and improved. These reforms are intended to be taxpayer friendly.
Appealing a ruling made by the IRS can be costly. The new law takes this into consideration by establishing an IRS Independent Office of Appeals. The intent here is to set up a truly independent office to listen to taxpayers present their cases to the IRS. The office will work to resolve federal tax issues without litigation.
The appeals office can receive advice from the IRS chief counsel, though the office will be independent. The advice is to come from staff members who are not involved in the case from a litigation standpoint.
Certain taxpayers are also now entitled to view nonprivileged case files and to initiate a process to protest if they are denied an appeal. The taxpayer will have basically the same information as the IRS.
Other parts of the law include developing a comprehensive customer service strategy. This is a plan to provide reasonable taxpayer needs for online service, telephone callback services and employee customer service training. Guidance and training materials will be updated as well. Another provision, in what would seem to be a no-brainer, is that the IRS will be precluded from rehiring certain IRS employees who were removed for misconduct.
In place will be low-income exceptions for payments required for submitting an offer-in-compromise, which is an agreement to settle the taxpayer’s tax bill for less than the full amount owed. Low-income is defined as a taxpayer whose adjusted gross income from the most recent tax year does not exceed 250% of the poverty level.
There will also be new rules in place regarding property seizures. Property will not be seized without fair and due process. Another tax enforcement procedure that will be modified will be the referrals for private debt collection.
Another change involves the de novo standard of review, which enables a court to review evidence as if it were being examined for the first time. An innocent spouse may now have a de novo review for equitable liability treatment by the Tax Court. This essentially means these cases will get a new look at the facts and law.
There will be modifications to the issuance of third-party summons. The IRS will be prevented from reaching out and contacting third parties (think banks, customers, etc.) prior to contacting the taxpayer. The IRS will need to provide reasonable notice to the taxpayer of the third-party summons. This will give the taxpayer a chance to provide the requested information and understand the issue.
Furthermore, the IRS will be required to establish a process to resolve misdirected tax refund deposits. This will include working with the financial institutions to identify which accounts the deposits went into, recover the amount and transfer the deposits to the appropriate account. In an effort to ease filings, the IRS will be allowed to require additional taxpayers to file returns electronically.
There is a directive to address identity theft and cybersecurity. The Secretary of the Treasury will work with public and private sectors to protect taxpayers from identity theft and refund fraud. A single point of contact for taxpayers affected by identity theft will be established. The contact will be specially trained to handle such issues and oversee the taxpayer’s case until it is resolved.
One change that would adversely affect taxpayers only applies if a tax return was not filed. The penalty for failure to file will be increased.
These are just a few of the changes we will see as the IRS works on plans to implement the new law.