With a direct focus on the IRS, the U.S. Senate has passed an extensive reform package aimed at further protecting taxpayers. Alongside new provisions adopted to improve customer service provided by the IRS, the Taxpayer First Act contains several new taxpayer protections.

Improved Identity Theft Defenses

Tax-related identity theft was a top contender for new provisions proposed within the bill. For example, the IRS is usually required to give a notification to a taxpayer immediately—or as soon as practicable—upon the confirmation or suspicion of unsanctioned use of an individual’s identity. It is now required that the IRS must also:

  • Supply taxpayers with proper instructions on how to work with law enforcement on filing a report for unauthorized use.
  • Pinpoint specific steps a taxpayer should follow in order to allow law enforcement access to personal information throughout the course of the investigation.
  • Offer advice to taxpayers regarding safety guidelines to protect themselves from future harm.
  • Distribute other means of identity protection, including the use of an “identity protection personal identification number” (IP PIN).

The new bill also includes a requirement for the IRS to initiate a program within the first five years that allows taxpayers the opportunity to provide better security for themselves and their identity by requesting IP PINS. Currently, victims of tax-related identity fraud are the only individuals with this protection available.

The IRS must also provide supplemental communications to suspected victims with information concerning the initiation of an investigation into the unauthorized use and whether or not the ongoing investigation has corroborated any unauthorized use. This change means that it must also notify the victim about whether legal action has been taken against the suspected party relating to any unapproved use or whether it has made a referral for criminal prosecution.

Further, the IRS is required to provide these tax-related identity theft victims with a single contact point throughout the direction of their case. This contact is required to track the individual’s case until completion while also coordinating with other employees within the IRS to develop the quickest resolution for all of the taxpayer’s issues.

Improving Appeals Rights

The passing of the Taxpayer First Act compiles into law the pre-existing, independent Office of Appeals within the IRS. It now also gives expanded rights of appeal to taxpayers in terms of tax matters.

As an example, if certain taxpayers have requested a conference with the Office of Appeals, the IRS is required, under law, to provide access to the nonprivileged portions of the case file on the disputed issues. This access must be granted to the taxpayer no later than 10 days before his or her scheduled conference date. As it currently stands, taxpayers must complete a Freedom of Information Act request to obtain access to personal case files.

In general, almost all taxpayers have the ability to engage in the resolution process through the appeals office. In the case of a denied request to appeal an IRS notice of deficiency, the bill requires that the IRS must provide the taxpayer written notice that includes the basis for the denial, a fully-detailed explanation of how the basis applies to the facts, and a detailed description of the events involved. The notice also must report on the procedures required for the taxpayer to protest the denial.

Developing Stronger Customer Service Engagement

The new bill now allows one year for the IRS to develop an inclusive customer service strategy before submitting it to Congress. These procedures must include a plan to expand taxpayer assistance to ensure improved security while also meeting expectations reasonable for taxpayers. In an effort to continue the improvement of customer service best practices, the plan must adopt ideas from private sector organizations, including telephone callback services, online services, and the training of employees within the customer service department.

Separately, the bill also includes a requirement for the IRS to provide beneficial taxpayer information to anyone on hold during telephone calls made to any IRS helpline. The information included in the on-hold messaging system will address items like where and how to report tax scams, common tax scams, and supplementary advice on how taxpayers can protect themselves from tax crimes and potential identity theft.

Further Provision Areas

The Taxpayer First Act also tackles a number of other areas, including:

Electronic Filing. The bill includes a provision that encourages the IRS to require individuals filing more than 10 returns —significantly lower than the current 250-return threshold — to file their returns electronically. The lower threshold will eventually be phased in, dropping to 100 returns in 2021 and 10 returns in 2022. Partnerships will operate under special rules.

Whistleblower reforms. The bill now permits the IRS to disclose tax return information related to the investigation of any taxpayer about whom a whistleblower has provided information (extending only to obtain information that otherwise is not available under reasonable conditions). It also includes updates that add antiretaliation provisions and mandates specific updates to whistleblowers on investigations.

Structuring. The bill addresses the abuse of “structuring laws” from IRS enforcement by establishing new protections. Those laws gave the agency permission to seize taxpayer assets when bank deposits were made by a taxpayer that appeared in amounts just under the bank reporting requirements of a $10,000 trigger.

Helping You Stay Current

This new bill will affect a variety of other areas past just tax-related identity theft. It addresses topics such as tax refund deposits that have been misdirected, cybersecurity, private debt collection, and innocent spouse relief. If you are unsure about the different parts to this new bill, be sure to contact your local CRI advisor for more information on these and other current tax developments.