The Expansion of Taxpayer First Act of 2019: What does it mean to you?

On July 1, 2019, the Congress and the President passed the expansion and strengthening of taxpayers’ rights and the focus on cyber security and protection from identity theft for taxpayers. This is good news for all of us, taxpayers. An overall theme of providing improved services to taxpayers is being brought by the expansion of funding for the IRS in a separate bill as well which are certainly positive steps for taxpayers.

We have to give the credit to the Chairmen Grassley (R-IA) of Finance and Neal (D-MA) of Ways and Means and the ranking members Senator Wyden (D-OR) and Congressman Brady (R-TX) and Subcommittee Chairman Lewis (D-GA) and Ranking Member Kelly (R-PA) because of their success in finding a common ground and agreement, regardless of the Congress being divided, on providing meaningful benefit to taxpayers through this legislation. 

What are the key provisions in the new bill?

1. Independent Appeals Process - Challenging the IRS position and not undertaking the cost and expenses of court by taxpayers, especially individuals and small businesses, is of great importance. Seeing the IRS appeals as an independent shop is the key. An effective tax accountant knows that great success can be delivered to clients can be found in having the ability to present the taxpayer’s understanding of the facts and the law related to IRS appeals.

The independence of the IRS office is being set in place statutorily by the new law. 

This underscores what has been the intent of Congress and the understanding of taxpayers. The IRS Appeals is also directed by this law to receive independent advice from IRS Chief Counsel, case files can be accessed by taxpayers, and the rights of the taxpayer to protest if denied the right to go to appeals is established.

2. Innocent Spouse (De Nove Review for Equitable Liability) - Arbitrary and capricious where the first thing that some courts started looking into as the standard of review (abuse of discretion) for cases where the IRS denies equitable relief for an innocent spouse. Brining the standard of review to de novo is a good move by Congress.

3. Third-Party Summons Modification of Procedures for Issuance - The IRS is required by Congress to provide reasonable notice in advance to the taxpayer of a third-party summons. It should be at least 45 days before the beginning of contacts and must not be greater than a year before. The opportunity to return to its original implementation of the safeguards on third party contacts shown in the 1998 IRS restructuring act is provided to the IRS. Taxpayers are also given a meaningful opportunity to first provide the information that the IRS is seeking before contacting third parties. The IRS definition of “reasonable notice” must be providing taxpayers an understanding of what the issue is and the information being requested that relates to that issue and this must be made certain by Congress.

4. Office of the National Taxpayer Advocate (Taxpayer Advocate Directives) - The retirement of Nina Olson is a loss for taxpayers. She will be retiring at the end of the month to raise goats and sheep. The good news, however, is that more teeth will be put into the Advocate’s issuance of Taxpayer Advocate Directives (TAD) by the Congress. It deals with the systemic problems taxpayers are seeing which is the opposite of Taxpayer Assistance Orders (TAO) as it deals with individual taxpayers.

5. Reforms for Whistleblowers - To quickly summarize, the reforms provide the protections for tax whistleblowers from retaliation as well as allows improved and expanded communication with whistleblowers about claims status which is most helpful.

6. Cybersecurity and Identity Protection - To curtail identity theft, the IRS has taken great steps and have dropped the number of cases of people who had been subject to identity theft. However, there is still a significant concern of cybersecurity for small and medium-sized businesses and CPAs. Allowing greater information sharing from the “Identity Theft Tax Refund Fraud Information Sharing and Analysis Center “ISAC” is included in the reforms on cybersecurity and identity theft. Improved centralization and standardization regarding identity theft and cybersecurity have also been allowed.

Although these are just some of the highlights of the Taxpayer First Act, Congress has done a great job with it overall which is good news for taxpayers.