Like Countable?

Install the App
TRY NOW

house Bill H.R. 3151

Should the IRS Be Modernized to Improve Services for Taxpayers?

bill Progress


  • EnactedJuly 1st, 2019
    The President signed this bill into law
  • The senate Passed on a voice vote
  • The house Passed on a voice vote
      house Committees
      Committee on Ways and Means
    IntroducedJune 6th, 2019

What is House Bill H.R. 3151?

This bill — the Taxpayer First Act — would aim to modernize the Internal Revenue Service’s (IRS) information technology systems, infrastructure, and services to improve taxpayers’ experience with the agency. It would codify an independent appeals process for taxpayers, bolster enforcement of tax laws, and reform the tax court.


Title I — Putting Taxpayers First

INDEPENDENT APPEALS PROCESS

The IRS Independent Office of Appeals would be codified into law and provide for additional congressional oversight over decisions to withhold taxpayers from the administrative review process. The IRS had been required to establish an independent appeals process, but after doing so increasingly obstructed certain taxpayers from accessing the review process.

The IRS would be required to provide taxpayers with their case file prior to the start of any dispute resolution process. Under current law taxpayers have to file a Freedom of Information Act (FOIA) request to access their file.

IMPROVED SERVICE

Comprehensive Customer Service Strategy

The IRS would be required to develop and submit a comprehensive customer service strategy to Congress which addresses how the IRS will assist taxpayers, which will include metrics and benchmarks for measuring success.

Low-Income Exception for Payments Otherwise Required for Submission of an Offer-in-Compromise (OIC)

The IRS would be authorized to enter into an offer-in-compromise (OIC) agreement with a taxpayer to settle a tax debt at a lower amount than what the taxpayer owes. Generally, when proposing an OIC to the IRS, the taxpayer must pay an application fee and provide an initial non-refundable lump sum payment, which the IRS has the authority to waive. This would codify the IRS’ ability to not require taxpayers certified as low-income (defined as those with incomes below 250% of the federal poverty level) to include the application fee and initial payment when submitting an OIC application.

SENSIBLE ENFORCEMENT

IRS Seizure Requirements with Respect to Structuring Transactions

The IRS would have to show probable cause that funds believed to have been structured to avoid Bank Secrecy Act (BSA) reporting requirements were derived from an illegal source or connected to criminal activity before seizing those funds. A post-seizure hearing would have to occur within 30 days of the seizure. If it’s determined that the funds and interest should be returned, the interest would be exempt from income tax.

If a court determines that the federal government should return funds and interest to an individual whose funds were seized by the IRS based on allegations of structuring, any interest paid by the federal government with respect to such funds would be exempt from income tax.

Clarification of Equitable Relief from Joint Liability

The Tax Court’s ability to give innocent spouses relief from joint liability would be codified. The Tax Court’s standard of review is clarified as on a “de novo” basis, meaning that the Tax Court will take a fresh look at the case without taking previous decisions into account. The review would be based on the administrative record and any newly discovered or previously unavailable evidence.

Summons Reforms

This section would clarify the IRS’ authority to issue John Doe summonses (summonses that don’t identify the person whom the summons is issued to) by emphasizing that the agency must narrowly tailor John Doe summonses to seek only information pertaining to the failure (or potential failure) of the person or group of persons to comply with federal tax law. This is consistent with the current IRS manual, which states that a John Doe summons may not be used for the purposes of a “fishing expedition.”

The Commissioner of the relevant operating division of the IRS and the Chief Counsel of the IRS would have to review and provide written approval of designated or related summonses prior to their issuance. In their written approval, they must state facts establishing that the IRS had previously made reasonable requests for the information and must be attached to the summons. The IRS would have to certify in any subsequent judicial proceedings that reasonable information requests were made.

Private Debt Collection and Special Compliance Personnel Program

Two additional categories of cases not eligible for referral to private collection agencies would be created: 1)  taxpayers whose income is substantially derived from supplemental security income benefits or disability insurance benefit payments and 2) taxpayers with an adjusted gross income at or below 200% of the poverty level. Additionally, this provision would alter the definition of inactive tax receivables that can be assigned to private debt collection agencies to those where more than two years has passed since assessment of the tax debt and limits installment agreements between the taxpayer and private debt collection agencies to seven years.

Reform of Notice of Contact of Third Parties

A taxpayer under audit would have to be notified by an IRS employee before the IRS initiates third party contacts (such as friends, neighbors and clients) during the audit. Currently, this notice typically occurs at the beginning of an audit, early enough that it doesn’t function as a notice of impending contact. Under this provision, the IRS would be required to notify the taxpayer at least 45 days prior to the period of contact, which may not exceed a year.

Limitation on Non-IRS Employees’ Access to Returns and Return Information

It would be prohibited for a person other than an IRS officer or employee from examining books, records, and witness testimony as part of an examination other than when serving as an expert. Additionally, only IRS employees or the Office of Chief Counsel are allowed to question a witness under oath.

ORGANIZATIONAL MODERNIZATION

Office of the National Taxpayer Advocate

The Office of the National Taxpayer Advocate (NTA) issues Taxpayer Advocate Directives (TADs), and this bill would strengthen TADs by requiring the IRS Commissioner or Deputy Commissioner to respond within a specified timeframe. Any TADs not honored by the IRS would have to be reported to Congress.

Modernization of IRS Organizational Structure

The IRS would be required to thoughtfully consider what a modern structure for the agency might look like, develop a plan for its implementation and submit a 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, better position itself to combat ongoing cyber threats, and take into account the Congressional priorities laid out in this package. The timely submission of the proposal to Congress would then remove the requirement of an organizational structure that features operating units serving particular groups of taxpayers with similar needs one year after the submission of the plan.

OTHER PROVISIONS

Return Preparation programs for Applicable Taxpayers

The IRS’s current Volunteer Income Tax Assistance (VITA) Program partners with IRS- certified volunteer organizations to provide free tax return filing assistance to low-income populations, persons with disabilities, taxpayers with limited English proficiency, and other underserved communities. The VITA matching grant program would be permanently authorized to support VITA programs’ maintenance and expansion at up to $30 million a year. The IRS would be authorized to mass communications and other means to promote the benefits and encourage the use of the program.

Provision of Information Regarding Low-Income Taxpayer Clinics

Low Income Taxpayer Clinics (LITC) assist low-income taxpayers with representation in controversies with the IRS. This section would clarify that IRS employees are able to provide taxpayers in need of such assistance with information about the availability of and eligibility requirements for LITCs, including location and contact information.

Notice From IRS Regarding Closure of Taxpayer Assistance Centers

This section would require the IRS to provide public notice, including by non-electronic means, to affected taxpayers 90 days prior to the closure of a Taxpayer Assistance Centers (TAC). The notice must include information on alternative forms of assistance available for affected taxpayers and the date of the proposed closure. The IRS also must notify Congress and provide the reasons for the closure.

Rules For Seizure & Sale of Perishable Goods

The IRS would only be permitted to deem seized property as “perishable” if it’s liable to perish, as current law allows it to be so deemed if the property would lose value by being kept or can’t be kept without great expense. That leads to property being sold without minimum bid requirements and for significantly less than could be received at auction.

Whistleblower Reforms

The IRS would be permitted to exchange information with whistleblowers if doing so would be helpful to an investigation. The IRS would be required to notify whistleblowers of the status of their claims at certain points in the review process. It’d also be authorized — but not required — to provide status updates at other points upon the whistleblower’s written request. To protect taxpayer privacy, it’d prohibit whistleblowers from publicly disclosing the information they receive from the IRS, under penalty of law. Additionally, anti-retaliation provisions similar to those provided to whistleblowers under the False Claims Act and the Sarbanes-Oxley Act are extended to IRS whistleblowers.

Customer Service Information

The IRS would be required to provide the following  information over the telephone while taxpayers are on hold with an IRS call center: information about common tax scams, direction to the taxpayer on where and how to report such activity, and tips on how to protect against identity theft and tax scams.

Misdirected Tax Refund Deposits

The IRS would be required to establish procedures for taxpayers to report instances where they did not receive an anticipated electronic fund transfer or a refund was erroneously delivered to the wrong taxpayer, and also to ensure the IRS will recover the erroneous refunds and deliver them to the correct taxpayer.


TITLE II — 21st CENTURY IRS

CYBERSECURITY AND IDENTITY PROTECTION

Recent IRS efforts aimed at combating identity theft tax refund fraud (IDTTRF) through public-private partnerships would be codified into law.

Recommendations to Prevent Identity Theft Refund Fraud

The IRS would be required to consider recommendations by the Electronic Tax Administration Advisory Committee to address the threat of IDTTRF. Recent changes to the ETAAC charter, charging it with making recommendations to the Treasury Secretary regarding methods to prevent IDTTRF, would be codified.

Information Sharing and Analysis Center

The IRS would be encouraged — but not required — to participate in an IDTTRF information sharing and analysis center (ISAC) with state and private sector partners. Limited return information could be shared, such as IP address and the speed at which the return was filed, with paid return preparers who are members of the ISAC. This provision would also require the Treasury Secretary to develop metrics for the ISAC’s success in detecting and preventing IDTTRF.

Compliance by Contractors with Confidentiality Safeguards

This section would establish additional confidentiality safeguards on return information provided to contractors. It’d prohibit the IRS from providing taxpayer information to any contractors or other agents of a federal, state, or local agency unless the contractor has safeguards in place to protect the confidentiality of return information and agrees to conduct on-site compliance reviews every three years. Under this proposal, the federal, state, or local agency is required to submit a report of its findings to the IRS and annually certify that contractors and other agents are in compliance with the requirements to safeguard the confidentiality of federal returns and return information.

Identity Protection (IP) Personal Identification Numbers

The IRS would be required to set up a program under which any concerned taxpayer — regardless of their state of residents — can request an IP PIN to use in filing his or her tax return. This would establish voluntary access to IP PINs nationally over a five-year period.

Single Point of Contact for Tax-Related Identity Theft Victims

Tax-related identity theft victims would have a single point of contact within the IRS for any taxpayer who is a victim of identity theft. The single point of contact would be responsible for tracking the taxpayer’s case to completion and coordinating with other units to resolve the taxpayer’s issues as quickly as possible. This provision is intended to address concerns over the lack of continuity of assistance when taxpayers are victims of tax related identity theft.

Notification of Suspected Identity Theft

The IRS would be required to notify a taxpayer if there has been any suspected unauthorized use of a taxpayer’s identity or that of the taxpayer’s dependents, if an investigation has been initiated and its status, whether the investigation substantiated any unauthorized use of the taxpayer’s identity, and whether any action has been taken (such as a referral for prosecution). Furthermore, when an individual is charged with a crime, the IRS would have to notify the victim as soon as possible, giving such victims the ability to pursue civil action against the perpetrators.

Guidelines for Stolen Identity Refund Fraud Cases

The IRS would be required to develop and implement publicly available caseworker guidelines reducing IDTRRF victims’ burdens as they work with the IRS to sort their tax affairs out. These guidelines may include procedures to reduce the amount of time victims would have to wait to receive their tax refunds, the number of IRS employees with whom victims would need to interact, and the timeframe within which the issues related to the IDTTRF should be resolved.

Increased Penalty for Improper Disclosure of Use of Information by Return Preparers

An increased monetary penalty would be imposed for the disclosure of taxpayer identity information by a return preparer in cases where such information is used in an identity theft crime, whether or not related to the filing of a tax return. This provision is intended to provide a strong incentive for tax preparers to secure client records, thereby decreasing the likelihood of those records being stolen by identity theft criminals.

DEVELOPMENT OF INFORMATION TECHNOLOGY

Management of IRS Technology

The position of IRS Chief Information Officer (CIO) would be codified, and the role would be given clear roles and responsibilities. The IRS would be required to develop and implement an IT strategic plan, in alignment with the overall goals of the IRS, to ensure adequate consideration and planning for its long term IT needs. Finally, the IRS would be required to finish its plans for the completion of the Customer Account Data Engine (CADE 2) and have a third party independently verify and validate planning for CADE 2 and Enterprise Case Management system(s) generally within a year of enactment.

Internet Platform for Form 1099 Filings

The IRS would be required to develop an internet portal that facilitates taxpayers filing Forms 1099 with the IRS. The internet portal is to be modeled after a Social Security Administration (SSA) system that allows individuals to file Forms W-2 with SSA. The website will provide taxpayers with access to resources and guidance provided by the IRS, and allow taxpayers to prepare, file, and distribute Forms 1099, and create and maintain taxpayer records.

Streamlined Critical Pay Authority for IT Positions

Streamline Critical Pay (SCP) authority would be reauthorized for the IRS with respect to IT positions through September 20, 2023.

MODERNIZATION OF CONSENT-BASED INCOME VERIFICATION SYSTEM

Disclosure of Taxpayer Information for Third-Party Verification

The IRS would be authorized to develop an automated system to receive Income Verification Express Service (IVES) forms (currently, forms are sent to the IRS via secure fax). It’d also be authorized to charge a separate user fee on all IVES requests over a two-year period to fund the new system’s development.

Limit Redisclosures and Uses of Consent-Based Disclosure of Tax Return Information

Tax return information redisclosures by the taxpayer’s designee would be limited to only those redisclosures to which the taxpayer has expressly consented.

EXPANDED USE OF ELECTRONIC SYSTEMS

Electronic Filing of Returns

The IRS would eventually require individuals filing 10 or more returns to file them electronically, with the requirement phased-in between 2019 and 2021 (the current threshold for this requirement is 250 returns). In the case of a partnership, the applicable number is 200 in the case of calendar year 2018, 150 in the case of calendar year 2019, and 100 in the case of calendar year 2020. The provision also provides an exception to this requirement for tax preparers located in geographic areas with limited or no internet access.

The IRS would be required to publish regulations and guidelines allowing electronic signatures to be used to request taxpayer information for the purposes of disclosures to a practitioner or to execute a power of attorney.

Payment of Taxes by Debit and Credit Cards

The IRS would be allowed to directly accept credit and debit card payments for taxes as long as the fee is paid by the taxpayer. The IRS would be directed to minimize these fees when entering into contracts to process credit and debit cards.

Authentication of Users of Electronic Services Accounts

The IRS would be required to verify the identity of anyone opening an IRS e-Services account before they’re able to use such services.

OTHER PROVISIONS

Repeal of Provision Regarding Certain Tax Compliance Procedures and Reports

This section strikes a provision requiring the IRS to develop procedures and produce an annual report for streamlining compliance with the tax code so IRS resources can be directed to help prevent IDTTRF instead.

Comprehensive Training Strategy

The IRS would be required to submit a comprehensive training strategy to Congress. This would address streamlining current training processes, developing annual training on taxpayer rights, improving technology-based training and better focusing on fair resolution of taxpayer disputes.


TITLE III — MISCELLANEOUS PROVISIONS

REFORM OF LAWS GOVERNING IRS EMPLOYEES

Prohibition on Rehiring Any IRS Employee Who Was Involuntarily Separated From Service For Misconduct

The IRS Commissioner would be prohibited from rehiring any previous IRS employee who’d been involuntarily separated for misconduct. These misconduct offenses may include fraud, failure to file a return, falsification of documents, and unauthorized access to taxpayer information.

Notification of Unauthorized Inspection or Disclosure of Returns and Return Information

The Treasury Secretary would be required to notify a taxpayer 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 of their information.

PROVISIONS RELATING TO EXEMPT ORGANIZATIONS

Mandatory E-Filing by Exempt Organizations

All tax-exempt organizations that are required to file annual returns would have to submit them electronically.

Notice Required from Revocation of Tax-Exempt Status for Failure to File Return

The IRS would be required to notify an organization after its second consecutive failure to file an information return, in order to give the organization time to file an information return and prevent the revocation of their tax-exempt status.

REVENUE PROVISION

Increase in Penalty for Failure to File

This bill increases the minimum penalty for failing to file taxes to $330 for returns required to be filed after December 31, 2019.

Impact

Taxpayers; the IRS; and Congress.

Cost of House Bill H.R. 3151

A CBO cost estimate is unavailable.

More Information

In-DepthRep. John Lewis (D-GA) reintroduced this bill from the 115th Congress to improve the independent appeals process and taxpayer services and ensure that all taxpayers receive fair, quality and timely help and support:

“This bill is a ray of hope. It is a significant win for the American people because it demonstrates that even in the most difficult times, we can come together as a nation, as a people and as a Congress to accomplish important things for the American people. We developed this bill the way legislation should be created. We listened to the voices of taxpayers, advocates and experts. We asked questions for many months. The Oversight Subcommittee hosted hearings and roundtables. Democratic and Republican members shared their concerns and ideas.  We negotiated. We took our time, and believe that we did it right. Together, we developed a bill that improves the independent appeals process and taxpayer services. We worked together to ensure that taxpayers – especially those who are low-income, disabled, and senior citizens -- receive fair, quality, and timely help and support. From the beginning, we committed to bipartisanship, and we refused to abandon our course, despite allegations that were not thoroughly research. Through it all, we set aside our differences about the tax code and came together on the behalf of the taxpayer. As a result, our final bill includes solutions from Members on both sides of the aisle and the dome.”

When a similar version of this bill was passed by the House Ways and Means Committee in April 2019, ProPublica characterized it as permanently barring the IRS from creating a free electronic filing system. Mandi Matlock, a tax attorney who does work for the National Consumer Law Center, called the bill “the final nail in the coffin of the idea of the IRS ever being able to create its own program” because it codifies the current Free File program.

This bill’s sponsors argue that media coverage has mischaracterized this bill’s position on allowing the IRS to develop its own direct filing product. In a statement, Senate Finance Committee Ranking Member Sen. Ron Wyden (D-OR) said his office had received confirmation from the IRS chief tax counsel that the bill as written doesn’t bar the IRS from designing its own direct filing product if it gives 12 months’ notice.

In the original debate over this bill, progressive lawmakers said they’d push for allowing the IRS to implement its own tax filing system. Rep. Katie Hill (D-CA) said, “We have to use this moment. This is something people are very worked up about. We have some clout to get movement on [having an IRS free file program].”

This bill has 27 bipartisan cosponsors, including 19 Democrats and eight Republicans.


Of NoteThe major tax-preparation companies — including Intuit, H&R Block and Liberty Tax — are members of a consortium called the Free File Alliance, which seeks to preempt any IRS free online tax preparation programs with its own services for low-income taxpayers provided by the for-profit companies. In 2002, the Free File Alliance made a deal with the IRS, called “Free File,” to offer free filing for anyone making $62,000 or less in partnership with the IRS. In the same deal, the IRS agreed not to offer its own software.

In the 2018 tax season, American taxpayers spent an average of 11 hours and around $200 preparing their tax returns (a cost equal to almost 10% of the average federal tax refund). The IRS’ current Free File program — which uses agency-vetted third-party software from tax-prep companies — has been criticized for being under-utilized (only about 3% of eligible taxpayers use it, even though the program claims to provide free tax preparation services to 70% of taxpayers) and serving as a vehicle for upselling taxpayers to other, paid products.


Media:

Summary by Lorelei Yang & Eric Revell

(Photo Credit: iStockphoto.com / bymandesigns)

AKA

Taxpayer First Act

Official Title

To amend the Internal Revenue Code of 1986 to modernize and improve the Internal Revenue Service, and for other purposes.

    Yes it should, and simplified to eliminate unnecessary loop holes, so that fewer people like Trump and his Oligarchs can evade taxation. When did bankruptcy become a corporate profit center? If you can’t manage a business, and run it honestly, you should find other work.
    Like (38)
    Follow
    Share
    This interferes with the development of the IRS free file system and essentially forces taxpayers to struggle through filing in a impossible system alone or be forced to pay a business to file for them ether electronically or a traditional tax preparer. The fact that we have a whole industry dedicated to taking extra money for something we are forced to do already is BS to start. I shouldn’t have to refile my taxes at all. The government already gets all the information. We the taxpayers shouldn’t have to do a god damn thing and we sure as hell shouldn’t have to pay extra for it. I don’t mind paying my taxes, but I sure as fucking hell mind paying to pay my taxes.
    Like (15)
    Follow
    Share
    Stop giving the rich a free ride. The GOP cuts funding to the IRS every chance it gets and enforcement of our tax laws has been so greatly curtailed that the poor are audited as often as millionaires. It's about time working Americans get equal representation instead of corporations.
    Like (10)
    Follow
    Share
    IRS must be citizen friendly, taxpayer friendly to average taxpayer. IRS must turn over any records requested by the House Ways and Means committee chair. It’s the law.
    Like (7)
    Follow
    Share
    I am definitely pro independent appeals process and court. This reform is long overdue and I cannot really see how it would help the 1% more than those of us on the other end of the spectrum. For those of you who have never had your property seized because of a mixup on a name you have no idea what relief this could bring.
    Like (7)
    Follow
    Share
    Easier would be nice. What would be nicer is if the 1% actually paid their taxes instead of paying accountants to keep them from paying taxes. We don’t really want the rich mans charity. I want him to pay his damn taxes.
    Like (7)
    Follow
    Share
    Modernized and made as less of a shelter for corporate welfare.
    Like (6)
    Follow
    Share
    No, it is past time to end all taxes on wages, labor, capital and gifts-estates. We can replace them with a simple, efficient and visible national retail sales tax. We can provide a monthly tax credit. https://youtu.be/7b7YrxMjsa0 Vote yes on FAIRtax.
    Like (5)
    Follow
    Share
    FUND THE WALL and give citizens safety and security FIRST!
    Like (5)
    Follow
    Share
    Considering how long it is & who is sponsoring it, it can’t be good.
    Like (4)
    Follow
    Share
    It is a handout to tax prep corporations, which weakens oversight and taxpayer recourse, not to mention cost the poor money. This bill was written by lobbyists , and was also passed by the Republican House a couple years ago, but was stopped by the Republican Senate. The fact that the Dems are sponsoring it now, from John Lewis of all people, is merely proof of the corrupt system in which we all live.
    Like (4)
    Follow
    Share
    The CBO estimate is unavailable and we want to put everything on the computers except ballots.....hmmmm.....
    Like (4)
    Follow
    Share
    The IRS has been an agency that we desperately need to move into the 21st century and this bill does a good job moving that process along especially by strengthening the independent appeals process.
    Like (4)
    Follow
    Share
    It should be a truth universally understood that the IRS needs updated rules, regulations, technology, hiring upgrades and employee training and support. The health of our economy depends on appropriate levels of enforcement and fairness in collecting taxes. Bring this essential arm of government UP TO DATE now.
    Like (4)
    Follow
    Share
    Improve services or serve themselves? No thanks.
    Like (3)
    Follow
    Share
    No ! The IRS should be shutdown and replaced with a simple flat tax.
    Like (3)
    Follow
    Share
    NOT BY THIS ADMINISTRATION THEY ONLY KNOW HOW TO SCREW OTHERS & TO FILL THEIR OWN POCKETS. Keep the idea til we get back to the RULE OF LAW.
    Like (3)
    Follow
    Share
    Abolish the IRS our leaders abuse the institution for corruption just like about everything else. WIN Win win 2020
    Like (3)
    Follow
    Share
    It should be abolished.
    Like (2)
    Follow
    Share
    Treasury and IRS need to join the 21st century. Return-free filing would be an excellent start.
    Like (2)
    Follow
    Share
    MORE