Bipartisan Legislation Would Increase Taxpayer Protections, Improve IRS Customer Service & Overhaul the IRS Appeals Process 

WASHINGTON, D.C. – U.S. Senators Rob Portman (R-OH) and Ben Cardin (D-MD) today unveiled bipartisan legislation – the Protecting Taxpayers Act – to reform a number of Internal Revenue Service (IRS) functions and administrative practices in order to make the agency more responsive and accountable to taxpayers.  Specifically, the bill is designed to (1) revitalize the IRS organizational structure and management; (2) increase taxpayer protections and modernize enforcement procedures; (3) improve small business and retirement plan tax administration; (4) better serve low-income taxpayers; (5) overhaul the IRS appeals process; and (6) strengthen the IRS IT infrastructure. The measure will be discussed at a Senate Finance Subcommittee on Taxation and IRS Oversight hearing later this morning. 

“Americans work hard every day to provide for themselves and their families, and, as taxpayers, the federal government works for them,” said Senator Portman.  “Too often, however, the federal government isn’t responsive to the needs of the people it serves, and the IRS has not always served the interests of taxpayers.  It has been 20 years since the last significant IRS reform, and it is time to update the agency once again. The bipartisan Protecting Taxpayers Act will restructure and reform the IRS to make it more responsive and accountable to the needs of taxpayers and help restore Americans’ faith in this agency.” 

“Our tax system is complicated, and the Protecting Taxpayers Act will continue the work of modernizing tax administration so the IRS can operate more efficiently and provide improved service to taxpayers,” said Senator Cardin.  “Americans of all income levels deserve a responsive, effective IRS, and the updates contained in this bipartisan bill will help keep the IRS on that path.” 

NOTE: The Protecting Taxpayers Act is designed to make the IRS more responsive and accountable to taxpayers.  It complements legislation recently introduced by Senate Finance Committee Chairman Orrin Hatch (R-OH) and Ranking Member Ron Wyden (D-OR).  Following is a bill summary of the Protecting Taxpayers Act that outlines its key provisions:

Revitalize IRS Organizational Structure

  • Reforms the IRS Oversight Board by:
    • Changing the name to the “IRS Management Board”
    • Streamlining the membership structure to quickly reconstitute the board
    • Increasing the board’s involvement in the agency’s budget request process
    • Requiring approval of a broader swath of strategic and performance plans to help drive the overall strategic direction of the agency
    • Increasing coordination with other oversight functions for the agency
    • Requiring approval of compensation and bonuses for senior executives at the agency to help create stronger performance incentives
  • Realigns training of IRS employees with mission and overall strategic direction of the agency by:
    • Requiring the IRS to submit a comprehensive employee training strategy
    • Emphasizing the Taxpayer Bill of Rights, customer service, and IT advancements in the agency’s approach to employee training
    • Allowing for greater flexibility at the IRS for face-to-face training among different divisions 

Increase Taxpayer Protections and Modernize Enforcement Procedures

  • Reinstates IRS authority to regulate paid tax return preparers in a balanced way
  • Sends quarterly notices of deficiency instead of annual notices to promote increased compliance and ensure fewer taxpayers are sent to collections
  • Directs IRS to establish procedures for taxpayers to report instances where electronic fund transfers or refunds were erroneously delivered
  • Modifies the authority to issue a designated summons, or a summons that freezes the statute of limitations for taxpayers, to only uncooperative taxpayers
  • Limits access of non-IRS employees to returns or return information, including a prohibition on questioning witnesses under oath 

Improve Small Business and Retirement Plan Tax Administration

  • Creates a safe harbor for employer-only tip audits if employers comply with certain employee education and IRS employee audit programs
  • Clarifies the reporting requirements for tip income in certain industries where tips are common practice
  • Streamlines the process for corporations to make their S corporation election
  • Directs the IRS to release federal tax levies on businesses that cause the business economic hardship
  • Realigns the quarterly reporting of estimated tax payments for small businesses
  • Allows retirement plan administrators, except as otherwise provided in regulation, to self-correct all inadvertent plan violations without additional submissions to the IRS 

Better Serve Low-Income Taxpayers

  • Establishes an income threshold to prevent certain low-income taxpayers from referral to the private debt collection program
  • Codifies the VITA program, providing for specific authorization on matching grants to support VITA, and authorizing the award of multi-year grants – all consistent with existing program operations
  • Clarifies that IRS employees are able to provide taxpayers with information about availability and eligibility requirements for Low-Income Taxpayer Clinics, including location and contact information
  • Codifies current low-income taxpayer exception with respect to user fees and up-front partial payments associated with any offer-in-compromise 

Overhaul the IRS Appeals Process

  • Reinforces the taxpayer right to independent appeal by requiring the IRS to send a proposed notice of deficiency detailing the taxpayers’ opportunity for administrative review with the Office of Appeals
  • Requires the IRS to provide a detailed explanation and right to protest in the limited event taxpayers are denied access to the appeals process
  • Directs the IRS to give taxpayers access to all of their non-privileged case files prior to an appeals proceeding
  • Protects against undue influence and preserves the independence of the appeals process by preventing IRS compliance personnel from participating in appeals proceedings without the direct consent of the taxpayer
  • Provides full notice and protest procedures for tax controversies that are designated for litigation by the IRS 

Strengthens the IRS IT Infrastructure

  • Reauthorizes streamlined critical pay authority for the recruitment and retention of information technology employees at the IRS through September 30, 2023
  • Requires the secretary to publish guidance to establish uniform standards for the acceptance of taxpayers’ signatures appearing in commercially-provided electronic form

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