Congress Passes IRS Reform Legislation
The Senate passed a far-reaching package of IRS reform legislation Thursday known as the Taxpayer First Act only days after it passed the House for the second time, sending it to President Trump’s desk for his signature.
The House passed the widely supported bipartisan legislation for the second time on Monday, after removing a controversial provision codifying the Free File Alliance (see House passes IRS reform bill again, this time without Free File provision).
Among its many provisions, the bill establishes an independent office of appeals within the IRS. It also requires the IRS to submit to Congress plans to redesign the structure of the agency to improve efficiency, modernize its technology systems, enhance its cybersecurity and better meet taxpayer needs.
The bill also includes a number of provisions to help protect taxpayers from tax-related identity theft and improve their interaction with the IRS if they fall victim to ID theft. The bill also expands to all taxpayers an IRS program that currently only allows victims of tax ID theft to obtain a personalized PIN that better secures their identity. The bill puts in place new safeguards to protect taxpayers against recent IRS enforcement abuses of so-called “structuring laws” that allowed the agency to seize taxpayer assets with civil forfeiture procedures if taxpayers appeared to be making bank deposits in amounts just below $10,000 to avoid bank-reporting requirements.
The bill also improves the IRS whistleblower program by authorizing the IRS to communicate with whistleblowers during the processing of their claims, while also protecting taxpayer privacy, as well as extending anti-retaliation provisions to IRS whistleblowers that are presently afforded to whistleblowers under other laws. In addition, it modifies the private debt collection program to ensure lower-income Americans are not targeted; and codifies the Volunteer Income Tax Assistance, or VITA, program, enabling the IRS to provide up to $30 million in matching grants to qualifying tax preparation sites.
However, the bill drops a provision codifying the Free File Alliance, after a series of reports by the investigative news site ProPublica claimed it would prevent the IRS from developing free tax-filing software of its own.
“This bipartisan, bicameral bill represents years of hard work and consensus building,” said Senate Finance Committee Chairman Chuck Grassley, R-Iowa, in a statement. “It’s a big first step toward strengthening taxpayer protections and turning the IRS into the customer service organization it ought to be. I look forward to President Trump signing it into law so the IRS can begin implementing long overdue reforms that will put taxpayers first.”
Grassley introduced the Taxpayer First Act in the Senate earlier this year with Sen. Ron Wyden, D-Ore., the ranking Democrat on the Senate Finance Committee.
“Americans interact with the IRS more than any other federal agency,” Wyden said in a statement. “Passage of the Taxpayer First Act will modernize the agency, allowing it to better serve taxpayers. Our bill includes critical provisions to improve customer service, protect personal data, preserve tax-preparation services and shield low-income taxpayers from abusive private debt collectors. Going forward, I will be closely tracking the IRS review of the Free File program and working to achieve a public filing program run by the IRS.”
The top Democrat and Republican on the tax-writing House Ways and Means Committee also praised passage of the Taxpayer First Act.
“After years of good-faith, bipartisan work, our IRS reforms are finally going to become law. In this historic legislation, we focused on putting taxpayers first,” said House Ways and Means Committee Chairman Richard Neal, D-Mass., and Kevin Brady, R-Texas, in a joint statement Thursday. “Our reforms authorize the restructuring of the entire IRS in order to better serve taxpayers. We require the IRS to focus on customer service and reign in some of the agency’s enforcement tools. And we provide the agency with needed tools to bring its IT infrastructure into the 21st century. The IRS should prioritize taxpayers’ rights and should be a resource — this legislation meets those goals."
"We want to applaud the leadership of Oversight Chairman John Lewis over the past five years, and want to thank Rep. Mike Kelly for helping bring this legislation over the finish line," they added. "We encourage President Trump to sign these historic reforms into law soon so that our tax administrator is better able to serve taxpayers everywhere.”
Provided By: Accounting Today