Congress Enhances Taxpayer Rights With the Taxpayer First Act

The Taxpayer First Act (TFA), signed into law in July 2019, expands and strengthens taxpayers’ rights and protections in their dealings with the IRS. Here are some of the highlights:

Independent appeals process. The TFA establishes the IRS Independent Office of Appeals to review disputes between taxpayers and the IRS. It also implements safeguards to help ensure that the office is independent and not merely a “rubber stamp” for IRS decisions. Among other things, the act provides that IRS appeals personnel shouldn’t consult with attorneys previously involved in a case.

In addition, the TFA gives taxpayers access to nonprivileged case files and requires the appeals office to notify taxpayers in writing if their appeals are denied (including the reasons for the denial). The process includes a way to protest such denials.

Third-party contacts. The TFA limits the IRS’s ability to contact third parties — such as lenders, customers or vendors — for information about a taxpayer. Under the act, the IRS must notify the taxpayer at least 45 days in advance (and not more than a year in advance) that it intends to contact such third parties.

Innocent spouse relief. The tax code provides “innocent spouses” with relief from joint liability for their spouses’ improprieties on a joint return under certain circumstances. The TFA provides that, when the IRS denies such relief and the taxpayer seeks review by the Tax Court, the court should review the determination de novo — that is, anew, without deference to the IRS’s decision.

Cybersecurity and identity theft protection. To help the IRS strengthen cybersecurity and prevent identity theft and refund fraud, the TFA facilitates information-sharing with state tax agencies and the private sector. The act also requires the IRS to establish a single point of contact for victims of tax-related identity theft, and it increases penalties for disclosure of taxpayer information by return preparers. (Several other reforms are included as well.)

Technological improvements. The TFA instructs the IRS to develop Internet-based platforms for Form 1099 filings and for disclosing taxpayer information for third-party income verification. It also charges the IRS with expanding electronic filing of tax returns; publishing guidance on the use of electronic signatures; appointing a chief information officer; and developing, implementing and updating a multiyear strategic plan to address the tax agency’s IT needs.

Other changes include plans to improve customer service, enhanced whistleblower protections and procedures, reduced user fees for low-income taxpayers, and a more prominent role for the IRS National Taxpayer Advocate.

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© 2019