January 11, 2021
The Taxpayer First Act
by: U. S. Senator Mike Crapo
We have all likely heard some variation of the famous saying that nothing is certain but death and taxes. Given the preeminent inevitability of taxes, we must make certain that the federal agency tasked with administering this responsibility operates with just and up-to-date guidelines. Since Congress passed and President Donald Trump signed the Taxpayer First Act (TFA) into law last year, work has been underway to implement its provisions to modernize the Internal Revenue Service (IRS) to expand taxpayer rights and make it a more taxpayer-friendly agency.
According to the 2019 IRS Data Book, providing the most current available summary of tax filings, in Fiscal Year 2019, the IRS processed 253 million individual and business tax returns and forms, collected more than $3.5 trillion in federal taxes paid by individuals and businesses, issued more than $452 billion in tax refunds and had a budget of $11.8 billion. The nonpartisan Congressional Research Service (CRS) reports that in the 20 years before enactment of the relatively recent Taxpayer First Act, the structure of the IRS had largely been unchanged. In addition, the IRS “has struggled with customer service, a large and growing amount of uncollected taxes, and information security, as documented by the Taxpayer Advocate and the Government Accountability Office (GAO).”
The bipartisan Taxpayer First Act made changes to restructure and modernize the IRS, with a focus on new protections for taxpayers:
- The law established an Independent Office of Appeals with requirements to give taxpayers more access to needed appeals information. This includes enabling individuals with adjusted gross incomes of $400,000 or less and entities with gross receipts of $5 million or less to have access to the IRS’s case files for their appeals.
- The law requires the IRS to develop a new, publicly available, comprehensive customer service strategy.
- Through the TFA, the IRS may only seize or require the forfeiture of assets if the assets are from an illegal source or the transactions were structured to conceal illegal activities beyond “structuring” the payments to fall below federal reporting requirements. Federal law requires businesses to report currency transactions of more than $10,000. In recent years, there have been reports of civil asset forfeiture abuses in which small businesses with legal earnings have been accused of “structuring” cash deposits to fall below the reporting threshold. Small business owners have been caught up in costly, drawn-out, bureaucratic nightmares to try to get their money returned. This provision is a step in the right direction to addressing unfair takings from and harassment of law abiding individuals and small businesses.
- The law requires the development of a plan to streamline the IRS’s structure to minimize duplication of services and better enable the agency to combat cybersecurity threats.
- The TFA expands electronic filing.
- The law enables public and private collaborative work to protect taxpayers from identify theft refund fraud and increases penalties for unauthorized disclosure or use of taxpayer identity information by a return preparer. The IRS is also required to notify taxpayers about suspected unauthorized use of the taxpayer’s identify and a related IRS investigations.
The following link provides more information about these and the many other provisions of this important law: https://www.irs.gov/taxpayer-first-act. These types of bipartisan reforms are the direction we need to continue to go to ensure taxpayers are treated fairly by the agency tasked with collecting their hard-earned dollars.