The House has approved a bill to help taxpayers enter into payment agreements with the IRS, relax the record-keeping requirements on cell phones, and improve IRS services for low-income taxpayers.

The Taxpayer Assistance Act of 2010, also known as the Tax Day Bill, passed by a lopsided bipartisan vote of 399-9 on Wednesday. The bill to reduce burdens on taxpayers, while enhancing taxpayer protections, was introduced Tuesday by Ways and Means Committee members, led by Oversight Subcommittee Chairman John Lewis, D-Ga. (see Congress Introduces Bill to Help Taxpayers Cope with IRS). 

“Tomorrow is tax day in America,” said Lewis in a statement. “While we know that taxpayers do not enjoy preparing tax returns, we thank them for complying with the laws, and, today, with this bill, we will try to ease some of the burden and ensure that the system is working for American taxpayers and businesses.”

This bill contains over a dozen provisions that will help taxpayers, he added, making it easier for struggling taxpayers to enter into payment options with the IRS and improve services for low-income individuals.

In addition, the bill will help businesses and nonprofit organizations by relaxing the record-keeping requirements for cell phones that they provide to employees. The bill would eliminate the strict substantiation rules requiring individuals to keep detailed records regarding cell phones and similar equipment used for business purposes.

It would also allow the Treasury Secretary to exempt, for religious reasons, certain tax return preparers from the electronic filing mandate. 

The bill would require the Internal Revenue Service to pay interest on refunds related to individual income tax returns that are filed electronically if the refund is not paid within 30 days of the later of the return due date or the date the return is filed.

In addition, the bill would require the Treasury Secretary to conduct a study on the effectiveness of collection alternatives, such as offers-in-compromise. It would also repeal the partial payment requirement on submissions of offers-in-compromise. As recommended by the Obama administration, the bill would help taxpayers enter into offer-in-compromise agreements to settle their federal tax liabilities, and increase the likelihood that some amount of tax is collected, by repealing the partial payment requirement. 

As recommended by National Taxpayer Advocate Nina Olson, the bill would allow IRS employees to refer taxpayers to Low Income Taxpayer Clinics. It would also increase the allocated amount for LITCs from $6 million to $20 million annually. 

The bill would require the IRS, to the extent practicable, to notify taxpayers of the availability of the Earned Income Tax Credit in prior taxable years.  The bill also would require the IRS to review return information (such as Forms W-2, Wage and Tax Statements) and identify potentially eligible taxpayers to the extent possible. 

The bill would also require the IRS to notify taxpayers when it suspects that their identities, or their dependents’ identities, have been stolen. 

The bill would allow the IRS to use “mass communication,” including the Internet and its Web site, to notify taxpayers of undelivered refunds.  

The legislation would also require the National Taxpayer Advocate to conduct a study on the feasibility of delivering federal tax refunds on debit cards or prepaid cards, or by other electronic means. 

As recommended by the National Taxpayer Advocate, the bill would require the Treasury Secretary to study, and make recommendations on, the administrative and legislative steps required to allow the IRS to receive information returns before it processes income tax returns. The bill would also require the Treasury Secretary to study how to reduce the number of taxpayers making in-person payments at IRS Taxpayer Assistance Centers. 

To offset the cost of the bill, the legislation also contains some revenue-raising provisions. As recommended by the Obama administration, the bill would clarify that the penalty applicable to bad checks or money orders extends to all commercially acceptable instruments of payment, including electronic payments. This provision is estimated to raise $47 million over 10 years.

Similar to another administration proposal to increase penalties on failure to provide information returns, the bill would increase the penalties for failing to file correct returns, failing to furnish correct payee statements, and failing to comply with other information reporting requirements.  This provision is estimated to raise $419 million over 10 years.

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