House passes IRS reform bill

The House passed bipartisan legislation Tuesday to overhaul some key aspects of the way the Internal Revenue Service operates, including the appeals process.

The Taxpayer First Act would create an independent appeals process to help taxpayers resolve disputes with the IRS. Taxpayers would have access to the same information as the IRS during the dispute resolution process. When the IRS performs an audit, the agency would need to provide notice to taxpayers before contacting their friends, neighbors and clients.

The far-reaching bill would also require the IRS to submit to Congress a plan to redesign the structure of the agency to improve efficiency, enhance cybersecurity, and better meet the needs of taxpayers. It would also require the IRS to submit to Congress a comprehensive plan to improve its customer service strategy, based on best practices from the private sector. In addition, the bill would overhaul the IRS’s enforcement tools to prevent seizure of taxpayer assets without timely, fair notice.

The 115th Congress convenes for the first time in 2017
U.S. House Speaker Paul Ryan, a Republican from Wisconsin, delivers remarks before being sworn-in in the House Chamber at the U.S. Capitol in Washington, D.C., U.S., on Tuesday, Jan. 3, 2017. Ryan was formally re-elected House speaker today at the start of the 115th Congress as he intensifies his efforts to move past his differences with Donald Trump after a divisive campaign. Photographer: Andrew Harrer/Bloomberg

An earlier version of the bill was passed by the House last April, but didn’t make much progress in the Senate beyond the Senate Finance Committee. Lawmakers from both parties reintroduced the legislation last month (see Congress reintroduces IRS reform legislation). The measure passed overwhelmingly by a voice vote, according to The Hill , which quoted one of the original authors of the legislation. “The bill will improve the Internal Revenue Service and help our taxpayers," said Rep. John Lewis, D-Ga., who chairs the House Ways and Means Oversight Subcommittee.

The bill would also codify the roles and responsibilities of the IRS chief information officer and require annual information technology strategic planning. In addition, it would offer taxpayers ways to electronically file tax forms and supporting documentation more easily. The legislation would strengthen the IRS’s ability to combat tax-related identity theft by creating a single point of contact for victims, codifying the Security Summit in which the IRS works with the tax prep industry and state tax authorities, while providing the IRS with the ability to safely share additional information with specified Information Sharing and Analysis Center members.

“With a new tax code, it is time for a new tax administrator,” said Rep. Kevin Brady, R-Texas, the ranking Republican on the House Ways and Means Committee, who spearheaded passage of the Tax Cuts and Jobs Act in 2017. “I applaud the House for passing the Taxpayer First Act — a bold step to redesign the IRS to be an agency with one singular mission: putting taxpayers first. We are refocusing the agency to live up to its mission of serving taxpayers, overhauling the IRS’s tools of enforcement, and strengthening the IRS’s ability to proactively combat identity theft and fraud. Good, bipartisan work like the reforms the House passed today should be where Congress’ focus remains, not on a misguided rush to impeachment like many on the left continue to push.”

The American Institute of CPAs praised passage of the bill. “The AICPA appreciates the bipartisan recognition by members of the U.S. House of Representatives for bringing the Internal Revenue Service into the 21st century," said Edward S. Karl, vice president of taxation at the AICPA. "The AICPA has long been interested in and active in working to find ways to modernize the IRS so that it can better serve the needs of taxpayers and tax practitioners. In particular, the AICPA has recommended creating a practitioner services division within the IRS so that there would be a centralized and coordinated approach to meeting the needs of tax practitioners. Establishing the unit would enhance the relationship between the IRS and tax practitioners and would benefit both the IRS and the millions of taxpayers who rely on the tax preparer community to comply with the tax laws.”

The bill will now go to the Senate, where it stands a good chance of passage. Senate Finance Committee Chairman Chuck Grassley, R-Iowa, teamed up with the top Democrat on the committee, ranking member Ron Wyden, D-Ore., on introducing the legislation in the Senate last month. However, Wyden objected Tuesday to one of the provisions in the bill that passed in the House codifying the Free File Alliance in which the IRS works with tax prep software vendors to offer some free tax filing software from commercial providers rather than directly from the IRS itself. “Again and again in my service in the Senate I have battled the tax preparation software industry to simplify filing taxes for the typical American," he said in a statement. "In fact, the industry spent millions to fight my proposals in two tax-reform bills to allow a ‘simple return,’ which would require the IRS to send any American a pre-filed tax return on request using the agency’s tax information. During the debate on the tax administration bill, my staff pushed back on a prohibition on the agency competing with private tax preparation services, and I will continue to push for my proposal for the pre-filed ‘simple’ return and the principle that a taxpayer should not have to use a private company to pay their taxes online. In addition, the final package reduced the role of private debt collection on the most vulnerable Americans and made permanent a highly-successful program for low-income taxpayers.”

Grassley insisted the legislation wouldn’t prohibit the IRS from offering free tax-filing services of its own. “The Taxpayer First Act of 2019 would continue the IRS Free File Program, which is important to many lower-income and middle-income taxpayers,” he said in a statement Tuesday. “Nothing in the legislation would prevent the IRS from continuing to provide online assistance to taxpayers or develop new online options to help taxpayers. Arguments to the contrary aren’t based in fact and rely on either misunderstandings or misleading special interests. The provision at hand requires the IRS to continue the Free File Program, which was originally developed in the Bush administration, extended by the Obama administration and continued by the Trump administration. Congress has supported the program and the provision in the Taxpayer First Act puts that support into statute. It certainly doesn’t ban IRS from helping taxpayers file their taxes. That’s just false.”

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