Senate committee passes Taxpayer Assistance and Service Act

The Senate Finance Committee voted nearly unanimously Thursday to approve a wide-ranging bipartisan tax administration bill known as the Taxpayer Assistance and Service Act aimed at improving operations at the Internal Revenue Service, making the IRS more responsive to frustrated taxpayers, and cracking down on rogue tax preparers with higher penalties.

The committee previewed the sprawling legislation earlier this week ahead of Thursday's markup session, and the only major change was an amendment introduced by Senate Democrats that would have barred the IRS from entering into audit immunity agreements with presidents like the recent one with President Trump and his family and businesses. That amendment was defeated by a party line vote of 14 to 13. Sen. Elizabeth Warren, D-Massachusetts, had also planned to introduce an amendment reviving the IRS's Direct File free tax-filing system after it was terminated last November. But she decided not to ask for a moment that amendment at the urging of the top Democrat on the committee, ranking member Sen. Ron Wyden, D-Oregon, but they plan to reintroduce it next year when they hope to be able to pass it on a bipartisan basis.

"I hope that this committee next year will work in a bipartisan way to get Direct File," said Wyden. "It's the right thing to do. Most of the Western industrialized nations are doing it, and let's figure out a way to get it done next year."

Warren also noted that the IRS MATH Act, which she had introduced with Sen. Bill Cassidy, R-Louisiana, was part of the original bill, but passed separately and was signed into law last year.

Wyden worked with Senate Finance Committee chairman Mike Crapo, R-Idaho, to introduce a discussion draft of the TAS Act in January 2025 on a bipartisan basis. The wide-ranging bill includes over 60 provisions aimed at improving the taxpayer experience. 

"This bipartisan bill modernizes and streamlines IRS operations, strengthens taxpayer rights and delivers a more taxpayer-first system," Crapo said in his opening statement. "It reflects years of bipartisan efforts to translate stories of casework frustrations into tangible fixes designed to make the IRS work more efficiently for the American people. Thank you to Ranking Member Wyden for his partnership in shaping this legislation and to the members of this Committee on both sides of the aisle who shared their ideas and proposals, many of which are incorporated in the bill before us."

He credited various senators from both sides of the aisle with contributing various provisions. "Senators Young, Warnock, Cassidy and Warner championed provisions to improve IRS customer service by requiring the IRS to expand scanning paper-filed tax returns, online accounts and communication tools, including online dashboards and callback technology," said Crapo. "These reforms would slash wait times for Americans who often otherwise wait weeks for mail or spend an afternoon on hold. Senators Blackburn and Cortez Masto spearheaded a provision to protect taxpayers from penalties due to IRS delays in electronic filing by extending the statutory mailbox rule to electronic submissions and payments. This change would treat a return or payment electronically sent on the due date as timely, just as it is for paper sent through the mail.

 "Senators Scott and Hassan led provisions to strengthen fair judicial review by clarifying the Tax Court's limited authority to grant relief from final decisions and allowing courts to consider all relevant evidence in innocent spouse cases," he added. "Senators Grassley and Wyden drafted provisions that would strengthen the IRS whistleblower program.

"Senator Barrasso is driving a provision that protects taxpayers' rights by requiring the IRS to notify taxpayers before the agency contacts third parties to obtain information regarding the taxpayer," Crapo added. "Senator Marshall is heading a provision that unlocks low-income taxpayer clinic funding, providing key resources for low-income taxpayers. And Senators Cornyn and Luján led a provision expanding access to the Tax Court's Small Case Procedure, which would give more taxpayers a streamlined and affordable forum for resolving tax disputes with the IRS.

"In addition, Senators Thune, Lankford, and Daines have led amendments that have been adopted in the modified mark before us today," he continued. "Senator Thune's amendment extends key tax deadlines for farmers and fishermen. Senator Lankford's amendment clarifies a tax-exempt organization's right to appeal adverse rulings of status to the IRS's office of appeals. 

"Lastly, Senator Daines championed an amendment that enhances accountability by increasing criminal and civil penalties for the unauthorized disclosure of taxpayer information while also ensuring IRS contractors who willfully cause data breaches are appropriately penalized," Crapo added. "These are just a sample of the many practical taxpayer-focused reforms included in the TAS Act."

He noted that the bill has drawn support from the National Taxpayer Advocate, who issued a statement after the bill was reported out of the committee by a nearly unanimous vote of 26 to 1.

"I want to thank Chairman Mike Crapo, Ranking Member Ron Wyden, the members of the Senate Finance Committee, and their staffs for the considerable work they put into developing, refining, and advancing this important and comprehensive tax administration legislation," said National Taxpayer Advocate Erin Collins in a statement. "With more than 60 provisions, the TAS Act would go a long way toward better protecting taxpayer rights, reducing unnecessary burdens, and improving the tax administration process for millions of taxpayers. Each of these measures addresses a distinct issue. Together, they make far-reaching practical and common-sense improvements that would help the IRS better serve taxpayers."

AICPA support

The American Institute of CPAs also expressed its support for the bill. "The TAS Act represents an important step towards creating a more effective and taxpayer-focused tax administration system," said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement. "This bill includes provisions that will strengthen taxpayer support while also helping ensure paid tax preparers meet minimal ethical and professional standards that reinforce Americans' trust in our profession and in the tax system. While we are disappointed that some important tax provisions were not included, particularly the SAFE Act, we will continue to work with members of Congress to support common-sense solutions and remain hopeful that these provisions will be addressed in future legislation. We are grateful to members of Congress for their leadership and we support continued progress on the TAS Act and future tax legislation."

The AICPA has advocated for the Survivors Assistance for Fear-free and Easy Tax Filing Act of 2025 (SAFE Act), introduced by Sen. John Fetterman, D-Pennsylvania, which would allow survivors of domestic abuse or spousal abandonment to file their taxes as if they were not married.  

However, it was apparently left out of the latest version of the bill passed by the committee.

The bill would also crack down on unlicensed tax preparers and ghost preparers, as well as require continuing education for uncredentialed preparers. 

"One of the most absurd aspects of the Tax Code is that its complexity forces millions of Americans to turn to paid tax return preparers every year, and this is part of the concern that we have about two tax systems: one for working people, one for the ultra wealthy," said Wyden. "Unlike the ultra wealthy, most people can't afford to hire armies of accountants and lawyers to navigate the system. There isn't a single law on the books to ensure that these paid preparers actually know what they are doing and following the law, and we're now making a bipartisan effort to change that. The results in many of these prep services is you've got something that's not worth the paper it's written on. Oftentimes, returns get filed late or incorrectly. The worst part is taxpayers might not even realize they've been ripped off until it's way late. Then the next thing you know, you're being hit by a costly and time-consuming audit. This bill takes important steps to crack down on these shady tax prep schemes that prey on families that are making a quick buck. Millions of Americans struggle right now to afford the skyrocketing cost of rent, gas and groceries. The last thing they need is to be hit by costless fees and penalties by the IRS."

Getting over the finish line

Tom Barthold, chief of staff of Congress's Joint Committee on Taxation, described two modifications and six additions to the Chairman's Mark of the legislation that was released earlier this week.

"The first modification clarifies and expands the definition of electronic filing identification numbers," said Barthold. "The second modification clarifies the right of the appeal that is established in the underlying mark that it is also generally available with respect to determinations to deny or revoke tax-exempt status. The additions to the mark, as made by the modification, the first is under present law there are special rules and dates for farmers and fishermen. It extends those dates from March 1 under present law and would establish an April 15 date. The second addition requires the [Treasury] secretary to report the IRS's practices for taxpayer document tracking, so that the committee can learn and hopefully make improvements in that area. The third addition accelerates the filing dates for information returns that the IRS receives of returns that the taxpayer already has received. These information returns are with respect to dividends, interest, retirement plan distributions, IRA distributions, certain miscellaneous payments, Social Security and Railroad Retirement Fund distributions, and payments made under third-party network payments. The fourth addition increases the criminal and civil penalties for unauthorized disclosure, extending it to contracts. The fifth addition relates to individuals who file a broad clarifying IRS authority with respect to assessment of penalties and establishes new procedures to ensure pre-assessment review. And the final addition made by the chairman's modification is to establish within the IRS a business childcare liaison, the general purpose of which is to foster increased employer-provided childcare facilities, legalizing the benefits provided under the Code."

It's unclear whether the House will take up the bill. The House Ways and Means Committee has been taking more of a piecemeal approach, approving eight separate tax administration bills earlier this month. 

"It is especially encouraging that virtually all these bills have advanced with strong bipartisan support," said Collins. "Tax administration may not always attract headlines, but it profoundly affects nearly every individual, family, and business in the country. But important work lies ahead to get this legislation across the finish line. If the House and Senate can pass the TAS Act this year, it will be a tremendous gift from the 119th Congress to America's taxpayers."