On July 1, 2019, the Taxpayer First Act (TFA) was signed into law. The TFA makes the most significant changes to IRS administrative procedures since the IRS Restructuring and Reform Act of 1998. The TFA strengthens certain taxpayer rights and requires modifications to the IRS’s organizational structure, customer service priorities, enforcement procedures, information technology, and use of electronic systems. More than 25 provisions in the TFA were recommended or strongly supported by the National Taxpayer Advocate (NTA) and TAS. In this blog, I will summarize the provisions directly affecting TAS and identify the provisions for which we advocated.
Provisions Impacting TAS
Codification of Taxpayer Advocate Directive (TAD) Authority. Since 1979, there has been a senior official within the IRS to advocate for taxpayers. Initially, the position was created administratively, and the individual who held it was known as the “ombudsman.” In 1988, Congress codified the position and authorized the issuance of Taxpayer Assistance Orders (TAOs). In 1998, Congress renamed the position as the National Taxpayer Advocate. TAOs allow the NTA to order the IRS to take or refrain from taking certain actions when a taxpayer is facing a significant hardship as a result of the IRS’s actions.
Through the 1988 and 1998 acts, Congress strengthened the authority of the NTA and gave the NTA the authority and responsibility both to advocate for taxpayers in individual cases (case advocacy) and to advocate for systemic change on behalf of all taxpayers or groups of taxpayers (systemic advocacy). A TAO, however, may only be used in the context of case advocacy. To strengthen the NTA’s systemic advocacy capability, the Commissioner administratively granted the NTA the authority to issue Taxpayer Advocate Directives (TADs) — which are analogous to TAOs. I should note that both TAOs and TADs may be rescinded by the Commissioner or the Deputy Commissioner, so they serve primarily as tools that enable the NTA to elevate issues to the IRS’s senior leadership for decision.
The TFA has taken the administrative TAD authority and for the first time codified and enhanced key aspects of it. The Internal Revenue Code (IRC) now requires the IRS to respond to any TAD within 90 days, and if the Deputy Commissioner refuses to comply with the TAD, the NTA may appeal it to the Commissioner, who must either comply or provide a written response explaining his reasons for modifying or rescinding it. Furthermore, the NTA’s Annual Report to Congress (page 680 ) must identify any TAD that was not timely honored by the IRS. The statutory TAD authority will provide the NTA with an additional tool to call attention to important taxpayer rights issues, and although the Commissioner appropriately will always have the final say, it will provide transparency to Congress and the public about the nature of any disagreements.
Number of “Most Serious Problems” in NTA Annual Reports to Congress. Under prior law, the NTA was required to report on at least 20 of the “most serious problems” encountered by taxpayers in their dealings with the IRS. The TFA reduced that number to ten. The House Ways and Means Committee report (page 60) explained that the intent of the change is to “streamline and focus” the report.
Coordination with TIGTA on Research or Studies. The TFA requires the NTA, before beginning any research or study for Annual Reports to Congress, to coordinate with the Treasury Inspector General for Tax Administration (TIGTA) to avoid duplication of efforts.
Statistical Support for NTA Annual Reports to Congress. The TFA requires the IRS to provide statistical support for the NTA’s Annual Reports to Congress and directs the NTA to indicate whether statistical information was reviewed or provided by the IRS and determined to be valid.
NTA Salary. Under prior law, the IRS had the discretion to set the NTA’s pay at either the highest rate of basic pay established for the Senior Executive Service under section 5382 of Title 5 of the United States Code or at a rate permitted under the “Critical Pay” law (section 9503 of Title 5 of the United States Code). Although the IRS could pay the NTA a substantially higher salary under the Critical Pay provisions, the NTA expressed concern that the IRS could use its authority to set the NTA’s compensation as an inducement for the NTA to refrain from criticism of the agency. For that reason, the NTA had recommended that Congress establish a fixed rate of pay for the NTA, as it has done for inspectors general under the Inspector General Act. The TFA implements that recommendation.
Taxpayer Rights Provisions
Apart from its provisions affecting TAS, the TFA contains significant new taxpayer rights protections, including the following:
I am pleased to report that the IRS appears committed to effectively implementing the TFA. Recently, the Commissioner announced the formation of an office within the IRS to oversee and coordinate the agency’s TFA implementation efforts. The new office will be headed by a group of four, composed of the Commissioner’s Chief of Staff and representatives of the Wage & Investment Division, the Small Business/Self-Employed Division, and the IRS’s Information Technology function.
My one concern is that TAS has not been included as a core member of the TFA implementation team. Congress created the position of the NTA to serve as the statutory voice of the taxpayer within the IRS. To implement the aptly named “Taxpayer First Act,” I believe TAS should have a seat at the table to the same extent as key IRS operating divisions, particularly for purposes of implementing the TFA requirements that the IRS develop a comprehensive customer service strategy, modernize the IRS’s organizational structure, create online taxpayer accounts, and develop a comprehensive employee training strategy that includes taxpayer rights.
Regardless, we stand ready to work together with the agency to implement the new law in a manner that is effective and efficient for both the IRS and taxpayers, all while ensuring the protection of taxpayer rights.
National Taxpayer Advocate Recommendations or Conclusions Included in Taxpayer First Act
||Establish an independent Office of Appeals and grant taxpayers the right to administrative appeal. Where an appeal is not permitted, establish procedures for taxpayers to file an administrative protest.
||2019 Purple Book #35
||1001(a) (page 3)
||Conduct taxpayer service surveys by mail and phone. In surveys of TACs, include taxpayers who attempted to use TAC services but were turned away. In taxpayer service surveys, include menu options (such as “other”) that allow respondents to indicate that the given alternatives do not describe their experiences or preferences. In developing taxpayer service surveys, use focus groups and pre-testing with real taxpayers to ensure the surveys reflect all the potential preferences of taxpayers. In implementing taxpayer service programs, place highest priority on meeting the preferences of taxpayers and stakeholders. Implement procedures to safeguard against adopting service methods that have as their implicit or explicit objective forcing taxpayers to online channels.
||2016 Most Serious Problem #2
||1101(a) (page 5)
||Limit IRS seizure to illegal structuring transactions.
||IRS Reform: Perspectives From The National Taxpayer Advocate, Hearing Before the H. Comm. On Oversight, 115th Cong. (May 19, 2017) (statement of Nina E. Olson, National Taxpayer Advocate)
||1201 (page 6)
||Clarify scope and standard of review under IRC § 6015 shall be de novo.
||2019 Purple Book #52
2011 Legislative Recommendation #4
|1203(a)(1) (page 8)
||Codify the rule that taxpayers may request equitable relief under IRC § 6015(f) any time before expiration of the period of limitations on collection.
||2017 Purple Book #16
2019 Purple Book #26
|1203(a)(2) (page 8)
||Amend private debt collection statute to exclude debts of certain low-income taxpayers.
||2019 Purple Book #28
||1205 (page 9)
||Third party contact procedures do not follow the law.
||2015 Most Serious Problem #12
||1206 (page 10)
||Codify TAD authority.
|2017 purple book #41
2019 purple book #43
|1301(a) (page 11)
||Establish compensation of the NTA by statute and eliminate eligibility for cash bonuses.
||2019 Purple Book #49
||1301(c) (page 13)
||Codify VITA grant program.
||2017 Purple Book #5
2019 Purple Book #3
|1401 (page 13)
||Clarify IRS employees may refer taxpayers to a specific low income taxpayer clinic.
|2017 Purple Book #8
2019 Purple Book #6
|1402 (page 17)
||Cuts to IRS Taxpayer Assistance Centers reduce community presence and impair taxpayers’ ability to receive in-person assistance.
||2017 Most Serious Problem #10
||1403 (page 17)
||Revise the regulations under IRC § 7623 to require the IRS, upon the whistleblower’s execution of a confidentiality agreement as part of an administrative proceeding under IRC § 6103(h)(4), to provide bi-annual status updates sufficient to allow a whistleblower to monitor the progress of the claim (e.g., whether the claim resulted in an audit, whether the audit has concluded, the existence of any collected proceeds, and whether the case has been suspended) according to procedures developed by the Whistleblower Office.
||2015 Most Serious Problem#13
||1405(a)(1) (page 17)
||Make unauthorized Disclosures of Return Information by Whistleblowers Subject to the Penalties of IRC §§ 7431, 7213, and 7213A.
||2015 Legislative Recommendation
||Enact anti-retaliation legislation to protect tax whistleblowers.
||2015 Legislative Recommendation
|1405(b) (page 17)
||Authorize Treasury to recover misdirected deposits of tax refunds and pay them to the correct taxpayer.
||2017 Purple Book #11
2019 Purple Book #9
|1407 (page 17)
||Fraud detection system results in false positives and delays legitimate taxpayers’ refunds.
||2017 Most Serious Problem #20
||2001 (page 21)
|The IRS should adopt a new approach to identity theft victim assistance – PTINs; single point of contact; notification of ID theft; and guidelines for stolen identity refund fraud cases.
||2011 Most Serious Problem #3
2013 Most Serious Problem #6
2015 Most Serious Problem #16
2017 Most Serious Problem #19
|2005 (page 24), 2006 (page 24), 2007 (page 25), & 2008 (page 26)
||Authorize the Treasury Department to issue guidance specific to IRC § 6713 regarding the disclosure or use of tax return information by preparers.
||2017 Purple Book #40
2019 Purple Book #39
|2009 (page 27)
||Limit redisclosures and unauthorized uses of tax returns and tax return information obtained through IRC § 6103-based “consent” disclosures.
||2017 Purple Book #39
2019 Purple Book #38
|2202 (page 32)
||Require employers filing more than five Forms W-2, 1099-MISC, and 941 to e-file them.
||2017 Purple Book #10
2019 Purple Book #8
|2301 (page 32)
||Require the IRS to provide annual Taxpayer Bill of Rights training to employees.
||2017 Purple Book #2
2019 Purple Book #1
|2402 (page 34)
||IRS should notify exempt organizations when automatic revocation is imminent.
||2011 Legislative Recommendation #10
||3102 (page 36)