Tax Preparation

After having received a very strong bipartisan support from the House and the Senate, President Donald Trump has finally signed the Taxpayer First Act into law on 1st of July.  The Taxpayer First Act, one of the major reforms after the introduction of Tax Cuts and Jobs Act, consist several new provisions intended to overhaul some key operations of the Internal Revenue Service along with having well-thought-out strategies to strengthen taxpayer rights.

Here are some of the salient features of the new IRS Reform Bill:

1.    Enhanced protection against identity theft

The bill comprises quite a few provisions that are aimed at providing more protection to the taxpayers from identity theft while improving their interaction with the agency if they ever encounter ID theft issues. For instance, the law will require the agency to inform a taxpayer as soon as practicable when it identifies or confirms unauthorized access or use of that particular taxpayer’s identity. The agency must also:

  1. Provide proper guidelines to the taxpayers regarding filing a report about the unauthorized use with law agency.
  2. Determine the steps that the taxpayer needs to follow to allow the law agency to access their personal information during the investigation.
  3. Provide comprehensive support and information to the taxpayer about the required actions that they need to take if they fall victim to the tax-related ID theft.
  4. Implement additional measures for identity protection of the taxpayers; like using IP PIN (Identity Protection Personal Identification Number) to safeguard the taxpayers.

The IRS needs to develop a strategy within five years to empower all the taxpayers in the country to request IP PINs to provide enhanced data security when filing their returns. As of now, it is only available to the victims of tax-related identity theft.

Under the new Taxpayer First Act, the agency needs to provide required information to the victims regarding whether an investigation into the unauthorized use has been started and whether it has identified and verified any unauthorized use. The IRS must also alert the victim if it has taken any action against those who tried to access and use the taxpayer’s personal information unlawfully.

To further strengthen the taxpayers’ rights, it has been made mandatory for the agency to assign a single point of contact (SPOC) to such victims throughout the resolution process. That particular SPOC is responsible for tracking the taxpayer’s case to completion and coordinate with the concerned IRS department to resolve the case at the earliest.

2.More Appeals Rights to the Taxpayers

The far-reaching IRS Reform Bill codifies the agency’s already-existing, independent Office of Appeals into law. In fact, this broadens the taxpayers’ rights of appeal regarding tax-related affairs.

For instance, the federal agency, under the new law, must assign certain taxpayers who request a conference with the Office of Appeals with access to the non-privileged portions of the cases filed on the disputed matters within ten days of the scheduled date of the conference. As of now, taxpayers need to file a Freedom of Information Act request to gain access to their case files.

The resolution process carried through the Office of Appeals is generally available to all kinds of taxpayers. If a taxpayer’s request to appeal an IRS notice of deficiency is denied, the agency is supposed to provide the taxpayer a written notice with comprehensive facts and data, the conditions for the denial and a thorough explanation of how it applies to the given affairs. It must also contain detailed steps regarding how to protest the denial.

3.Improved and more focused customer support

The Taxpayer First Act has granted the agency one year to design and submit a detailed customer service strategy to Congress. It must include a comprehensive set of proposals and plans regarding how the agency is going to serve the taxpayers in the coming years. The strategy must derive the best and most appropriate customer service practices from the private sector, such as telephone callback and web-based services along with providing comprehensive training and assessment to the staff belonging to the customer service department.

Besides that, under the new law, the federal agency is required to provide essential information to taxpayers who are kept on hold during a phone call to their helpline number. This kind of information may include common tax-related scams, how and where to file cases regarding such scams as well as some important advice on how taxpayers can overcome tax-related crimes and ID thefts.

Additional Provisions

The new bill also addresses several other areas like:

Structuring: 

The Taxpayer First Act introduces new parameters from IRS enforcement abuses, previously covered under the “structuring laws.” This law allowed the agency to seize the asset(s) of a particular taxpayer when he or she showed up to make bank deposits in amounts just under the $10,000 trigger required for bank reporting.

E-filing: 

In normal circumstances, the agency requires taxpayers who file 10 or more tax returns — down considerably from the current 250-return threshold — to e-file their returns. The provision for lower threshold is going to be implemented in two phases, falling to 100 returns for 2021 and 10 returns in the following year. However, special rules will be applied to partnerships.

Whistleblower reforms:

The law allows the agency to reveal the whistleblower return information related to the investigation of any individual taxpayer to whom the information has been provided by the whistleblower. In addition, it also grants some updates to whistleblowers on the ongoing investigations along with including some new provisions for anti-retaliation.

Over and above all:

This newly introduced Taxpayer First Act will have a significant impact on various other aspects like private debt collection, cybersecurity, innocent spouse relief, and misdirected deposits of tax refunds.

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