Taxpayer First Act
This legislation was signed into law on July 1, 2019. Its main focus is on administrative and structural changes which will affect how the IRS operates in the future. It also includes a few items that will directly affect taxpayers as well. The overall administrative changes are designed to help modernize the IRS and help it operate more efficiently to meet taxpayer’s needs.
Below are some of the key provisions in the legislation:
Filing and Penalty Provisions
- Identity Protection PIN
The IRS is required to phase in over the next five years the ability for any taxpayer residing in the United States to request an IP PIN.
- Tax exempt organizations – All tax exemption organization federal returns must be filed electronically.
- Electronic filing mandate for corporate and partnership returns are lowered from 250 returns as follows:
- 100 returns for 2021
- 10 returns for 2022 and beyond
- Calendar year 2018 – 200
- Calendar year 2019 – 150
- Calendar year 2020 – 100
- Calendar year 2021 – 50
- After 2021 – 10
- Minimum penalty for failure to file a return on time will be $330 beginning with calendar year 2020.
- Improper Disclosure Penalty – Increases the penalty related to improper disclosure of taxpayer information by tax preparers related to tax identity theft to:
- Penalty per return will be $1,000
- Maximum penalty for any one year is $50,000
- Filing 1099s – By January 1, 2023 the IRS must create and make available on their website the ability for taxpayers to prepare and file Form 1099 electronically.
IRS Administrative Provisions
- Reorganization of IRS
IRS must submit a reorganization plan to Congress by September 30, 2020. This plan must consider how IRS will prioritize taxpayer services, streamline and simplify its structure, better position itself to combat ongoing cybersecurity and other threats, address whether the IRS Criminal Division should report directly to the IRS Commissioner and implement other provisions of the Taxpayer First Act.
- Plan to Improve Service
The legislation requires the IRS to submit to Congress a written comprehensive customer service strategy. This plan must provide assistance to taxpayers that is secure, designed to meet reasonable taxpayer expectations and adopt appropriate best practices of customer service provided in the private sector, including online services, telephone call back services, and training of employees providing customer services.
- Enforcement Procedure Changes
- Limits IRS seizure authority to property derived from an illegal source.
- Revises requirements related to equitable relief from joint liability for unpaid taxes.
- Restricts referrals of tax debts to private debt collection agencies, excluding taxpayers whose income consists of disability insurance benefits or other low income taxpayers.
- IRS may no longer immediately sell seized property merely if is liable to become greatly reduced in price or value or cannot be kept without great expense.
- Establishes Independent Office of Appeals and makes access to appeals generally available to all taxpayers
See the text of the Taxpayer First Act (HR 3151) for more details on the above provisions and other provisions included in this legislation.
IRS Modernization Plan
The IRS published their new Integrated Modernization Business Plan in April 2019. This plan describes a six-year strategy to modernizing IRS systems and taxpayer services. It will consist of two 3-year phases beginning this year (2019).
Completion of this plan will enable the IRS to:
- Significantly improve the taxpayer experience by standardizing customer workflows and expanding access to information.
- Reduce call wait and case resolution times with customer callback technology, online notices and live online customer support.
- Expedite return and refund processing with real-time return processing and taxpayer error correction.
- Simplify identity verification to expand access to online services while protecting data.
- Increase systems availability for taxpayers and practitioners.
- Facilitate implementation of new tax provisions including common extenders enacted by Congress by eliminating millions of lines of legacy code.
This modernization plan is organized around the following four pillars:
Expand digital options, improve traditional channels and provide simplified and proactive services for taxpayers and their representatives.
The plan has the following objectives for the taxpayer experience:
- Help taxpayers resolve issues quickly and efficiently.
- Empower taxpayers with information about their account, obligations and payment options.
- Make services available to customers when they need them.
- Protect taxpayer information and data.
The Key Programs that will be utilized to meet the objectives are:
- Taxpayer Digital Communications Outbound Notifications (TDC-ON)
Provide a web-based platform for taxpayers to receive online notifications (such as tax credit qualifications and balance due). Would allow delivery of digital notices using the secure messaging platform to the taxpayer’s secure online account (to preparer’s online account as well). Also, include digital chat option.
- Web Applications
Improve interactions and communications with taxpayers, employers, IRS and third parties (tax preparers and tax software programs) by providing broad range of self-service options and establishing secure information exchange options. Would enable authorized third parties and taxpayers to interact digitally with IRS.
- Live Assistance (Callback & Omnichannel)
IRS will provide call-back option to taxpayer, will redesign the customer voice portal and improve identity verification. Provide live text chat, virtual assistance capabilities and video chat assistance.
Core Taxpayer Services and Enforcement
Streamline and integrate IT programs that enable top quality service.
The plan has the following objectives for core taxpayer services and enforcement:
- Integrate tax processing systems to increase cost effectiveness of operations.
- Enable real-time processing and increase transparency of return status.
- Increase data usability and the use of data analytics to combat fraud.
IRS will accomplish these objectives with the following programs:
- CADE 2 Transition State 2 — This program will help modernize the taxpayer account processing environment and develop an integrated real-time processing environment to support tax returns, information returns, payments and other transactions. A key project supporting CADE 2 TS is the Individual Tax Processing Engine (ITPE) project which will convert approximately 200,000 lines of legacy assembly language code to modern software language. This code conversion is a major milestone towards retiring the Individual Master File (IMF).
- CADE 2 Target State — This will provide capabilities that will allow direct visibility and access to taxpayer account detail on a near real time basis and furthers the effort to retire the IMF.
- Enterprise Case Management (ECM) — This solution will digitize case information, automate work selection and will improve resource alignment.
- Return Review Program (RRP) — The program that runs returns through fraud detection and other detection processes during the processing of the returns.
- Real-Time Tax Processing (RTTP) — This program will deliver independent and near real-time data processing, allowing the IRS to move away from batch processing, view returns dynamically and understand the status of a return as it is processed. Within certain parameters, RTTP will allow amendments to be processed directly.
Modernized IRS Operations
IRS will use innovative technologies and processes, such as Cloud, Agile, DevOps, Application Programming Interfaces, robotic process automation and next generation infrastructure to reduce costs and manual effort.
The plan has the following objectives for modernizing IRS operations:
- Reduce complexity of technical environment.
- Leverage data to deliver secure, agile, and efficient applications and services.
- Strengthen organizational agility through automation and streamlining processes.
Cybersecurity & Data Protection
IRS will protect taxpayer data using advanced analytics and tools and align to government wide cybersecurity standards and priorities by doing the following:
- Establish trusted and streamlined access to information through identity and access management technologies
- Proactively identify emerging threats and vulnerabilities through real-time intelligence information analytics
- Protect taxpayer data and systems via end-to-end visibility and common platforms
See the following for more information on the IRS Modernization Plan:
- IRS Fact Sheet 2019-9 (IRS Modernization Plan provides plan to improve services for taxpayers, tax community) of April 2019
- IRS Integrated Modernization Business Plan