A change in the direction of tax administration? Taxpayer First Act of 2019: A change in the direction of tax administration?

Course Objectives: At the end of the presentation, a participant will be able to: Outline some of the major changes of the Act which affect tax return preparers Describe the changes made to the IRS Independent Office of Appeals Identify the procedures enacted to create a more efficient tax administration Assess the effectiveness of measures required of the IRS to combat identity theft Summarize other provisions of the Act impacting a tax practice

Enactment Taxpayer First Act of 2019 Public Law 116 – 25 Signed into law on July 1, 2019 Impact: Changes the management and oversight of the IRS with the aim of improving customer service and the process for assisting taxpayers with the Appeal Office, modifies IRS’s organizational structure, provides new safeguard to taxpayers in their dealing with the IRS

IRS Independent Office of Appeals Section 7803(e) Act codifies an independent administrative Appeals function Purpose of Appeals: Resolve tax controversies and review administrative decisions of the IRS in a fair and impartial manner to both the taxpayer and the government Available to all taxpayers subject to reasonable expectations which the IRS may provide

IRS Independent Office of Appeals Section 7803(e) Availability of Appeals required for eligible taxpayers Eligible taxpayers defined as those for the tax year: Individuals whose Adjusted Gross Income not exceeding $400,000 Entities whose gross receipts do not exceeding $5 million for the tax year Section 7803(e)(7) Once Notice of Deficiency issued, taxpayers may petition Appeals Office If denied administrative Appeal opportunity, taxpayer will be allowed to protest denial of request

Comprehensive Customer Service Strategy IRS must develop a comprehensive customer service strategy and submit the plan within one year with plan and training materials available to public within two years Strategy must include plan for appropriate levels of: Online services Call back services Training of employees providing customer service Designed to meet reasonable customer expectations Act Section 1101

IRS Organizational Structure Treasury Department to submit to Congress by September 30, 2020 – A comprehensive written plan to redesign the organization of the IRS Plan should include: Streamline the structure of the agency to eliminate duplication of services and responsibilities Position the IRS to best combat cyber security and other threats to the IRS Address whether Criminal Division of IRS should report to the IRS Commissioner

Voluntary Income Tax Assistance (VITA) Program and Low-Income Taxpayer Clinics VITA is codified – Section 7526A Provide grants up to $30 million to partnering organizations IRS may use mass communication to promote the benefits of VITA and encourage its use Low-Income Taxpayer Clinics Provide up to $6 million in matching grants Assist low-income taxpayers with representation for controversies before the IRS IRS may now advise taxpayer of the availability of the clinics Taxpayer Assistance Centers Must provide 90 day notice prior to closure of a center

Office of Taxpayer Advocate National Taxpayer Advocate can issue Taxpayer Advocate Directive to IRS TADs identify systemic problems and mandate changes to IRS tax administration Certain IRS officials can modify or rescind a TAD Now: TADs must be responded to within a set period of time NTA must inform Congress of the IRS failure to comply with a TAD IRS will provide other services to the NTA

Identity Theft IRS must establish a single point of contact for taxpayers adversely affected by identity theft (Act Sec. 2006) IRS must notify taxpayer: If it determines that there has been any suspected unauthorized use of a taxpayer’s identity, or that of the taxpayer’s dependents, If an investigation has been initiated and its status, Whether the investigation has substantiated any unauthorized use of the taxpayer’s identity (Act Sec. 2007(a)) IRS must develop casework guidelines which reduce the burden of identity theft victims

Identity Theft Individual Protection Personal Identification Number (IP IN) Within Five Years of date of enactment IRS must establish a program to issue IP PINs To any U.S. resident who requests one In the Interim, the IRS will expand the number of states where IP PINs can be requested

Identity Theft IRC § 7613: If any person who is engaged in the business of preparing or providing services in connection with the preparation of, returns of tax imposed by chapter 1, or any person who for compensation prepares any such return for any other person, and who— discloses any information furnished to him for, or in connection with, the preparation of any such return, or uses any such information for any purpose other than to prepare, or assist in preparing, any such return, shall pay a penalty…….

Identity Theft Penalties added under §6713 by TFA: In the case of a disclosure or use described in subsection (a) that is made in connection with a crime relating to the misappropriation of another person's taxpayer identity (as defined in section 6103(b)(6)), whether or not such crime involves any tax filing, subsection (a) shall be applied— $1,000 for each such disclosure Not to exceed $50,000 for a calendar year

Identity Theft Enhanced punishment under § 7612 – Disclosure or Use of Information by Preparer of Returns: who knowingly or recklessly discloses …. shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not more than $1,000 ($100,000 in the case of a disclosure or use to which section 6713(b) applies), or imprisoned not more than 1 year, or both together with the costs of prosecution.

Electronic Systems and Services Magnetic Media Filing Thresholds reduced for calendar years: All partnerships with more than 100 partners must file electronically IRS may issue waivers to tax return preparers who have limited access to the internet due to geographic location IRS to allow electronic signatures for practitioners in representing taxpayer’s before the Service Prohibition on charging of fees on use of debit, credit or charge cards to IRS removed as long as Service is otherwise compensated IRS is required to verify the identity of anyone who opens an E-Service account, before that person will be allowed to use it 2018 2019 2020 2021 Persons 250 100 10 Partnerships 200 150 50

Tax-Exempt Organizations E-File required for all tax-exempt organizations, who are required to file: Form 990 Series Form 8872 (Political Organization Report of Contributions and Expenditures IRC §6033(n) Information on forms to be made publicly available in machine- readable form as soon as practicable (IRC §6104(b)) Some transition relief provided IRS must notify tax-exempt organizations that failure to file will result in loss of tax-exempt status Have not filed for two consecutive years Must file by date of next report due date

Miscellaneous Provisions Seizures of assets limited under structuring violations of the Bank Secrecy Act Burden of proof changed for some innocent spouse relief cases Restriction on use of John Doe summonses Restriction on the use of private collection agencies for certain tax accounts Notice to Taxpayer of IRS Contacts Review process required for Designated Summonses Limits placed on actions by IRS contractors Revised procedures for seizure and sale of perishable goods Whistleblower Act reforms Phone calls to the IRS

Miscellaneous Provisions Procedures to recoup misdirected tax refund deposits Cybersecurity to be focused on by IRS, state tax agencies, private sector tax industry Taxpayer information confidentiality safeguards to be required for Federal and State contractors IRS Chief Information Officer position to be established and plans for Customer Account Data Engine 2 to finalized within a year Filing of Form 1099s to be facilitated by creation of an IRS Internet Portal New automated Income Verification System to be created Limitation on disclosed taxpayer information based on consent- based disclosures

Miscellaneous Provisions Repeal of requirement to study return-free tax system Plan for training of IRS Employees Prohibition on IRS rehiring certain fired employees Notification of unauthorized inspection of returns Streamlined Critical Pay authority for IT positions

Failure to File Penalty Minimum Failure to Timely File Penalty Increased for returns required to be filed in tax years after December 31, 2019 Increased from $205 to $330 (as adjusted for inflation)

Regulation of unregulated tax return preparers Not Addressed Regulation of unregulated tax return preparers

Finis