H.R. 3151, the “Taxpayer First Act” was signed into law on July 1, 2019, to modernize and improve the Internal Revenue Service. The Taxpayer First Act changes a wide variety of matters under the Internal Revenue Code. The biggest changes include the creation of the Independent Office of Appeals, a reduction of the financial burden on taxpayers seeking an offer in compromise, a new opportunity to request equitable relief for joint liability, and notice to the taxpayer of IRS contact with 3rd parties.
Independent Office of Appeals
The Act establishes the Internal Revenue Service Independent Office of Appeals to resolve Federal tax controversies without litigation. Taxpayers who receive a notice of deficiency under Section 6212 may request a referral to the Independent Office of Appeals for resolution. Except for frivolous tax submissions as provided under Section 6702(c), taxpayers whose requests were denied will receive a description of the process for protesting the denial. Beginning July 1, 2020, certain taxpayers will have access to the case file of the Chief of Appeals. Taxpayers with gross income below $400,000 or gross receipts below $5,000,000 for the tax period in dispute who request a conference with the Independent Office of Appeals will have access to the non-privileged case file from the Chief of Appeals at least ten (10) days before the conference, with a waiver of the ten-day minimum for taxpayers who elect to expedite the conference.
The Independent Office of Appeals reports to the IRS Chief of Appeals and gets legal assistance from the Staff of the Chief Counsel. While “to the extent practicable” staff of the Chief Counsel shall not be the same staff involved in the case or the same staff who prepared the case for litigation, it does not appear to completely prevent the same staff of the Chief of Appeals who are trying a case from giving legal assistance to the Independent Office of Appeals.
Eligible Taxpayers can skip 20% payments when making lump sum Offers In Compromise
Eligible taxpayers will be able to skip the up-front twenty percent payment and user fee when they submit lump-sum offers in compromise under section 7122. To be eligible a taxpayer’s gross income must be less than 250% of the applicable poverty level. For example, federally, for a family of four in 2019, gross income must be less than 2.5 x $25,750 = $64,375.
Notice and right to hearing for taxpayers whose assets were seized as part of a structuring transaction
The Act also improves notice to persons whose property has been seized for being part of a structuring transaction. The term “structuring transaction” refers to any transactions designed to get around the requirements of the Bank Secrecy Act and the requirement for financial institutions to keep records of cash purchases of negotiable instruments, file reports if the daily aggregate exceeds $10,000, and report suspicious activity that may signify money laundering, tax evasion, or other criminal activities. Now, the IRS must provide notice within thirty (30) days to persons whose property has been seized informing them of their right to request a hearing within thirty (30) days. The seized property will be returned unless the court finds probable cause that there was a violation of Section 5324 (prohibiting structuring transactions) and the property seized is from an illegal source or if the funds were structured for the purpose of concealing the violation of criminal law or other regulation. Taxpayers who receive interest on property recovered under this provision will be able to exclude the interest from income.
Right to Tax Court review of new facts for equitable relief from spousal joint liability
Spouses seeking equitable relief from joint and several liability for joint returns will enjoy an expanded standard and scope of review. Taxpayers may now request the Tax Court to make a de novo review of equitable relief determinations, which shall include any newly discovered or previously unavailable evidence. Previously, newly discovered evidence was excluded. Requests for equitable relief for unpaid liabilities must be made before the expiration of the period of limitations under Section 6502 (generally ten years from the assessment of the tax). Requests for equitable relief for paid liabilities must be made before the expiration of the time for claiming a refund or credit for paid liabilities (generally the later of three years from the time the return was filed or two years from the time the tax was paid).
Private tax collectors
Private Tax Collectors will no longer be able to collect from taxpayers whose primary source of income is social security disability or supplemental social security or whose income is below 200% of the Federal poverty level. Installment agreements reached with private tax collectors are now able to be made for seven years, whereas before they were limited to five years.
We’ll have more information posted on Friday, July 18th about this Taxpayer First Act. In the meantime if you have questions about this, please contact us!
Here is also the link to the full PDF version of the Act for your download at your leisure.