As a follow-up to enactment of the Tax Cuts and Jobs Act, the House of Representatives on April 18 approved multiple pieces of legislation intended to overhaul the IRS’s operations and tax administration systems and implement new taxpayer protections.
“A new tax code calls for a new tax administrator, and we have worked together so that the IRS can be transformed into an agency with a singular mission: ‘taxpayer first,’” House Ways and Means Committee Chairman Kevin Brady (R-TX) said in a statement after passage. “With this package, we are taking a monumental step in redesigning the IRS for first time in 20 years, refocusing the agency to live up to its mission of quality service, and reining in its enforcement powers to prevent future abuse.”
The changes were approved as part of the Taxpayer First Act (H.R. 5444) by a unanimous vote of 414-0 and the 21st Century IRS Act (H.R. 5445) by a vote of 414-3. In addition, the House agreed to seven additional taxpayer-service related bills that were approved by the House Ways & Means Committee on April 11.
The package of bills will be combined with H.R. 5444 before the legislation goes to the Senate, where it’s understood the Senate Finance Committee may be working on its own version of the legislation.
The broader IRS reform legislation was originally spearheaded by Ways & Means Oversight Subcommittee Chair Lynn Jenkins (R-KS) and Ranking Member John Lewis (D-GA).
While the legislation does not directly single out retirement plan compliance and reporting requirement changes, or include any changes to the Tax Exempt and Government Entities division, there are a few proposals that may be of interest to retirement professionals.
Taxpayer First Act (H.R. 5444)
In general, H.R. 5444 directs the IRS to redesign the organizational structure of the agency, create an independent appeals process to review taxpayer disputes, revamp its enforcement procedures regarding asset seizures and enhance tax-filing assistance programs. The legislation also would eliminate the IRS Oversight Board created under the 1998 restructuring act.
As for the IRS’s organizational structure, the legislation directs the agency’s administrator to submit to Congress by September 2020 a comprehensive written plan to redesign the organization, reflecting the taxpayer service priorities emphasized in the legislation. It also would remove the 1998 restructuring requirement that the agency’s operating units be organized by lines of business rather than geographically, as under the previous structure.
In addition, all tax-exempt organizations would be required to file their Form 990s electronically. Transition relief would be provided for smaller organizations by allowing the IRS to delay this requirement for up to two years. Currently, only tax-exempt organizations which have assets greater than $10 million and those which file more than 250 returns with the IRS are required to file Form 990 electronically.
21st Century IRS Act (H.R. 5445)
This legislation intends to strengthen cybersecurity and taxpayer identity protection measures by the agency, as well as upgrade its information technology and electronic systems.
One provision of interest is the development of online accounts and portals. The Treasury Secretary would be directed to develop secure, individualized online accounts to provide services to taxpayers and their designated return preparers. These services would include obtaining taxpayer information, making payment of taxes, sharing documentation, and addressing and correcting issues. It also calls for the development of a process for accepting returns of tax and supporting documentation in electronic format. The IRS is directed to develop and submit a plan for online accounts to Congress within a year of enactment.
Also included is a requirement that by 2023 the agency make available an online web application to allow the electronic preparation, filing and distribution of Form 1099, similar to the online services provided by the Social Security Administration. Under the legislation, businesses would be able to prepare and file the information returns online while preparing payee statements and creating applicable records.
The seven previously mentioned bills added to H.R. 5444 include:
- HR. 2901: Codify the Volunteer Income Tax Assistance program to provide matching grants to fund tax return preparation and filing services for low-income taxpayers.
- HR. 5437: Require IRS to establish a program within five years to provide an identity protection personal identification number to any taxpayer.
- HR. 5438: Allow Treasury Department officials and employees to refer taxpayers to qualified low-income taxpayer clinics for advice and assistance.
- HR. 5439: Require the IRS to create a centralized team of specially trained employees to manage taxpayer identity-theft cases to completion.
- HR. 5440: Require the IRS to provide a 90-day notice in advance of closing a taxpayer assistance center and report to Congress explaining the reasons for a proposed closure.
- HR. 5443: Require all tax-exempt organizations to electronically file their Forms 990.
- HR. 5446: Amend the rules for streamlined seizure and sale of perishable goods.
