Taxpayer Assistance and Service Act

Title 1: Tax Administration and Customer Service

  By Meeren Amin, Brian C. Bernhardt, Kristy Caron, Matthew D. Lee, and Jonathan M. Wasser   This article is the first in a series of articles analyzing the Taxpayer Assistance and Service Act (the “TAS Act”), bipartisan legislation introduced by Senators Crapo and Wyden to improve service and administration at the Internal Revenue Service (“IRS”). Our introduction to the series can be found [HERE].   This article examines the most important provisions of Title I of the TAS Act, titled “Tax Administration and Customer Service.” Title I focuses on modernizing IRS operations and responds to longstanding concerns about IRS backlogs, extended wait times, and lack of transparency.   Digitization of Tax Returns and Correspondence (Section 101) Manual data entry of paper returns has contributed to IRS processing backlogs. Section 101 of the TAS Act requires the IRS to accept and process all returns and amended returns electronically and to digitize paper returns and correspondence using optical character recognition or similar technology. For returns prepared electronically but printed and filed on paper, Section 101 requires the return to include a code that the IRS can digitize by scanning (subject to potential exceptions if manual data entry or another process is faster or more reliable).   Dashboard for Backlogs and Wait Times (Section 102) Taxpayers currently lack access to reliable information regarding IRS processing times and phone service availability, resulting in unnecessary calls and correspondence that further strain agency resources. Section 102 requires the IRS to establish a user-friendly, real-time dashboard on www.irs.gov that will include information on call volume, backlogs, wait times, and callback availability. The IRS also must use technology to detect and screen out automated calls that increase wait times for human callers.   Electronic Access to Refund and Return Information (Section 103) Current IRS online tools do not provide taxpayers with sufficient individualized information about refund delays or steps they can take to resolve issues. Section 103 requires upgrades to the IRS’s “Where’s My Refund?” tool, “Where’s My Amended Return?” tool, and online accounts to provide individualized information about the status of returns and refunds. Specifically, the IRS would be required to tell taxpayers whether the IRS has received and entered a return into its system, whether processing is complete, and the date any refund was or will be issued. If a return has been suspended, the IRS would be required to disclose the reason for the suspension, the information requested from the taxpayer, and the deadline for responding.   Callback Technology Expansion (Section 104) Section 104 would require the IRS to provide all taxpayers with the option to receive a callback for any call to an IRS phone line that has not been answered within five minutes.     Online Account Expansion (Section 105) Currently, taxpayers can only use their online IRS accounts to view limited information. Section 105 requires the IRS to upgrade its online accounts to permit taxpayers and their representatives to view images of tax returns, documents, notices, and letters sent or received by the IRS during a rolling six-year period. Taxpayers and their authorized representative would also have the ability to respond to IRS inquiries through the online account.   Automation of Refund Offset Bypass (Section 106) The IRS offsets current-year refunds against prior-year federal income tax debts but may bypass such offsets for taxpayers experiencing economic hardship. Section 106 mandates that the IRS automatically bypass tax refund offsets for taxpayers eligible for the Earned Income Tax Credit whose accounts are classified as currently not collectible.   Installment Agreement Fees Eliminated for Certain Individuals (Section 107) Section 107 waives installment agreement fees for taxpayers with adjusted gross income at or below 250% of the federal poverty level, and for taxpayers who enter into an online direct-debit installment agreement.   Economic Hardship and Collection Alternatives (Section 108) Section 108 requires the IRS to establish a program to identify taxpayers who are experiencing economic hardship and inform them of available collection alternatives, including partial-payment installment agreements, offers-in-compromise, and currently-not-collectible status.   Quarterly Notices for Delinquent Taxpayers (Section 109) After an initial stream of notices, the IRS currently sends only an annual notice to taxpayers with tax delinquencies. Section 109 will require at least quarterly notices disclosing an estimate of the penalties and interest that may accrue if the debt is not paid and information on available programs and services. These notices are not required for taxpayers in active installment agreements, accepted offers-in-compromise, or currently-not-collectible status.   Low-Income Taxpayer Clinic Funding Unlocked (Section 110) Section 110 would remove the caps on federal grants to low-income taxpayer clinics and allow the IRS to reduce the matching-funds requirement if doing so would expand coverage to additional taxpayers.   Chief Counsel Reviews of Offers-in-Compromise Streamlined (Section 111) Current law requires the IRS Office of Chief Counsel to review every accepted offer-in-compromise where the unpaid tax and interest is $50,000 or more. Section 111 would limit Chief Counsel review to cases the IRS determines present a significant legal issue.   Modification of Procedural Requirements for Penalties and Disallowance Periods (Section 112) Section 112 confirms that written supervisory approval is required before the IRS sends an appealable notice regarding a penalty or a multi-year ban on claiming certain credits, including the earned income tax credit, the child tax credit, and the American Opportunity Credit.     Return of Excess Offer-in-Compromise Amounts (Section 113) Currently, if the IRS collects more than the agreed-upon offer-in-compromise amount, it is not authorized to refund the excess. Section 113 requires the IRS to return any amounts collected in excess of the offer amount, unless the parties specifically agree otherwise or the taxpayer has defaulted.   Extension of Period for Return of Wrongfully Levied Amounts (Section 114) Under current law, the period for returning wrongfully levied amounts runs from the “date of levy,” which differs depending on whether the levy was delivered on paper or electronically. Section 114 clarifies that the relevant date is the date the funds were received by the IRS.   Reports to Congress (Section 115) Section 115 requires the IRS, within two years of enactment, to report to Congress on the implementation of Title I, including an analysis of its successes and challenges and any legislative recommendations. The Secretary also must provide annual reports on IRS efforts to identify, prevent, and resolve tax fraud, including identity theft.   Conclusion   Title I of the TAS Act represents a comprehensive effort to modernize the IRS’s operations and improve the taxpayer experience. The digitization mandates in Section 101 and the dashboard requirements in Section 102 directly address the processing backlogs and lack of transparency that have plagued the agency in recent years. The expansion of online accounts in Section 105 will be a significant step forward for individual taxpayers and tax professionals who currently face substantial limitations in accessing client information. On the collections side, provisions like the requirement to inform taxpayers of collection alternatives reflect a recognition that the IRS’s current processes can impose unnecessary economic hardship on vulnerable taxpayers. We will continue our analysis next week with a review of Title II, which addresses issues facing American citizens abroad.…

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