By: Mari Boyle
Following an instance of bipartisan congressional action, the Taxpayer First Act of 2019 (TFA) was signed into law on July 1, 2019. While TFA aims to strengthen all taxpayer rights, the legislation has significant tax-related benefits for small business owners. The TFA not only addresses key issues afflicting ordinary taxpayers such as identity theft and customer service concerns but also those affecting small business owners such as enforcing the independent appeals process, notice requirements for third party contact, and cybersecurity concerns. Below are highlights of some provisions you should be aware of as a small business owner or entrepreneur:
Greater Enforcement of the independent appeals process
An important provision within the TFA for small business owners is the codification of the “Internal Revenue Service Independent Office of Appeals.” This allows an individual to resolve tax discrepancies without incurring costly litigation and court fees. The TFA implements the Independent Office of Appeals statutorily along with procedures the IRS must follow in the process. Some procedures the TFA puts into place include requiring the IRS to make the dispute case file available to the taxpayer and inform individuals denied an appeal on how to protest the decision. The TFA also requires the IRS to report all independent appeal denials and reasoning to Congress.
third party contract notice requirement
Of relief to small business owners is the third-party notice requirement implemented by the TFA. A practice of the IRS of particular annoyance to small businesses is when the IRS reaches out to third parties for information on the taxpayer, as opposed to settling the issue directly with them. This often occurs during a business’s tax audit or for nonresponsive taxpayers. These third parties can include banks, creditors, and even customers. The TFA requires the IRS to provide 45-days’ notice before contacting someone other than the taxpayer for purposes of their tax liability. This gives the taxpayer the opportunity to resolve the issue with the IRS before involving third parties.
updated cybersecurity and identity protection – Tax Information
Amid growing concerns about identity theft and cybersecurity, the TFA enacted several reforms to curb the prevalence of the issue. Included among them is a requirement that the IRS provide an Identity Protection Personal Identification Number (IP PIN) to anyone who requests it. IP PINs are a six-digit number used as a substitute for identity verification to minimize the likelihood of fraud and misuse of identification information associated with tax returns (such as a business’ EIN or a person’s SSN). The reforms also allow for greater information sharing with the Identity Theft Refund Fraud Information Sharing and Analysis Center (ISAC), a partnership between the IRS, state tax agencies, and private sector, so ISAC can better detect and prevent fraud and identity theft.
The TFA also requires the IRS to notify a taxpayer when suspicious identity theft actions occur, inform them of how to file a report, and suggest identity protection measures the taxpayer should take. The act also implements an IRS single point of contact for identity theft victims. While this does not necessarily mean a taxpayer will have one specific individual committed to communicating with them, it does provide for greater continuity in assisting identity theft claims.
These reforms provide enhanced protection and notification procedures for small business owners looking to minimize cybersecurity threats as well as simplified preventative actions owners can take to avoid security breaches.
improvements to customer service
An issue most can agree on is that customer service calls are usually a painful experience. In response, the TFA requires the IRS to submit a comprehensive customer service plan to Congress within one year. Within two years, the IRS must provide updated and easily understood training materials for customer service employees. The TFA directs plan to adopt common best practices provided in the private sector, such as online and call back services and customer service employee training. Additional requirements for the plan include short term and long term proposals to improve taxpayer satisfaction with customer service and a method for measuring the plans progress.
strengthening the national taxpayer advocate
The Office of the National Taxpayer Advocate is an independent office representing taxpayer interests. When a common taxpayer issue arises, the office issues Taxpayer Advocate Directives asking the IRS to resolve the problem. Prior to the enactment of the TFA, the IRS had the ability to modify or rescind the directive largely without oversight. The TFA eliminates that possibility by mandating compliance with the directive within 90 days. If the IRS decides to modify or rescind a directive, the IRS must inform the National Taxpayer Advocate of the reason and notify Congress of all unaddressed directives.
low-income exceptions for offer-in-compromise payments
An offer-in-compromise is an agreement between the IRS and a taxpayer to settle the tax debt for less than full liability. When applying for an offer-in-compromise, the taxpayer is required to pay an application fee and a non-refundable initial payment. The TFA waives those fees for low-income taxpayers applying for an offer-in-compromise. The TFA defines low-income taxpayers as those whose income is less than 250% of the applicable poverty level. While you may think this only applies to individuals without businesses, this can be of some assistance for individuals who are part of the gig economy or have sole proprietorships.
To read the legislation in its entirety, go here.
Sources:
https://www.congress.gov/bill/116th-congress/house-bill/3151/text?q=%7B%22search%22%3A%5B%22taxpayer+first+act%22%5D%7D&r=1&s=1#toc-HE9D7A5E20D3F400AADE9086B1B0A2E4F
https://www.currentfederaltaxdevelopments.com/blog/2019/7/6/taxpayer-first-act-of-2019-summary-of-key-provisions
https://www.forbes.com/sites/deanzerbe/2019/07/02/congress-expands-taxpayer-rights-with-taxpayer-first-act-of-2019/#4fc79ef31729
https://tax.thomsonreuters.com/news/special-study-on-taxpayer-first-act-of-2019/
Pictures:
https://rsmus.com/what-we-do/services/tax/federal-tax/tax-controversy/highlights-of-the-taxpayer-first-act-of-2019.html
https://www.kiplinger.com/slideshow/taxes/T055-S001-how-the-irs-will-be-more-taxpayer-friendly/index.html
Mari Boyle, at the time of this post, is a second year law student at Penn State Dickinson Law. Mari is from Pittsburgh, Pennsylvania and is interested in corporate law and litigation. Mari currently serves as Treasurer for the Business Law Society and as an Associate Editor of the Dickinson Law Review.
