With the April filing season finally in the rear view mirror – a time to exhale and also to catch up on what Congress is putting forward in taxes. The tax writing committees – led by Senate Finance Chairman Hatch (R-UT) and House Ways and Means Chairman Brady (R-TX) -- recently marked up a number of small-ball bipartisan provisions – with an emphasis on addressing identity theft and taxpayer rights (a perennial favorite around April 15th). A detailed description of the provisions – markups were on April 28th in the House and April 20th in the Senate – can be found at www.jct.gov (see recent publications).
While the general outlook currently is that we won’t see anything major in the way of tax law changes this year – the feeling is that most of these odds-and-ends (discussed below) have a good chance of becoming law in a lame duck session (and anything else that the tax writing committees act on in the next few months that is bipartisan and noncontroversial). I anticipate that the two tax-writing committees will also continue their hearings and oversight to lay the groundwork for more fundamental changes to the tax law next year -- as part of the work with a new administration.
Identity Theft – both the Ways and Means Committee and Finance Committee had similar language on identity theft. Senator Nelson (D-FL) and Congressman Renacci (R-OH) were key supporters of these provisions – Florida from all evidence appears to be ground zero for identity theft. Provisions passed include:
Changing the due date for filing returns reporting payments of wages and employee compensation to February 15 of the calendar year following the year in which the amounts were paid (NOTE: the end-of-year extenders bill – the PATH Act changed the filing deadline to January 31st).
Requiring that the IRS provide a centralized point of contact for identity theft victims – basically seeking better service to taxpayers subject to identity theft.
IRS required to notify the taxpayer if the IRS believes the taxpayer’s identity was used without authorization – as well as notifying the taxpayer if any criminal charges were brought against the person who engaged in identity theft.
Allowing a taxpayer who is subject to identity theft to elect out of electronic filing requirements (an opt out from the requirements otherwise placed on return preparers to file electronically).
The Congress remains intensely interested (as does the IRS) in dealing with identity theft – and for those caught up in it -- it can be a tremendous grind. It continues to be a major problem. In recent discussions with an IRS criminal investigator in Florida, he told me they have found that the folks engaged in illegal narcotics switch their work to identity theft/tax during filing season – the money is better. Sobering.
Whistleblowers Thanks to the patron saint of whistleblowers, Senator Grassley (R-IA) as well as good support from Ranking Member Wyden (D-OR) who is also a good champion of whistleblower – two helpful changes were made to the IRS whistleblower program:
- allowing limited communications with whistleblowers after the whistleblower has filed -- essentially letting the whistleblower know if the case is being actively considered by exam; and, informing the whistleblower when the taxpayer has made a payment to settle the tax liability at issue (even if the right to appeal has not expired). The provision also gives the IRS general authority to inform the whistleblower as needed. Finally, the legislation will provide that the limited taxpayer information provided to the whistleblower is protected. All very useful changes that will be a big help to the whistleblower program.
- providing the whistleblower with protections from employer retaliation similar to those provided for whistleblowers under the False Claims Act (yet another example of how the two whistleblower laws -- the False Claims Act and the IRS Whistleblower law are intertwined). While the IRS has been very good at protecting the identity of whistleblowers -- for some whistleblowers there is still a risk factor of retaliation.
Nothing is going to do more to go after illegal offshore accounts -- like the Panama papers -- than supporting and strengthening the IRS whistleblower program.
Charity Eliminate the requirements for charities to report on donors (the “Schedule B”). This is in response to the efforts by some attorney generals to look at the donors lists. This provision was championed by Ways and Means Oversight Chair Peter Roskam (R-IL).
The Senate included a provision that requires the IRS to provide a detailed notice that the exempt organization’s status is going to be revoked and a kinder/gentler allowance for exempt organizations that have lost their exempt status for failure to file. Also included was a commonsense provision that will improve (and make more timely) transparency of exempt organizations.
Installment Agreement – User Fees. This is a perennial. We add fees, we take them away. We add them back. Now, the Congress is stating no increase in fees for installment agreements and no fees at all for low-income taxpayers. Credit to Nina Olson the Taxpayer Advocate at the IRS for this change.
IRS Management. There are a number of provisions that continue to be part of an extended thank you note from Congress to the IRS reflecting unhappiness about IRS actions on exempt organizations. Congressional provisions include directing the IRS that the IRS can’t rehire people the IRS previously fired; the IRS can transfer/remove senior IRS executives that are underperforming; no use of IRS funds for political targeting; the IRS can’t close a taxpayer assistance center without informing Congress and explaining how taxpayers will be served. Perhaps as a bigger picture though, the IRS did see an increase in its appropriations for the first time in a long time (the increase earmarked for better customer service).
No More Hold Music. Certainly a favorite provision for many will be the proposal that requires the IRS to provide individuals on hold with the IRS call center – basic information about common tax scams; direction to the taxpayer on where to report such activity; and tips on how to protect against ID theft and tax scams. Thus, with the stroke of a pen eliminating for millions the opportunity to be exposed to classical music.
Regulation of Paid Preparers -- the Finance Committee originally put forward legislation that would allow for IRS regulations of paid preparers (in response to the Loving decision that put a severe limitation on IRS actions in this area). However, the provision was stripped from the Finance Bill at the last minute -- although Chairman Hatch stated that he intended to work on the issue with Ranking Member Wyden and other interested Senators. I suspect we will eventually see something from the Finance Committee on this issue.
So there you have it. In some ways the limited scope of tax items being considered at this time reflects the surprising amount of tax legislation that passed at the end of last year -- as well as a recognition that big changes will have to wait for a new administration.
