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National Taxpayer Advocate 2019 Purple Book

The National Taxpayer Advocate is releasing the National Taxpayer Advocate 2019 Purple Book. In it, she presents a concise summary of 58 legislative recommendations that she believes will strengthen taxpayer rights and improve tax administration. Most of the recommendations have been made in detail in prior reports but others are presented in this book for the first time.

She believes that most of the recommendations presented in this volume are non-controversial, common sense reforms that the tax-writing committees and other committees and other Members of Congress may find useful.

National Taxpayer Advocate 2019 Purple Book: Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and Improve Tax Administration

INTRODUCTION

STRENGTHEN TAXPAYER RIGHTS

  1. Codify the Taxpayer Bill of Rights, a Taxpayer Rights Training Requirement, and the IRS Mission Statement as Section 1 of the Internal Revenue Code
  2. Require the IRS to Provide Taxpayers with a “Receipt” Showing How Their Tax Dollars Are Being Spent

IMPROVE THE FILING PROCESS

  1. Authorize the Volunteer Income Tax Assistance Grant Program
  2. Authorize the IRS to Establish Minimum Competency Standards for Federal Tax Return Preparers
  3. Require That Electronically Prepared Paper Tax Returns Include a Scannable Code
  4. Clarify That IRS Employees May Help Taxpayers Locate a Specific Low Income Taxpayer Clinic
  5. Extend the Time for Small Businesses to Make Subchapter S Elections
  6. Require Employers Filing More than Five Forms W-2, 1099-MISC, and 941 to Submit Them Electronically
  7. Authorize the Treasury Department to Recover Misdirected Deposits of Tax Refunds and Pay Them to the Correct Taxpayers
  8. Treat Electronically Submitted Tax Payments as Timely if Submitted Before the Applicable Deadline
  9. Adjust Estimated Tax Payment Deadlines to Occur Quarterly
  10. Harmonize Reporting Requirements for Taxpayers Subject to Both FBAR and FATCA By Eliminating Duplication and Excluding Accounts a U.S. Person Maintains in the Country Where He or She Is a Bona Fide Resident

IMPROVE ASSESSMENT AND COLLECTION PROCEDURES

  1. Continue to Limit the IRS’s Use of “Math Error Authority” to Clear-Cut Categories Specified by Statute
  2. Provide Additional Time for Taxpayers Outside the United States to Request Abatement of a Math Error Assessment Equal to the Time Extension Allowed in Responding to a Notice of Deficiency
  3. Require the IRS to Waive User Fees for Taxpayers Who Enter into Low-Cost Installment Agreements and Evaluate the Potential Revenue and Compliance Costs of Other User Fee Increases
  4. Improve Offer in Compromise Program Accessibility by Repealing the Partial Payment Requirement
  5. Modify the Requirement That the Office of Chief Counsel Review Certain Offers-in-Compromise
  6. Require the IRS to Mail Notices at Least Quarterly to Taxpayers with Delinquent Tax Liabilities
  7. Protect Retirement Funds from IRS Levies in the Absence of “Flagrant Conduct” By a Taxpayer
  8. Toll the Time Periods for Requesting the Return of Levy Proceeds While the Taxpayer or a Pertinent Third Party Is Financially Disabled
  9. Authorize the IRS to Release Levies That Cause Economic Hardship for Business Taxpayers
  10. Strengthen Taxpayer Protections in the Filing of Notices of Federal Tax Lien
  11. Provide Taxpayer Protections Before the IRS Recommends the Filing of a Lien Foreclosure Suit on a Principal Residence
  12. Provide Collection Due Process Rights to Third Parties Holding Legal Title to Property Subject to IRS Collection Actions
  13. Extend the Time Limit for Taxpayers to Sue for Damages for Improper Collection Actions
  14. Codify the Rule That Taxpayers Can Request Equitable Relief Under IRC § 6015(f) Any Time Before Expiration of the Period of Limitations on Collection
  15. Direct the IRS to Study the Feasibility of Using an Automated Formula to Identify Taxpayers at Risk of Economic Hardship
  16. Amend IRC § 6306(d) to Exclude the Debts of Taxpayers Whose Incomes Are Less Than Their Allowable Living Expenses From Assignment to Private Collection Agencies or, If That Is Not Feasible, Exclude the Debts of Taxpayers Whose Incomes Are Less Than 250 Percent of the Federal Poverty Level

REFORM PENALTY AND INTEREST PROVISIONS

  1. Convert the Estimated Tax Penalty into an Interest Provision for Individuals, Trusts, and Estates
  2. Apply One Interest Rate Per Estimated Tax Underpayment Period for Individuals, Estates, and Trusts
  3. Reduce the Federal Tax Deposit Penalty Imposed on Certain Taxpayers Who Make Timely Tax Deposits
  4. Authorize a Penalty for Tax Return Preparers Who Engage in Fraud or Misconduct by Altering a Taxpayer’s Tax Return
  5. Require Written Managerial Approval Before Assessing the Accuracy-Related Penalty for “Negligence”
  6. Compensate Taxpayers for “No Change” National Research Program Audits

STRENGTHEN TAXPAYER RIGHTS BEFORE THE OFFICE OF APPEALS

  1. Provide Taxpayers with a Legally Enforceable Right to an Administrative Appeal within the IRS, Except if Specifically Barred by Regulations
  2. Require That at Least One Appeals Officer and One Settlement Officer Be Located and Permanently Available in Each State, the District of Columbia, and Puerto Rico
  3. Require Taxpayers’ Consent Before Allowing IRS Counsel or Compliance Personnel to Participate in Appeals Conferences

ENHANCE CONFIDENTIALITY AND DISCLOSURE PROTECTIONS

  1. Limit Redisclosures and Unauthorized Uses of Tax Returns and Tax Return Information Obtained Through Section 6103-Based “Consent” Disclosures
  2. Authorize the Treasury Department to Issue Guidance Specific to IRC § 6713 Regarding the Disclosure or Use of Tax Return Information by Preparers
  3. Allow a Period of Notice and Comment on New Intergovernmental Agreements and Require That the IRS Notify Taxpayers Before Their Data Is Transferred to a Foreign Jurisdiction

STRENGTHEN THE OFFICE OF THE TAXPAYER ADVOCATE

  1. Clarify That the National Taxpayer Advocate May Hire Legal Counsel to Enable Her to Advocate More Effectively For Taxpayers
  2. Clarify the Authority of the National Taxpayer Advocate to Make Personnel Decisions to Protect the Independence of the Office of the Taxpayer Advocate
  3. Codify the National Taxpayer Advocate’s Authority to Issue Taxpayer Advocate Directives
  4. Clarify the Taxpayer Advocate Service’s Access to Files, Meetings, and Other Information
  5. Authorize the National Taxpayer Advocate to File Amicus Briefs
  6. Require the IRS to Address the National Taxpayer Advocate’s Comments in Final Rules
  7. Authorize the Office of the Taxpayer Advocate to Assist Certain Taxpayers During a Lapse in Appropriations
  8. Repeal Statute Suspension Under IRC § 7811(d) for Taxpayers Seeking Assistance from the Taxpayer Advocate Service
  9. Establish the Compensation of the National Taxpayer Advocate by Statute and Eliminate Eligibility for Cash Bonuses

STRENGTHEN TAXPAYER RIGHTS IN JUDICIAL PROCEEDINGS

  1. Repeal Flora: Give Taxpayers Who Cannot Pay the Same Access to Judicial Review as Those Who Can
  2. Provide That the Time Limits for Bringing Tax Litigation Are Subject to the Judicial Doctrines of Forfeiture, Waiver, Estoppel and Equitable Tolling
  3. Clarify That the Scope and Standard of Judicial Review of Determinations Under IRC § 6015 Are De Novo
  4. Clarify That Taxpayers May Raise Innocent Spouse Relief as a Defense in Collection Proceedings and in Bankruptcy Cases
  5. Clarify That Taxpayers May Seek Innocent Spouse Relief in Refund Suits
  6. Fix the Donut Hole in the Tax Court’s Jurisdiction to Determine Overpayments by Non-Filers with Filing Extensions

MISCELLANEOUS RECOMMENDATIONS

  1. Establish the Position of IRS Historian Within the Internal Revenue Service to Record and Publish Its History
  2. Amend the Combat-Injured Veterans Tax Fairness Act Of 2016 to Allow Veterans of the Coast Guard to File Claims for Credit or Refund for Taxes Improperly Withheld from Disability Severance Pay
  3. Authorize Independent Contractors and Service Recipients to Enter into Voluntary Withholding Agreements Without Risk That the Agreements Will Be Used to Challenge Worker Classification Determinations

ADDITIONAL REFERENCE MATERIALS

Read the full 2018 Annual Report to Congress