On July 1, President Donald Trump signed into law the Taxpayer First Act (TFA), PL. 116-25. The TEA implements a number of modifications of IRS management, procedures, and oversight in an attempt to make the agency more taxpayer friendly in terms of enforcement, appeals, and customer service.
The TFA includes a wide array of provisions that enhance the agency's efforts in the realms of cybersecurity and identity theft, address issues regarding the Office of the Taxpayer Advocate, and make changes relating to collections and other important areas that all tax practitioners should review. The TFA also amends Sec. 7803 to establish the IRS Independent Office of Appeals and provides some important taxpayer safeguards.
An independent Appeals Office
The new Independent Office of Appeals continues to operate separately from the compliance functions to resolve tax controversies and review the IRS's administrative decisions in a fair and impartial manner.
The new law also provides taxpayers a right to review administrative case files and to protest a denial of a referral to the Appeals Office. Specifically, individuals with an adjusted gross income (AGI) of $400,000 or less and businesses with gross receipts of less than $5 million for the tax year at issue are allowed access to nonprivileged portions of their case file by the Appeals Office at least 10 days before their scheduled conference. When designating a notice of deficiency case as ineligible for referral to Appeals, the IRS must provide the taxpayer a written notice with a detailed explanation of the basis for the denial, along with procedures to protest the denial.
This independent office is allowed to obtain legal advice and assistance from the IRS Office of Chief Counsel, but to the extent practicable, that assistance is provided only by counsel staff members who were not involved in advising the IRS employees working directly on the case prior to the referral to the Office of Appeals.
Agency interactions with third parties
A second major item in the TFA for taxpayers is its reform of notice requirements for third-party contacts.
Under prior law, the IRS could not contact any person other than the taxpayer regarding the determination or collection of a taxpayer's tax liability without providing reasonable notice in advance to the taxpayer that those contacts may be made.
The IRS previously took the position that the reasonable-notice requirement was met when it sent the taxpayer...