In the second part of my guide to the highlights of the Taxpayer First Act of 2019, I'll discuss the seizure and sale of perishable goods and a wide variety of other topics.
Documents released to IRS contractors. Effective on July 1, 2019, and applicable to any tax administration contracts under Code Sec. 6103(n) in effect on that date, the Act provides that IRS cannot, under the authority of Code Sec. 6103(n), provide books and records that IRS obtained under its authority, to a contractor described in Code Sec. 6103(n), other than when the contractor requires such information for the sole purpose of serving as an expert. (Code Sec. 7602(f), as amended Act Sect 1208(a).)
Low-income taxpayer clinics. Effective on July 1, 2019, the Act allows Treasury Department personnel to advise taxpayers of the availability of and eligibility requirements for receiving advice and assistance from qualified low-income taxpayer clinics that receive funding under the Code and to provide location and contact information for such clinics (Code Sec. 7526(c), as amended by Act Sec. 1402).
Seizure and sale of perishable goods. Effective for property seized after July 1, 2019, the Act limits the property that may be sold pursuant to the IRS’s authority to seize and sell tangible property to satisfy unpaid taxes to property that is liable to perish (Code Sec. 6336, as amended by Act Sec. 1404.)
Whistleblower reforms. With respect to disclosures made after July 1, 2019, the Act allows the IRS to exchange information with whistleblowers where doing so would be helpful to an investigation. It also requires the agency to notify whistleblowers of the status of their claims at certain points in the review process and authorizes, but does not require, the IRS to provide status updates at other times upon written request of the whistleblower. To protect taxpayer privacy, it prohibits whistleblowers from disclosing publicly information they receive from the IRS, under penalty of law (Code Sec. 6103(k)(13), as amended by Act Sec. 1405(a).)
In addition, effective on July 1, 2019, the Act amends the Code to extend anti-retaliation provisions to IRS whistleblowers. These are similar to those that are provided to whistleblowers under the False Claims Act and the Sarbanes-Oxley Act (Code Sec. 7623(d) as amended by Act Sec. 1405(b).)
Information the IRS is to provide during phone calls. Effective on July 1, 2019, the Act requires the IRS to provide the following information while taxpayers are on hold with the call center: information about common tax scams, direction to the taxpayer on where and how to report such activity and tips on how to protect against identity theft and tax scams (Act Sec. 1406.)
Misdirected tax refund deposits. The Act requires the IRS to prescribe regs, within six months of July 1, 2019, to establish procedures to allow taxpayers to report instances in which a refund made by electronic funds transfer was not transferred to the account of the taxpayer, to coordinate with financial institutions to identify and recover these payments, and to deliver refunds to the correct accounts of taxpayers (Code Sec. 6402(n) as amended Act Sec. 1407.)
Information sharing. Effective for disclosures made after July 1, 2019, the Act provides the IRS may disclose specified return information to specified Identity Theft Tax Refund Fraud Information Sharing and Analysis Center (ISAC) participants if such disclosure is in furtherance of effective federal tax administration relating to the following: (1) the detection or prevention of identity theft tax refund fraud; (2) validation of taxpayer identity; (3) authentication of taxpayer returns; or (4) the detection or prevention of cybersecurity threats to IRS. (Code Sec. 6103(k)(14), as amended Act Sec. 2003(c).)
Identity Protection Personal Identification Numbers. Within five years of July 1, 2019, the Treasury Department is required to establish a program to issue an Identity Protection Personal Identification Number (IP PIN) to any U.S. resident individual who requests one. This is a 6-digit number assigned to eligible taxpayers that allows their tax returns/refunds to be processed without delay and helps prevent the misuse of their Social Security Numbers (SSNs) on fraudulent Federal income tax returns. And, for each calendar year beginning July 1, 2019, the Treasury Department is required to expand the issuance of IP PINs to individuals residing in such states as IRS deems appropriate, provided that the total number of states served by the program continues to increase (Act Sec. 2005.)
Notification of suspected identity theft. Effective for determinations made after Jan. 1, 2020 (i.e., made after the date that is six months after the date of enactment), the Act requires the IRS to notify a taxpayer if it determines there has been any suspected unauthorized use of a taxpayer’s identity, or that of the taxpayer’s dependents, if an investigation has been initiated and its status, whether the investigation substantiated any unauthorized use of the taxpayer’s identity, and whether any action has been taken (such as a referral for prosecution). Furthermore, when an individual is charged with a crime, the IRS must notify the victim as soon as possible, giving such victims the ability to pursue civil action against the perpetrators (Code Sec. 7529(a), as added by Act Sec. 2007(a).)
In the third and final installment of this column, I'll review expanded e-filing by exempt organizations and other topics.
Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as...