An Act in Three Scenes: Understanding the Taxpayer Assistance and Services Act

As Shakespeare once said, “all the world’s a stage, and all the men and women merely players.” When it comes taxpayer advocacy, there is no bigger player than the Taxpayer Advocate Service, and no bigger stage than Congress.  

Scene 1: Setting the Stage  

The Taxpayer Advocate Service (TAS), led by the National Taxpayer Advocate (NTA), is “your voice” at the IRS. It is an independent organization within the IRS that endeavors to ensure the fair treatment of taxpayers and promotes an understanding of their rights. TAS assists with unresolved IRS issues, advocates for taxpayer rights, and suggests legislative changes to Congress to improve tax administration and prevent future problems.  

Over the year, the TAS has proposed a number of changes in its Annual Reports to Congress. These proposals aim to enhance the taxpayer experience, improve tax administration, and provide financial accountability and operational transparency. Now, Congress has finally released legislative text reflecting many of these proposals. 

Scene 2: Congress Gets Working  

In response to these annual reports to Congress, Chairman Crapo and Ranking Member Wyden of the Senate Finance Committee announced a bipartisan bill at the end of January 2025. The bill incorporates more than 40 of the NTAs recommendations. Comments on the bill are due by March 31, 2025. 

Tax Administration and Customer Service  

The bill mandates the digitization of correspondence to speed up processes and increase transparency. Taxpayers would have access to more up-to-date information on wait times and backlogs.  

It also proposes expanding callback technology and online accounts. Automating callback technology will free taxpayers and practitioners from waiting on hold. Upgrading to the online account system will enable taxpayers to view images of their returns, documents, and notices, addressing issues where taxpayers have not received or cannot locate correspondence.  

Additionally, the bill aims to improve IRS notices, such as “math error” or “clerical error” notices, by specifying the line item, code section, and nature of the error, helping taxpayers understand and verify changes made to their returns.  

Streamlined Supervisory Review 

The bill proposes streamlining processes that typically require supervisory review. For example, under current procedures, the IRS Office of Chief Counsel is required to review and provide legal opinions for every Offer in Compromise (OIC) where the amount at issue exceeds $50,000, even though few of these cases present significant legal issues. The bill would remove this level of supervision for most cases and require a legal opinion only when there are significant legal issues.  

Additionally, the bill clarifies when supervisory review is needed for imposing penalties or multi-year bans on credits, requiring the review to occur before the IRS issues a notice of intent to apply a penalty.  

Simplified FBAR Compliance  

U.S. persons who maintain foreign bank accounts are required to report these accounts to the Financial Crimes Enforcement Network (FinCEN) by filing a Foreign Bank Account Report (FBAR). FBARs must be filed with FinCEN, but other forms, including those that also require disclosure of foreign financial assets, must be filed with the IRS.  

The bill seeks to reduce confusion and burden by allowing such persons to file the FBAR with their IRS tax returns. It also requires the government to study methods by which they can reduce the costs associated with compliance for low- and moderate-income taxpayers living abroad. 

Expanded Tax Court Jurisdiction  

The bill proposes expanding the Tax Court’s jurisdiction to include suits for refunds or credits, making refund litigation more accessible to low- and moderate-income taxpayers. Currently, these cases must go to Federal Court, which is more costly.  

The Tax Court’s jurisdiction over collection due process (CDP) cases would also be expanded to:  

1. Waive the 30-day deadline for filing a petition in a collection due process (CDP) case,  
2. Hear challenges to an IRS-determined liability in a CDP case where a taxpayer has not had a prior opportunity to dispute the underlying liability in Tax Court, and  
3. Order refund or credit in a CDP case where the underlying liability is in issue so that taxpayers are not forced to file multiple causes of action to obtain a refund.  

Additionally, the bill would give the Tax Court discretion to reopen cases with a “final determination” when justice requires, such as in cases of mistakes, newly discovered evidence, or fraud.  

Expanded Access to the Independent Office of Appeals  

The IRS Independent Office of Appeals (Appeals) aims to resolve tax controversies without litigation by considering the potential outcomes of court cases. This can lead to partial or full relief for taxpayers, saving both parties from litigation. However, Appeals currently relies on the IRS Office of Chief Counsel for legal analysis, which can impair efficiency. The bill proposes allowing Appeals to hire its own team of attorneys.  

The bill also seeks to expand access to Appeals by codifying and limiting exceptions to specific situations where:  

• Disputes do not involve tax liability.  
• The taxpayer challenges the constitutionality of the Internal Revenue Code and its associated Regulations.  
• Issues were already resolved with a closing agreement.  
• The taxpayer’s position is deemed frivolous.  

Scene 3: Chances of Enactment 

The announcement of this bill as a discussion draft is a strong signal of bipartisan support. However, the bipartisan nature of the bill does not guarantee it will become law. Congress is currently navigating a difficult path, with high stakes tax legislation front and center of the current administration’s legislative agenda. This bill is most likely to be attached to either a larger spending bill (which would likely put its timeline for passage sometime in the latter half of the year) or as part of the anticipated reconciliation tax bill. The bipartisan support will boost the bill’s chances of becoming law, but the current focus on reduction of government spending, along with concerns about the costs of the tax legislation, may ultimately end up sinking it. 

The EisnerAmper Tax Controversy team is experienced in helping clients navigate the complexities of dealing with the IRS. Reach out to us for assistance.