Hello, and thank you for inviting me into the Lounge, in spite of my warning that doing so would subject your readers to some posts about tax policy. To introduce myself, I direct the Philip C. Cook Low-Income Taxpayer Clinic at Georgia State University College of Law, where I also teach doctrinal tax courses and conduct research in a variety of areas of tax policy, particularly in areas in which the tax system intersects with the economically vulnerable. Talking tax to a generalist audience can sometimes be fraught, but I think now is actually a great time for it. This is because of some recent proposed legislation that could have a sweeping effect on tax administration if enacted, particularly with regard to whether the IRS is fulfilling its role in protecting taxpayer rights. The Taxpayer Assistance and Service Act is a sweeping legislative discussion draft coming out of the Senate Finance Committee that is aimed at modernizing and improving the efficiency of the Internal Revenue Service (IRS). The act introduces key reforms to streamline tax processing, enhance taxpayer services, and provide better assistance to individuals facing financial hardship. While there’s a lot more in this act than can be covered fully in a short visiting stint in the Lounge, I want to use my time to dive into a few provisions to illustrate how in particular they can impact the lives of the most economically vulnerable (i.e., the taxpayers who typically are represented in low-income taxpayer clinics). For this first post, however, I thought it would be useful to provide a general overview of the Act and to discuss some initial reactions to it from both the current and former National Taxpayer Advocate.
One of the biggest pain points for taxpayers is dealing with IRS delays and inefficiencies that have only gotten worse in recent years as the IRS faces the challenge of fulfilling its dual mission of enforcement and service while being constantly under budget pressure and with some of the most outdated computer systems in the federal government. The Act seeks to reduce these inefficiencies by requiring the IRS to scan and digitize paper-filed tax returns, reducing processing backlogs caused by manual data entry. Additionally, taxpayers will soon have access to an online dashboard that provides real-time updates on IRS backlogs and estimated phone wait times, making it easier to track their filings and refunds. To further improve transparency, the IRS’s online refund tracking tool will be upgraded to provide more detailed and personalized updates on refund status.
The Act also prioritizes better communication and support for taxpayers, ensuring they receive timely and clear information. IRS phone lines will now include callback options, reducing the frustration of long hold times. Additionally, taxpayers will be able to view images of their tax returns, notices, and other IRS communications through their online accounts. To prevent confusion and unnecessary delays, the IRS will be required to provide detailed explanations when adjusting a return due to a math or clerical error, including the relevant tax code section and a clearly stated response deadline.
Many Americans struggle to pay their taxes, and the IRS’s collection process can sometimes worsen financial difficulties. The Act introduces several taxpayer-friendly changes to mitigate these challenges. Those eligible for the Earned Income Tax Credit (EITC) will automatically have certain refund offsets bypassed to avoid economic hardship. Additionally, low-income taxpayers setting up installment agreements to pay their taxes over time will have their fees eliminated. Instead of receiving only one notice per year, taxpayers with outstanding balances will now receive quarterly updates, helping them stay informed about their obligations.
Another important component of the Act is the increased funding for Low-Income Taxpayer Clinics (LITCs), which assist individuals who cannot afford legal representation in tax disputes. The previous funding cap of $6 million per year and $100,000 per clinic is removed and more flexibility about matching requirements is added, allowing more taxpayers to access these essential services. For taxpayers facing legal disputes, the Act introduces several measures to streamline judicial processes. The Tax Court will now be able to issue subpoenas before a trial, helping resolve cases faster. To ensure fair treatment, the IRS will be required to obtain supervisory approval before imposing multi-year bans on claiming tax credits. Additionally, whistleblower protections will be strengthened, allowing those reporting tax fraud to remain anonymous while receiving clearer guidelines on award eligibility.
For U.S. citizens living overseas, the Act aims to reduce the tax-filing burden by simplifying foreign bank account reporting and adjusting currency exchange rules that affect tax calculations. Foreign tax credit reporting thresholds will also be raised, making compliance less complicated for expatriates. The Act also provides significant benefits for small business owners and freelancers. Small businesses will now have more time to opt for S-corp tax treatment. Estimated tax due dates will be adjusted to fall at even three-month intervals to align with true quarters. Additionally, a new option will allow businesses and freelancers to voluntarily withhold taxes, helping them avoid large year-end tax bills.
The National Taxpayer Advocate has expressed strong support for the Act, highlighting it as one of the most significant pieces of taxpayer rights legislation in recent history. Notably, about 40 of the 68 provisions in the Act directly stem from recommendations made by the Advocate’s office. In a public statement, the Advocate emphasized that tax administration often takes a backseat to tax policy in legislative discussions, yet it is the area where taxpayers most acutely experience the IRS’s effectiveness—or lack thereof. The Act seeks to address many of the procedural hurdles that taxpayers face when trying to resolve issues, from obtaining refunds to navigating IRS notices and appeals. The Advocate also commended the bill’s emphasis on improving customer service, reducing processing delays, and ensuring that taxpayers have a clear and accessible path to resolving disputes. While acknowledging that the legislative process remains complex and that modifications to the Act are likely, the National Taxpayer Advocate has encouraged lawmakers to prioritize its passage to create a fairer, more transparent, and more taxpayer-friendly IRS.
Former National Taxpayer Advocate Nina Olson, now Executive Director of the Center for Taxpayer Rights, has also weighed in on the Act, calling it a significant achievement for taxpayer rights. She emphasized that taxpayer rights protections often require a long legislative gestation period, but the Act represents meaningful progress in strengthening these rights. While celebrating the bipartisan nature of the legislation, Olson acknowledged that compromises were made and that some provisions could be stronger. She encouraged lawmakers and tax professionals to review the bill carefully and provide feedback to ensure it fully meets the needs of taxpayers. Olson also highlighted concerns regarding certain procedural deadlines, arguing that additional extensions for taxpayers—particularly those living abroad—would further align the bill with principles of fairness and accessibility. Despite these critiques, Olson ultimately views the Act as a strong foundation that, if passed, would be a critical step toward improving IRS administration and protecting taxpayer rights.
So, that’s the 30,000 foot overview. There’s a lot in this Act that is deserving of comment and many more proposals than I’ve mentioned in this post. Most importantly, much of this does not involve technical aspects of tax law that only specialists can understand—rather, it involves the aspects of tax administration that impact all of us regularly. There will be a lot of discussion of this Act in the weeks and months ahead, and that discussion should not be confined solely to the tax bar. There is a lot of potential here to not only to better safeguard the rights of all taxpayers but specifically to improve access to justice for the most vulnerable. In the remainder of my posts, I’ll look at a few of the proposals in Act in detail to explain how enhancing digital services, improving customer support, enhancing low-income taxpayer clinics, and offering relief to those facing financial hardship has the potential to enable the tax system to be more socially just, particularly as it applies to the most vulnerable among us.
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