Tax measure would add IRS services, court options, and targeted help

The IRS would digitize paper returns and letters and provide online tools for taxpayers. Taxpayers could view returns and IRS letters, send responses online, and let authorized representatives, preparers, or reporting agents access information with their permission. The IRS may skip a paper-digitizing method if it finds the method slower or less reliable than alternatives; it must report that finding to Congress. The paper-digitizing rules apply on different schedules: individual income returns begin in the first calendar year starting more than 180 days after enactment; estate and gift returns, after 24 months; and other returns and letters, after 18 months. The online account tools are due more than 18 months after enactment; the public wait-time dashboard applies after 12 months.

Taxpayers could seek review in the Tax Court and other courts in more situations. The court provisions cover taxpayers disputing certain tax bills, credit bans, collection actions, or refunds, with different rules for each type of case. A person may challenge a multi-year ban on certain child, education, or earned-income credits in the Tax Court. Refund lawsuits in the Tax Court would be limited to claims of no more than $2 million; small-dispute procedures would cover refund claims up to $50,000. Some filing deadlines could be excused for reasons such as waiver or a serious delay that the court accepts. These rules apply to specified cases and filings, not every tax deadline. Several court provisions apply to cases pending when enacted. The Tax Court refund-suit authority would apply to actions filed more than 12 months after enactment; the expanded small-dispute limit would apply to proceedings that start after enactment.

The Taxpayer Advocate could hire attorneys and request IRS records, legal advice, and meeting access. These provisions concern the Office of the Taxpayer Advocate and taxpayers it assists, including people facing economic hardship during a lapse in federal funding. The Advocate may request information for an open taxpayer-assistance case, for reports to Congress, or for legal advice. The IRS would generally have two weeks to provide it, unless both offices agree to another date. During a funding lapse, designated IRS workers could continue tasks needed to help taxpayers facing economic hardship caused by IRS action or inaction, or to carry out a Taxpayer Assistance Order. The IRS access rules would take effect upon enactment. The separate personnel decision provision would take effect 12 months after enactment.

The IRS could suspend or revoke some preparers’ identification numbers and impose penalties; whistleblowers could remain anonymous in Tax Court. The preparer rules cover paid tax return preparers and people who electronically file documents for others. The privacy rule covers whistleblowers in Tax Court proceedings about awards. Preparers would have to meet suitability and education requirements, unless they qualify through an approved state program or as a specified practitioner. The IRS would need to give notice and a chance for a hearing before a regular suspension or revocation; a temporary suspension would be limited to 180 days and require a risk of serious harm. A whistleblower’s identity could be disclosed only if the Tax Court finds that the public interest in disclosure outweighs potential harm to that person. Most preparer identification-number changes would take effect 180 days after enactment; some electronic filing rules apply after the IRS establishes a validation program. The whistleblower privacy rule would cover pending and newly filed cases.

The measure addresses tax deadlines for people held abroad and offers small businesses new tax and IRS support options. Other provisions address U.S. taxpayers living abroad, eligible U.S. nationals held hostage or wrongfully detained abroad and their spouses, farmers and fishers, and businesses considering employee child care benefits. The hostage and wrongful-detention rules cover U.S. nationals determined eligible under the named federal hostage laws; related relief can also apply to a spouse. Refunds under the later program would require an application and cover specified amounts tied to January 1, 2021, through enactment. Independent contractors and payers could agree to tax withholding on certain service payments. The text also provides for a business child care liaison to share information and assist employers; it does not itself grant employers a child care tax benefit. The hostage deadline rules would apply to tax years ending after enactment; the application program for certain past penalties is due by January 1, 2027. The withholding guidance is due within 18 months after enactment.