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With Republicans controlling every branch of government, eliminating Internal Revenue Service (IRS) inefficiencies should be a no-brainer. Rep. Jason Smith’s (R-MO) Preserving Taxpayers’ Rights Act, H.R. 3220, will do just that. This bill eliminates wasteful tactics used in IRS audits and evaluations of tax disputes.
When the IRS notices a discrepancy between an individual’s reported income and information from third parties, it issues a notice of deficiency. A notice of deficiency indicates that the taxpayer has 90 days to either agree to a proposed increase in tax liability or appeal to resolve the discrepancy by providing previously unreported information. Far too often, appeals processes are funneled into Tax Courts rather than the IRS’s own Office of Appeals established for this precise purpose. Litigation burdens both taxpayers and the IRS with unnecessarily expensive procedures.
H.R. 3220 eliminates this tautology by establishing a legal right to have disputes heard by the IRS Office of Appeals before litigation is considered. It also creates stricter criteria for the IRS to designate cases for litigation, permitting only those involving recurrent legal abuses that impact many taxpayers, not just individual income disputes.
Another wasteful practice fixed by this bill is the use of designated summons during corporate tax audits. A designated summons forces a corporation, or relevant parties, to appear before court and provide information. When ordered, a designated summons unilaterally and indefinitely suspends an audit process. Sometimes, the IRS uses these summonses to compel information from a corporation without evidence of wrongdoing or noncompliance. An indefinitely suspended audit process can last for years. Under H.R. 3220, the IRS will only authorize designated summonses when a corporation is notably noncompliant.
Lastly, H.R. 3220 prevents the IRS from hiring outside lawyers to conduct or take testimony in a tax audit. The IRS has its own staff of government tax law attorneys for this purpose. One of the promises of the IRS Office of Appeals for deficiencies and audits is an objective and unbiased process. This is not possible when private firms, which have their own interests and clients, handle information explicitly intended for the government. H.R. 3220 rectifies this potential privacy breach.
The Preserving Taxpayers’ Rights Act is a necessary reform that eliminates government waste, defends taxpayers’ legal rights, and protects privacy. There’s no justifiable reason to oppose any of these objectives, which is why a bipartisan group of cosponsors joined Rep. Smith in introducing this bill, four Democrats and three Republicans. If members of Congress support efficiency and accountability, they must support this bill.