Committee on Ways and Means

For Immediate Release
Contact: Press Office 202-225-8933
April 10, 2002

Thomas Blasts Democrats for Opposing Important Taxpayer Protections and IRS Improvements

WASHINGTON -Ways and Means Committee Chairman Bill Thomas (R-CA) today criticized House Democrats who opposed important taxpayer protections and improvements in the operations of the Internal Revenue Service.

“With tax-filing day coming in less than a week, Democrats said ‘No’ to improving conditions for hard-working taxpayers,” said Thomas. “They said ‘No’ to allowing the IRS to waive penalties for taxpayers making innocent mistakes, and they rejected increased confidentiality of taxpayer records. Democrats voted against making browsing of taxpayer records by IRS employees a potential cause for termination, and they opposed an increase in funding for low-income taxpayer clinics.”

The bill, opposed by 193 Democrats, added over 30 important changes to IRS practices. More information on HR 3991, the Taxpayer Protection and IRS Accountability Act of 2002, will follow.

Committee on Ways and Means
Subcommittee on Oversight

TAXPAYER PROTECTION AND IRS ACCOUNTABILITY ACT

KEY THEMES:

  • The Taxpayer Protection and IRS Accountability Act of 2002 - would take concrete steps to refine the role of the IRS in administering the nation’s tax laws, ensuring that in all its activities it fully embraces the concepts of fairness, efficiency, and confidentiality.
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    SPECIFIC EXAMPLES OF HOW THE BILL HELPS TAXPAYERS:

    TAXPAYER PRIVACY/CONFIDENTIALITY
  • Tax records contain considerable sensitive financial and personal information. That means that no one - not even IRS employees - should be allowed to see them without a good business reason.
  • Under the bill’s provisions, unauthorized browsing of taxpayer records would be considered one of the “ten deadly sins” that can lead to dismissal for IRS employees.
  • Coupled with improvements in IRS staff behavior, this will help prevent violations of taxpayer privacy. Similarly, limiting IRS inspections of tax prepares based on taxpayer examinations will also help protect the privacy of taxpayer information.
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    DEADLINE EXTENSION FOR E-FILERS
  • Broader use of E-filing will allow the IRS to more efficiently and more cheaply process income tax returns.
  • By extending the filing deadline 15 days (until April 30), taxpayers will be given an incentive to E-File.

    • REFORMING PENALTIES
  • · Allows taxpayers -- that would otherwise pay nothing -- to settle their debts with the IRS over a period of time without being forced to pay the entire amount. This partial pay installment plan brings common sense to the collection process.
  • We reduce the federal tax deposit avoidance penalty from 10% to 2% in certain cases. For example, if a small business is unable to make a deposit at their bank, but they personally take their $2,000 deposit into the local IRS office and pay in full on the due date, right now they are charged $200 because they are not making the deposit through the authorized depository - the bank. Even the IRS thinks the penalty is too much.
  • We allow the IRS to waive unfair penalties for honest taxpayers who make innocent mistakes. For example, a taxpayer mails his return on April 15 with a check for $200,000 - the balance due. He mistakenly puts on only $1.40 in postage rather than $1.50. Instead of the taxpayer being assessed a $10,000 failure to file penalty, the IRS could waive penalties for taxpayers having a good history of tax compliance.
  • When the IRS makes an error and imposes a levy on a taxpayer, right now they have only a short time limit during which they can provide relief to the taxpayer. This is especially unfair if IRS levies against a taxpayer’s retirement account. For example, the IRS misapplies a tax payment and, consequently imposes a levy on a taxpayer's IRA account of $25,000. The IRS later realized its mistake, but is unable to restore the IRA balance. The taxpayer is not only required to include $25,000 in income during the levy year, but must pay a penalty for the early distribution of the IRS. The bill requires the IRS to extend the time limit for taxpayers to contest levies and provides relief to taxpayers whose retirement accounts were affected.
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    LOW INCOME TAXPAYER CLINICS
  • We increase funds for Low Income Taxpayer Clinics to provide legal assistance to citizens involved in disputes with the IRS, as well as offering help to individuals for whom English is a second language to understand their tax rights. This authorization would increase to $9 million for 2002, $12 million for 2003 and $15 million for 2004.
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