WASHINGTON, D.C. – Americans will enjoy stronger taxpayer protections and commonsense relief under four Ways and Means Committee bills approved by the U.S. House of Representatives. The legislation – all passed with strong bipartisan support – will ensure Americans who are held hostage or wrongfully detained abroad are no longer subject to tax penalties and fines from the IRS for failure to pay taxes while in captivity; provide the National Taxpayer Advocate with the authority to directly engage with a court of law to champion the interests of taxpayers when there is litigation that could have an impact on taxpayer rights; clarify that Americans should not be held liable for false or fraudulent tax returns that are filed on their behalf by so-called “ghost preparers” attempting to deceive the IRS by making it appear that the taxpayers prepared and submitted such returns themselves; and protect victims of fraud from owing taxes on their scam-related losses.

Ways and Means Committee Chairman Jason Smith (MO-08) issued the following statement on House-passage of legislation protecting and strengthening taxpayer rights:

“The basic principle of fairness demands that no American – whether they have had to endure the suffering of being held hostage abroad or been a victim of fraud here at home – should be subject to IRS tax penalties or held liable for the crimes committed against them or the losses they incurred. Thanks to the work of members of the Ways and Means Committee, Congress is now one step closer to righting these wrongs while empowering the work of the office that is solely dedicated to championing the interests of taxpayers. With the passage of these bills, we are advancing solutions that will fix failures in current law and strengthen taxpayer protections.”

End Tax Penalties on American Hostages Act (H.R. 9496)

• Under current law, the IRS can provide tax relief to some Americans who are held hostage or wrongfully detained abroad, but that authority is limited in several ways.
• In some instances, reports suggest that Americans have returned to the U.S. after being held hostage abroad only to find that they owe thousands of dollars in tax penalties and fines to the IRS.
• This critical gap in the tax code results in Americans who were held hostage or wrongfully detained abroad facing additional and onerous burdens upon returning home, due to no fault of their own.
• This billaids hostages held abroad and their families by providing the IRS with tools to ensure these American citizens and their families do not incur penalties for late tax payments due to captivity.

Read a fact sheet on the bill here.

The bill passed the Committee 40-0. 

The bill was approved by the U.S. House of Representatives by unanimous consent.

Taxpayer Advocate Participation Act (H.R. 9498)

• The National Taxpayer Advocate is currently not authorized to represent the interests of taxpayers who appear in litigated cases as an amicus curiae.
  • While trial lawyers advocate on behalf of clients to win individual cases, precedential issues that could affect all or many taxpayers sometimes come before the courts with no one representing the interests of taxpayers as a group.
• This bill protects taxpayer rights by allowing the National Taxpayer Advocate to weigh in on cases impacting taxpayers.
  • Amends the Internal Revenue Code to allow the National Taxpayer Advocate to appear as amicus curiae in any action brought in a court of the United States related to Federal tax law.

Read a fact sheet on the bill here.

The bill passed the Committee 39-0.

The bill was approved by the U.S. House of Representatives by unanimous consent.

Protecting Taxpayers from Ghost Preparers Act (H.R. 9499)

• Misconduct solely by a taxpayer’s return preparer can indefinitely suspend the assessment limitation period which is 3 years.
  • This occurs when an unlicensed tax professional refuses to sign the tax return – so called “ghost preparers” – and makes the return appear as if the taxpayer prepared it themselves.
• This bill clarifies that the exception to the general statute of limitation for fraudulent returnsapplies only when it isthe taxpayer who seeks to evade their tax obligations.

Read a fact sheet on the bill here.

The bill passed the Committee 40-0. 

The bill was approved by the U.S. House of Representatives by unanimous consent.

Tax Relief for Fraud Victims Act (H.R. 9500)

• Under current law, the deduction for personal casualty and theft losses is largely suspended, unless the loss is attributable to a federally (or in some instances, state) declared disaster.
• Many victims of private-sector fraud – like Ponzi schemes, identity theft, or investment scams – have no ability to deduct their significant financial losses, essentially taxing them on the money that was stolen from them as a result.
• This bill repeals the limitation on personal casualty losses to strike the requirement that a loss must be linked to a federally or State declared disaster.
  • Provides flexible reporting for fraud victims.
  • Extends the timeframe for victims to file claims for credits or refunds related to theft losses.
  • Provides special rules for distributions from retirement plans related to fraudulent theft losses, allowing victims to repay these distributions into an account and seek refunds for taxes previously paid on these distributions.
  • Allows fraud-related theft losses to be retroactively deductible if incurred after December 31, 2020, and distributions from qualified retirement plans made after that date are not subject to additional tax on early distributions.

Read a fact sheet on the bill here.

The bill passed the Committee 39-0. 

The bill was approved by the U.S. House of Representatives with a vote of 408-17.