Taxpayer First Act - IRS Modernization

Management of IRS information technology (Section 2101)

This provision has multiple sections with specific requirements for the IRS information technology (IT) organization. First, the IRS Commissioner must appoint an IRS Chief Information Officer (CIO), a position currently occupied by an acting CIO. The IRS CIO is responsible for developing, implementing and maintaining IT systems for the IRS, as well as ensuring that technology is secure and integrated with IRS systems. The CIO must maintain operational control of all IRS technology and act as the chief advocate for the agency's technology needs, while also consulting with the Chief Procurement Officer on significant technology acquisitions.

Another section of this provision requires the CIO to develop and implement a multiyear strategic plan for the IRS' information technology. This plan must be reviewed and updated annually. Recognizing the significance of Enterprise Case Management and the Customer Account Data Engine 2 program, which is designed to replace the core components of one of the agency's major legacy systems, the law also requires independent verification and validation of these project plans.

Internet platform for Form 1099 filings (Section 2102)

The Act requires IRS to develop an Internet portal by January 1, 2023 that allows taxpayers to electronically file Forms 1099. The portal is to be modeled after a Social Security Administration (SSA) system that allows employers to file Forms W-2 with SSA. The website will provide taxpayers with IRS resources and guidance, and allow them to prepare, file and distribute Forms 1099, and create and maintain tax records.

Streamlined Critical Pay Authority (Section 2103)

The Act reauthorizes streamlined critical pay (SCP) authority for IRS with respect to IT positions. This authority ends on Sept. 30, 2025. The SCP authority gives IRS a management tool to quickly recruit and retain employees with high levels of expertise in technical or professional fields that are critical to the success of IRS's restructuring efforts. The authority was originally authorized for ten years and extended twice.

Disclosures for third-party income verification (Section 2201)

The Act requires IRS to develop an automated system to receive third-party income verification forms. This system would replace the current system, which relies on secure fax.

Also, the provision authorizes IRS to charge a separate user fee on all Income Verification Express Services (IVES) requests over a two-year period to fund the development of the new system.

Electronic filing of returns (Section 2301)

Prior law prohibited any requirement that persons who file fewer than 250 returns during a calendar year do so electronically. Under the Act, the 250 is reduced to 100 in calendar year 2021, and from 100 to 10 after 2021.

In the case of a partnership, the number will be 200 for calendar year 2018, 150 for calendar year 2019, 100 for calendar year 2020, and 50 for calendar year 2021.

The Act also authorizes IRS to waive the requirement that a tax return preparer must file electronically. A preparer may apply for a waiver and demonstrate that their inability to file electronically is due to lack of internet availability (other than dial-up or satellite service) in the geographic location where the return preparation business is operated.

Resources:

• National Taxpayer Advocate Blog: Highlights of the Taxpayer First Act and Its Impact on TAS and Taxpayer Rights

Electronic signatures by taxpayers to authorize action by their practitioner (Section 2302)

The Act requires IRS to publish guidance to establish uniform standards and procedures for the acceptance of taxpayers' electronic signatures, which are meant to authorize disclosure to a practitioner or for any power of attorney granted by a taxpayer to a practitioner.

Payment of taxes by debit and credit cards (Section 2303)

Under prior law, IRS was prohibited from directly accepting credit and debit card payments for taxes due to a restriction on paying card issuer fees. IRS instead used a third-party processor to accept credit and debit card payments.

The Act enables IRS to directly accept credit, debit, or charge cards for the payment of income taxes provided that the fee is paid by the taxpayer.

Authentication of users of IRS e-Services accounts (Section 2304)

The Act requires IRS to verify the identity of any individual opening an e-Services account before he or she is able to use the service.

Repeal of requirements regarding return-free tax system (Section 2401)

The Act repeals a provision in Restructuring and Reform Act of 1998 legislation that requires IRS to study the possibility of implementing a return-free tax system for tax years beginning after 2007.​​​​​​