Senate committee passes Taxpayer Assistance and Service Act

The Senate Finance Committee voted nearly unanimously Thursday to approve a wide-ranging bipartisan tax administration bill known as the Taxpayer Assistance and Service Act aimed at improving operations at the Internal Revenue Service, making the IRS more responsive to frustrated taxpayers, and cracking down on rogue tax preparers with higher penalties.

The committee previewed the sprawling legislation earlier this week ahead of Thursday's markup session, and the only major change was an amendment introduced by Senate Democrats that would have barred the IRS from entering into audit immunity agreements with presidents like the recent one with President Trump and his family and businesses. That amendment was defeated by a party line vote of 14 to 13. Sen. Elizabeth Warren, D-Massachusetts, had also planned to introduce an amendment reviving the IRS's Direct File free tax-filing system after it was terminated last November. But she decided not to ask for a moment that amendment at the urging of the top Democrat on the committee, ranking member Sen. Ron Wyden, D-Oregon, but they plan to reintroduce it next year when they hope to be able to pass it on a bipartisan basis.

"I hope that this committee next year will work in a bipartisan way to get Direct File," said Wyden. "It's the right thing to do. Most of the Western industrialized nations are doing it, and let's figure out a way to get it done next year."

Warren also noted that the IRS MATH Act, which she had introduced with Sen. Bill Cassidy, R-Louisiana, was part of the original bill, but passed separately and was signed into law last year.

Wyden worked with Senate Finance Committee chairman Mike Crapo, R-Idaho, to introduce a discussion draft of the TAS Act in January 2025 on a bipartisan basis. The wide-ranging bill includes over 60 provisions aimed at improving the taxpayer experience. 

"This bipartisan bill modernizes and streamlines IRS operations, strengthens taxpayer rights and delivers a more taxpayer-first system," Crapo said in his opening statement. "It reflects years of bipartisan efforts to translate stories of casework frustrations into tangible fixes designed to make the IRS work more efficiently for the American people. Thank you to Ranking Member Wyden for his partnership in shaping this legislation and to the members of this Committee on both sides of the aisle who shared their ideas and proposals, many of which are incorporated in the bill before us."

He credited various senators from both sides of the aisle with contributing various provisions.

"Senators Young, Warnock, Cassidy and Warner championed provisions to improve IRS customer service by requiring the IRS to expand scanning paper-filed tax returns, online accounts and communication tools, including online dashboards and callback technology," said Crapo. "These reforms would slash wait times for Americans who often otherwise wait weeks for mail or spend an afternoon on hold. Senators Blackburn and Cortez Masto spearheaded a provision to protect taxpayers from penalties due to IRS delays in electronic filing by extending the statutory mailbox rule to electronic submissions and payments. This change would treat a return or payment electronically sent on the due date as timely, just as it is for paper sent through the mail.

"Senators Scott and Hassan led provisions to strengthen fair judicial review by clarifying the Tax Court's limited authority to grant relief from final decisions and allowing courts to consider all relevant evidence in innocent spouse cases," he continued. "Senators Grassley and Wyden drafted provisions that would strengthen the IRS whistleblower program.

"Senator Barrasso is driving a provision that protects taxpayers' rights by requiring the IRS to notify taxpayers before the agency contacts third parties to obtain information regarding the taxpayer," Crapo added. "Senator Marshall is heading a provision that unlocks low-income taxpayer clinic funding, providing key resources for low-income taxpayers. And Senators Cornyn and Luján led a provision expanding access to the Tax Court's Small Case Procedure, which would give more taxpayers a streamlined and affordable forum for resolving tax disputes with the IRS.

"In addition, Senators Thune, Lankford, and Daines have led amendments that have been adopted in the modified mark before us today," he said. "Senator Thune's amendment extends key tax deadlines for farmers and fishermen. Senator Lankford's amendment clarifies a tax-exempt organization's right to appeal adverse rulings of status to the IRS's office of appeals. 

"Lastly, Senator Daines championed an amendment that enhances accountability by increasing criminal and civil penalties for the unauthorized disclosure of taxpayer information while also ensuring IRS contractors who willfully cause data breaches are appropriately penalized," Crapo said. "These are just a sample of the many practical taxpayer-focused reforms included in the TAS Act."

An amendment, offered by Sen. James Lankford, R-Oklahoma, and Raphael Warnock, D-Georgia, would protect due process for nonprofit organizations by explicitly adding "determinations of tax-exempt status" to the list of situations under which taxpayers have a right to appeal and requiring that notice of this right is provided. The amendment was incorporated without objection into the bill.

Crapo noted that the bill has drawn support from the National Taxpayer Advocate, who issued a statement after the bill was reported out of the committee by a nearly unanimous vote of 26 to 1.

"I want to thank Chairman Mike Crapo, Ranking Member Ron Wyden, the members of the Senate Finance Committee, and their staffs for the considerable work they put into developing, refining, and advancing this important and comprehensive tax administration legislation," said National Taxpayer Advocate Erin Collins in a statement. "With more than 60 provisions, the TAS Act would go a long way toward better protecting taxpayer rights, reducing unnecessary burdens, and improving the tax administration process for millions of taxpayers. Each of these measures addresses a distinct issue. Together, they make far-reaching practical and common-sense improvements that would help the IRS better serve taxpayers."

AICPA support

The American Institute of CPAs also expressed its support for the bill.

"The TAS Act represents an important step towards creating a more effective and taxpayer-focused tax administration system," said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement. "This bill includes provisions that will strengthen taxpayer support while also helping ensure paid tax preparers meet minimal ethical and professional standards that reinforce Americans' trust in our profession and in the tax system. While we are disappointed that some important tax provisions were not included, particularly the SAFE Act, we will continue to work with members of Congress to support common-sense solutions and remain hopeful that these provisions will be addressed in future legislation. We are grateful to members of Congress for their leadership and we support continued progress on the TAS Act and future tax legislation."

The AICPA has advocated for the Survivors Assistance for Fear-free and Easy Tax Filing Act of 2025 (SAFE Act), introduced by Sen. John Fetterman, D-Pennsylvania, which would allow survivors of domestic abuse or spousal abandonment to file their taxes as if they were not married. However, it was apparently left out of the latest version of the bill passed by the committee.

The bill would also crack down on unlicensed tax preparers and ghost preparers, as well as require continuing education for uncredentialed preparers. 

"One of the most absurd aspects of the Tax Code is that its complexity forces millions of Americans to turn to paid tax return preparers every year, and this is part of the concern that we have about two tax systems: one for working people, one for the ultra wealthy," said Wyden. "Unlike the ultra wealthy, most people can't afford to hire armies of accountants and lawyers to navigate the system. There isn't a single law on the books to ensure that these paid preparers actually know what they are doing and following the law, and we're now making a bipartisan effort to change that. The results in many of these prep services is you've got something that's not worth the paper it's written on. Oftentimes, returns get filed late or incorrectly. The worst part is taxpayers might not even realize they've been ripped off until it's way late. Then the next thing you know, you're being hit by a costly and time-consuming audit. This bill takes important steps to crack down on these shady tax prep schemes that prey on families that are making a quick buck. Millions of Americans struggle right now to afford the skyrocketing cost of rent, gas and groceries. The last thing they need is to be hit by costless fees and penalties by the IRS."

Getting over the finish line

Tom Barthold, chief of staff of Congress's Joint Committee on Taxation, described two modifications and six additions to the Chairman's Mark of the legislation that was released earlier this week.

"The first modification clarifies and expands the definition of electronic filing identification numbers," said Barthold. "The second modification clarifies the right of the appeal that is established in the underlying mark that it is also generally available with respect to determinations to deny or revoke tax-exempt status. The additions to the mark, as made by the modification, the first is under present law there are special rules and dates for farmers and fishermen. It extends those dates from March 1 under present law and would establish an April 15 date. The second addition requires the [Treasury] secretary to report the IRS's practices for taxpayer document tracking, so that the committee can learn and hopefully make improvements in that area. The third addition accelerates the filing dates for information returns that the IRS receives of returns that the taxpayer already has received. These information returns are with respect to dividends, interest, retirement plan distributions, IRA distributions, certain miscellaneous payments, Social Security and Railroad Retirement Fund distributions, and payments made under third-party network payments. The fourth addition increases the criminal and civil penalties for unauthorized disclosure, extending it to contracts. The fifth addition relates to individuals who file a broad clarifying IRS authority with respect to assessment of penalties and establishes new procedures to ensure pre-assessment review. And the final addition made by the chairman's modification is to establish within the IRS a business childcare liaison, the general purpose of which is to foster increased employer-provided childcare facilities, legalizing the benefits provided under the Code."

It's unclear whether the House will take up the bill. The House Ways and Means Committee has been taking more of a piecemeal approach, approving eight separate tax administration bills earlier this month. 

"It is especially encouraging that virtually all these bills have advanced with strong bipartisan support," said Collins. "Tax administration may not always attract headlines, but it profoundly affects nearly every individual, family, and business in the country. But important work lies ahead to get this legislation across the finish line. If the House and Senate can pass the TAS Act this year, it will be a tremendous gift from the 119th Congress to America's taxpayers."

At least one observer foresees obstacles in getting the bill over the finish line before the end of the congressional term. "This vote is a big win for taxpayers," said Glen Frost, founding partner of Frost Law, in a statement. "The bill is packed with common-sense proposals that can help individuals, businesses, and the entire tax community as well as tax administration work inside the IRS and at the Tax Court. It's heartening to see bipartisan support for this proposal in the Senate. Several of these provisions have similar widespread support in the House. But the legislative calendar remains an obstacle. We hope there is a way to find time to get these concepts across the finish line before this session of Congress ends."

Summary of provisions

Here is a summary of the various provisions, prepared with the help of Google's Gemini Notebook:

TITLE I—TAX ADMINISTRATION AND CUSTOMER SERVICE

• Scanning and Digitization: Mandates barcode scanning technology for electronically prepared returns printed on paper. Manually prepared paper returns and other paper correspondence must be processed using optical character recognition (OCR) or similar technology to automate transcription.
• Taxpayer Backlog Dashboard: Establishes a weekly dashboard on the public IRS website when there are "significant delays". A significant delay is defined as failing to process items within 21 days or failing to answer 30% of toll-free calls in a week. The dashboard must show average processing times and detailed phone wait statistics (median times, shortest wait hours, and callback metrics).
• Individualized Online Portals: Instructs the IRS to offer up-to-date, individualized details via websites or mobile apps tracking return processing milestones, expected refund dates, or reasons and requirements for suspended processing.
• Callback Services & Account Viewing: Requires the IRS to employ callback options for toll-free lines if wait times exceed 10 minutes. Taxpayers must be allowed to view 6 years of filings/correspondence online, upload replies directly, and permit tax representatives to seamlessly access multiple client accounts.
• Improved Error Notices: Requires mathematical or clerical error notices to explain the error in comprehensive, plain language, itemize adjustments, provide a transcript helpline, and display the deadline to request an abatement in bold, 14-point font next to the address on page one.

• Low-Income & Hardship Protections:

  • Refund Offset Bypass: Automatically bypasses federal refund offsets for low-income individuals qualifying for the Earned Income Tax Credit (EITC).
  • Fee Waivers: Waives installment agreement fees for taxpayers below 250% of the poverty level or those paying electronically.
  • Proactive Collection Alternatives: Proactively identifies individuals likely facing economic hardship to present alternative payment options like partial collection, offers-in-compromise (OIC), or "currently not collectible" status.
• State-Declared Disasters: Empowers the IRS to apply federal disaster extension rules to qualified State-declared disasters upon the written request of a Governor or the Mayor of D.C., extending mandatory filing and payment deadlines to 120 days (up from 60).
• Supervisory Approval for Penalties: Prohibits assessing penalties or applying disallowance periods unless personally approved in writing by the employee's immediate supervisor prior to sending a notice to the taxpayer.

TITLE II—AMERICAN CITIZENS ABROAD

• Combined Reporting: Integrates Foreign Bank and Financial Account (FBAR) reporting with the annual federal income tax return, treating them as timely filed if the main tax return is on time.
• GAO Study on Compliance Burdens: Directs the Comptroller General to study and report on tax compliance difficulties encountered by US citizens living abroad, particularly low- and moderate-income individuals.

• Foreign Currency Transaction Rules:

  • Increases the personal transaction exchange exclusion threshold from $200 to $1,000 (adjusted for inflation).
  • Allows taxpayers to recognize foreign currency losses on qualified mortgages securing an overseas residence (only up to the gain recognized on the home sale) and vice versa.
  • Establishes an election allowing qualified expats to aggregate foreign income/expenses and use annual average exchange rates.
• Low-Income Dual Citizens: Minimizes reporting and tax certification burdens for low-income, dual-citizen expatriates who have limited connections to the US and minimal unpaid tax liability.

TITLE III—JUDICIAL REVIEW

• Pre-Hearing Subpoenas: Grants Tax Court judges and special trial judges the authority to issue subpoenas and examine witnesses/documents before hearings to facilitate discovery and settlements.
• Relief from Judgments: Confirms that the Tax Court can correct clerical errors and relieve a party from a final judgment on grounds such as mistake, surprise, newly discovered evidence, fraud, or void judgments.
• Special Trial Judges & Disqualification: Authorizes special trial judges to hear additional cases with party consent, punishes contempt up to Class C misdemeanor caps, and formally applies federal judicial disqualification rules (28 U.S.C. 455) to the Tax Court.
• Multi-Year Credit Claiming Bans: Establishes specific notice requirements when a taxpayer's Child Tax Credit, American Opportunity Tax Credit, or EITC is denied under a multi-year ban. It explicitly grants the Tax Court jurisdiction to review and redetermine whether these disallowance periods were properly imposed.
• Equitable Tolling: Clarifies that the Tax Court has jurisdiction to apply equitable tolling for filing petitions based on equity, specifically mandating a 14-day tolling extension if physical or online filing locations are inaccessible (e.g., due to government shutdowns).
• Refund Jurisdiction: Broadens the Tax Court's jurisdiction, allowing it to determine tax liabilities and issue refunds/credits during collection due process (CDP) cases. It also establishes concurrent jurisdiction with federal district courts to hear general suits for refunds or credits.
• Unpaid Tax Claims: Allows the Tax Court, district courts, and Court of Federal Claims to retain jurisdiction over tax liability disputes even if the tax is not fully paid, provided the taxpayer is compliant with an active installment agreement or is in "currently not collectible" status.

TITLE IV—OFFICE OF THE TAXPAYER ADVOCATE

• Direct Hire Authority: Permits the National Taxpayer Advocate (NTA) to independently recruit and appoint legal counsel who report directly to the NTA instead of the IRS Chief Counsel.
• Swift Access to IRS Information: Mandates that the IRS Commissioner provide the NTA with access to necessary taxpayer returns, Chief Counsel legal advice, and taxpayer-IRS meetings within 2 weeks of a request. Any failure to provide access must be flagged in annual congressional reports.
• Government Shutdown Support: Authorizes the Commissioner and NTA to incur obligations during a lapse in appropriations to assist taxpayers facing economic hardship from IRS action/inaction.

TITLE V—TAX RETURN PREPARERS

• PTIN Suitability & Education: Formally establishes strict suitability background checks (including personal tax compliance) and continuing education requirements (up to 18 hours on ethics and tax law) for paid preparers seeking a Preparer Tax Identification Number (PTIN).
• PTIN Suspension & Penalties: Gives the IRS power to suspend or revoke PTINs for incompetence, disreputable conduct, fraud, or tax noncompliance, and impose monetary penalties of up to $1,000 (or $5,000 for fraud).
• PTIN Evasion Felony: Makes the willful misuse, misappropriation, or evasion of PTIN requirements a felony punishable by a fine of up to $50,000 ($100,000 for corporations), up to 2 years of imprisonment, or both.
• Misappropriation of Refunds: Increases penalties for paid preparers who improperly endorse or negotiate refund checks, or misappropriate direct deposit electronic refunds, to the greater of $1,000 or the full amount of the refund.

TITLE VI—APPEALS

• Independent Office of Appeals Counsel: Grants Appeals the authority to directly hire its own counsel who report to the Chief of Appeals rather than the IRS Chief Counsel.
• Refund Timelines & Explanations: IRS must review and determine refund claims within 36 months. Disallowed claims must receive a detailed written explanation. Delays past the deadline trigger an overpayment interest rate penalty on the IRS of 1 additional percentage point, capped at $1,000.
• Hazards of Litigation: Mandates that Appeals evaluates and considers all "hazards of litigation" in resolving cases referred to them.
• Right of Appeal: Clarifies that the appeals process must be available to all taxpayers regarding liabilities, penalties, or additions to tax, barring a few specific exceptions (such as constitutional challenges or active criminal referrals).

TITLE VII—WHISTLEBLOWERS

• De Novo Tax Court Review: Clarifies that Tax Court reviews of whistleblower award determinations must be de novo, utilizing the original administrative record and newly discovered or previously unavailable evidence.
• Sequestration Protection: Exempts whistleblower awards from reduction under federal sequestration orders.
• Anonymity in Proceedings: Whistleblowers shall proceed anonymously before the Tax Court unless the court determines a heightened societal interest outweighs potential harm to the whistleblower.
• Interest on Delayed Awards: Mandates that if the IRS fails to provide a preliminary award notice within 12 months after all proceeds are collected and liabilities are resolved, interest will accrue at the standard overpayment rate.
• Strict Return Confidentiality: Prohibits whistleblowers and their counsel from redisclosing a taxpayer's confidential return information received during proceedings, backed by felony criminal penalties for willful violations.

TITLE VIII—HOSTAGES

• Tax Postponement: Suspends all federal tax deadlines, interest accruals, penalties, and additions to tax for US nationals unlawfully or wrongfully detained abroad or held hostage, as well as their spouses.
• Refund & Abatement Program: Directs the IRS, State Department, and Justice Department to run a program to refund or abate interest and penalties collected from eligible hostages and wrongful detainees dating back to January 1, 2021.

TITLE IX—SMALL BUSINESSES

• Voluntary Contractor Withholding: Permits voluntary tax withholding agreements on non-wage payments made to independent contractors.
• S Corporation Election Extension: Extends the time small business corporations have to make S-corp elections to the due date of the return itself, including extensions.
• Quarterly Estimated Payment Changes: Aligns installment dates by moving estimated tax payment deadlines from June 15 to July 15, and from September 15 to October 15.
• Failure-to-Pay Safe Harbor: Waives failure-to-pay penalties for individuals who timely pay 125% of their preceding year's income tax liability.
• Mailbox Rule for Electronic Filings: Formally extends the physical "mailbox rule" to electronic submissions and electronic payments, treating the electronic transmission date as the filing/payment date.
• Third-Party Contact Notice Specificity: IRS must identify the exact items of information they seek from third parties and provide taxpayers with a minimum of 45 days to resolve the request independently before contacting third parties.

TITLE X—MISCELLANEOUS

• CBO Loan Data Access: Authorizes the redisclosure of specific education loan tax information to CBO employees to assist with official budgetary cost projections.
• Magnetic Media for Large Partnerships: Mandates electronic (magnetic media) filing for partnerships with over 100 partners, and authorizes the requirement for partnerships with assets/income exceeding $10 million in the preceding three years.
• Employment Tax Penalty: Extends Section 6676 penalties to erroneous refund or credit claims relating to employment taxes.