H.R. 5445 (115^th): 21st Century IRS Act

H.R. 5445 improves cybersecurity and taxpayer identity protection and modernizes the information technology at the Internal Revenue Service (IRS). Specifically, the legislation does the following:

Title I: Cybersecurity and Identity Protection, requires the Secretary of the Treasury to work collaboratively with the public and private sectors to protect taxpayers from identity theft refund fraud.

In addition, the title requires the Electronic Tax Administration Advisory Committee (ETAAC) to study and make recommendations to the Secretary regarding models to prevent identity theft and refund fraud and authorizes the Secretary to participate in an Information Sharing and Analysis Center (ISAC) to centralize and enhance data compilation and analysis to facilitate sharing actionable data and information with respect to identity theft and refund fraud.

The title further requires that state, local, or federal agencies to conduct on-site reviews every three years of all of its contractors and agents receiving federal returns and return information. Finally, the title requires the Secretary, in coordination with the Bureau of Fiscal Service and the IRS, to issue a report describing how new payment platforms can be utilized to increase the number of tax refunds paid by electronic funds transfer.

Title II: Development of Information Technology, requires the IRS to appoint a Chief Information Officer (CIO) for the development, implementation, and maintenance of information technology for the IRS; developing and maintaining a multi-year plan for information technology needs at the IRS; and requires the Chief Procurement Officer and the CIO to consult on the all significant technology acquisitions in excess of $1 million.

Further, Title II requires the Secretary to develop secure, individualized online accounts to provide services to taxpayers and their designated return preparers and develop a process for accepting tax forms and other supporting documentation in electronic format by December 31, 2023. Finally, the title requires the Secretary to make an internet website available by January 1, 2023 that allows for the preparation, filing, and distribution of Forms 1099 and maintains records of completed and submitted Forms 1099.

Title III: Modernization of Consent-Based Income Verification System, the Income Verification Express Services (IVES) Program requires that transcript information requests be submitted to the IRS by fax and then the transcripts are furnished electronically to a secure mailbox. Title III requires the Secretary to implement a qualified disclosure program that is fully automated, accomplished through the Internet, and through which disclosures are accomplished in as close to real-time as is practicable.

The title also provides that persons designated by the taxpayer to receive return information shall not use the information for any purpose other than the express purpose for which consent was granted, and shall not disclose return information to any other person without the express permission of, or request by, the taxpayer.

Title IV: Expanded Use of Electronic Systems relaxes the current restrictions on the authority of the Secretary to mandate electronic filing based on the number of returns required to be filed by a taxpayer in a given taxable period. First, it phases in a reduction in the threshold requirement that taxpayers have an obligation to file a specified number of returns and statements during a calendar year. Second, it authorizes the Secretary to waive the requirement that a Federal income tax return prepared by a specified tax return preparer be filed electronically if a tax return preparer applies for a waiver and demonstrates that the inability to file electronically is due to lack of internet availability.

The title also requires the Secretary to publish guidance to establish uniform standards and procedures for the acceptance of taxpayers' signatures appearing in electronic form with respect to such requests or power of attorney and removes the prohibition on paying any fees or providing any other consideration in connection with the use of credit, debit, or charge cards for the payment of income taxes.

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Apr 13, 2018.

21st Century IRS Act

This bill amends the Internal Revenue Code to establish requirements for the Internal Revenue Service (IRS) regarding cybersecurity, the protection of taxpayer identities, information technology, and electronic systems.

With respect to cybersecurity and identity protection, the bill:

requires the IRS to work with the public and private sectors to protect taxpayers from identity theft refund fraud, requires the Electronic Tax Administration Advisory Committee to make recommendations to prevent identity theft and refund fraud, authorizes the IRS to participate in an information sharing and analysis center for identity theft tax refund fraud, and prohibits the disclosure of returns or return information to contractors or other agents for agencies that do not comply with confidentiality safeguards. The IRS must develop and implement:

online accounts to provide services to taxpayers and return preparers, a process for accepting electronic tax forms and supporting documents, an Internet platform for Form 1099 filings, a fully automated program for disclosing taxpayer information for third-party income verification using the Internet, and uniform standards and procedures for the acceptance of electronic signatures. The bill also:

establishes the position of IRS Chief Information Officer; limits redisclosures and uses of tax return information by individuals designated by taxpayers to receive the information; allows the IRS to require additional taxpayers to file returns electronically; and allows the IRS to pay fees for the use of credit, debit, or charge cards for tax payments if the fees are recouped by charging taxpayers.