Senate Taxwriters Approve Bill to Expand Taxpayer Protections

The Senate Finance Committee voted 26 to 1 on July 30 to approve an IRS reform bill that would offer new ways for taxpayers to pursue refund claims and address a range of tax administration issues.

The Taxpayer Assistance and Service (TAS) Act was developed jointly by the chair and ranking member of the Senate Finance Committee over the course of more than a year and would make significant changes to IRS services and procedures, including provisions that would: 

• Require the IRS to respond to refund claims within 12 months;
• Allow taxpayers to appeal denied refund claims to IRS Appeals and the Tax Court;
• Move up the deadline for filing many Form 1099-series information returns from March 31 to January 31;
• Create a new rule for the timeliness of electronic returns and payments;
• Clarify the supervisory approval requirements for examiners asserting penalties;
• Lower the threshold for requiring e-filing for partnerships from 100 partners to 50 partners or $1 million in assets; and
• Require the IRS to create taxpayer accounts allowing access to important account information and capabilities.

Overwhelming bipartisan support makes the bill a potential candidate for enactment this year, but lawmakers would need to resolve differences with the House. 

The House Ways and Means Committee has taken a piecemeal approach to tax administration issues, passing more than 20 separate stand-alone bills this year, 13 of which have also passed the full House (see our related Alert: Ways and Means Committee Votes to Advance Tax Administration Bills). The TAS Act and the House bills cover many of the same issues, but there are differences in their details and scope. 

Refund Claims

The TAS Act would expand taxpayers’ ability to pursue refund claims in two important ways. First, the legislation would require the IRS to issue a determination on a refund claim within 12 months (down from 36 months in an earlier discussion draft). Under current law, the IRS is not required to act on refund claims at all, but taxpayers can file suit if the IRS has not responded after six months. The legislation would allow taxpayers to appeal a denial of a refund claim to the independent Office of Appeals. 

Second, the TAS Act would expand the U.S. Tax Court’s jurisdiction to cover refund claims, a significant change in the court’s jurisdiction that would provide another venue for refund suits in addition to U.S. district courts and the U.S. Court of Federal Claims. 

The TAS Act includes other expansions to Tax Court jurisdiction and the Appeals process, as discussed below. 

Information Return Deadlines

The TAS Act would accelerate the deadlines for filing Form 1099-series information returns to report dividends, interest, retirement plan distributions, contractor payments, and payment card and third-party network payments. Currently, statements generally must be provided to recipients by January 31 and e-filed with the IRS by March 31. The act would require taxpayers to file returns by January 31, when statements are due to recipients. 

Online Accounts and Modernization

The TAS Act includes a package of proposals to move the IRS toward digitalization and enhancing online capabilities. Some of those proposals would:

• Require the IRS to electronically process all e-filed returns and use optical character recognition to transcribe any paper returns unless the technology is slower or less reliable than manual transcription;
• Require the IRS to create new taxpayer-facing dashboards tracking taxpayer refunds, amended returns, IRS call times, backlogs, and processing times; and 
• Require the IRS to expand its online accounts system to verify the status of returns, payments, and refunds; allow taxpayers to access any returns, documents, notices, and letters sent or received over the previous six years; and allow taxpayers to respond to any document, notice, or letter by uploading or otherwise electronically transmitting a response.

Several similar provisions are included in the Taxpayer Experience Improvement Act (H.R. 7971) and BARCODE Efficiency Act (H.R.6956), which both passed the House April 27. 

Mailbox Rule and Electronic Payment and Return Deadlines

The TAS Act would extend a version of the “mailbox rule” for physical mailings and paper filings to cover electronic submissions. Under the bill, an electronic submission would be deemed timely if the taxpayer authorizes it for submission by the payment or return due date, as long as the submission is actually received no more than three business days after the due date. 

The three-day requirement was added in the newest version of the bill and differs from the Electronic Filing and Payment and Fairness Act (H.R. 1152), which passed the House in 2025. H.R. 1152 would deem the date of an electronic filing or payment to be the date it is sent electronically without any restriction based on when it is received.

The TAS Act does not address or update the original mailbox rule for physical mailings and paper filings, which has been affected by the U.S. Post Office’s new rule for postmarks (see our related Alert: Postal Service Finalizes New Rule on Postmark Dates).

Penalty Approval

The TAS Act would revise Section 6751(b) to modify and clarify when supervisory approval is required for penalties and certain disallowance determinations. Under the bill, approval would need to be obtained from the “immediate supervisor of the individual making the determination or the IRS Office of Servicewide Penalties” before “the date any appealable notice is sent.”

That language differs slightly from the Fair and Accountable IRS Reviews Act (H.R. 5346), which passed the House in 2025. H.R. 5346 would require IRS examiners to obtain written approval from “the person to whom such individual reports” before “any written communication with respect to such penalty (including proposal of a penalty as an adjustment) is sent to the taxpayer.”

The TAS Act also defines the disallowance period for specified refundable credits and provides that such disallowance periods require supervisory approval even if calculated through electronic means.

Penalty Assessment Authority

The TAS Act would clarify the IRS’s authority to assess penalties and remove the off-Code filing deadlines applicable to Sections 6039F and 6048. 

The bill would essentially reverse the Tax Court’s holding in Farhy v. Commissioner, which held that the IRS lacked the statutory authority to assess and administratively collect penalties for Form 5471 under Section 6038(b) (see our related Alert: Circuit Court Overturns Farhy Decision, Holds IRS Has Authority to Assess Section 6038 Penalties).

Although the D.C. Circuit reversed it, the decision can still apply in other circuits, and taxpayers have argued that the original Farhy reasoning could apply to penalties with similar statutory frameworks. 

The TAS Act would amend Section 6671 to provide that all penalties in the Code are assessable and collectible as taxes, apart from narrow exceptions for penalties required to be collected in civil or criminal proceedings.

Appeals and Taxpayer Advocate

The TAS Act would provide direct-hire authority to both the Chief of Appeals and the Office of the National Taxpayer Advocate. It also would give the Taxpayer Advocate more authority to request information from the IRS.

The bill seeks to further strengthen the independence of Appeals by codifying and clarifying the right to appeal, while limiting the exceptions to an exclusive identified list.

Tax Court

The TAS Act would make several changes to Tax Court procedures, including expanding subpoena authority and clarifying that the court has jurisdiction over equitable tolling questions. It would expand the ability of the chief judge to assign special judges and would raise the threshold for small case procedures from $50,000 to $100,000.The TAS Act also would allow the Tax Court to order the issuance of refunds in collection due process cases. 

The Tax Court Improvement Act (H.R. 5349) passed the House in 2025 and includes similar provisions. 

Preparer Requirements

The TAS Act would impose new education and certification requirements on paid preparers. Attorneys, accountants, and enrolled agents would generally be exempt as “specified practitioners,” but the latest version of the bill omits an exception from a prior draft for employees who are “supervised” by specified practitioners.

The provision is a response to the 2014 decision in Loving v. IRS, in which the U.S. Court of Appeals for the D.C. Circuit struck down an IRS effort to regulate uncredentialed return preparers. Lawmakers have offered several legislative proposals since then that would grant the IRS the explicit authority to resurrect the program. The TAS Act takes a more prescriptive approach, directing the IRS to impose education requirements and background checks but precluding the agency from requiring an examination.

The act also would expand the definition of “return” for preparer penalty purposes to include documents that purport to be returns but fail to meet all the formal requirements of a return, such as unsigned returns, incomplete returns, or returns filed in the wrong format or to the wrong office.

Third-Party Information Requests During Exam

The TAS Act includes a provision similar to the House-passed Taxpayer Notification and Privacy Act (H.R. 6495), which would expand the information that must be provided in notifications to taxpayers when seeking information from third parties.

Please visit BDO’s Tax Risk Services page for more information on how BDO can help.