Does the Taxpayer First Act Significantly Impact Payroll?

In a rare show of bipartisanship, Congress recently passed the Taxpayer First Act (TFA) and sent it to President Donald Trump's desk. The president signed the bill in early July. Now we wait to see if it will be implemented. Regardless, its passage is a monumental step toward making the tax system fairer.

Does the Taxpayer First Act significantly impact payroll? No, not really. There is some impact on payroll to be sure, but that impact is mostly indirect. Implementation of the TFA will not really affect standard payroll processing, withholding, and tax reporting.

With that said, let us look at some of the key provisions of the law and how they relate to payroll. Remember that you can always contact BenefitMall if your company is having trouble with payroll processing or tax compliance. We specialize in all things payroll and benefits administration.


Restrictions on John Doe Summonses

Among the many provisions of the TFA is one that puts further restrictions on the use of John Doe summonses by the IRS. A John Doe summons is a summons issued when the IRS suspects someone of unknown identity is committing tax related crimes.

As a payroll provider, we are required to answer a John Doe summons by providing any and all requested information. Thankfully, Congress recognized the IRS' tendency to use John Doe summonses as the basis for 'fishing expeditions'. The TFA puts a stop to that by restricting when summonses can be used and requiring the IRS to detail in a summons the specific provision of the tax code they believe has been violated. Experts say this provision will reduce the number of John Doe summonses the IRS issues to companies like BenefitMall.


Restricted Contractor Access

Another provision of the TFA further restricts contractor access to tax returns and taxpayer information. Such contractors are typically outside attorneys and other professionals assisting with cases too complex for a single attorney or law firm to handle. Prior to the legislation, any such contractors had unrestricted access to private information. That is no more.

Contractors are no longer permitted access to any records or data obtained as a result of a summons unless they can prove they need the information in order to execute the services for which they have been contracted. And even when given access to information, contractors are no longer allowed to question summoned witnesses.

How does that affect payroll? It gives employees and payroll providers some additional peace of mind in knowing that information provided in response to a summons is not going to be openly distributed among contractors who have no need to see the information.


Better Customer Service

On a less serious note, but still equally important, is a provision that requires the IRS to develop new customer service standards that are in line with the private sector. Assuming the IRS implements this provision as intended, the days of getting the runaround when contacting the IRS will soon be over.

Experienced payroll professionals are not calling the IRS for advice every other week. But there are times – especially during the busy tax season – when contacting the IRS is unavoidable. It is about time the agency was forced to bring its customer service standards up to par. Good customer service is long overdue.

There are many other provisions of the TFA that space does not allow us to discuss. We can say that the new law is nothing short of landmark legislation that tips the scales away from the IRS and more toward the taxpayer. That is the way it ought to be. Don't you agree?