IRS Reform: Regulating the Regulators

AIA is driven by the interests of our nation’s hardworking taxpayers and small businesses. To fulfill our mission, we must rein in the IRS’s abusive and unsolicited practices and put forward concrete policy amendments that restore fairness. For years, these practices have severely undermined taxpayer confidence and impeded small businesses. 

Through our work, we constantly advocate for the implementation of regulatory change that addresses the root of these problems. As such, we have outlined policy recommendations designed to return the IRS to an agency of service and strengthen an otherwise fractured system. 

The Presumption of Rights Agenda 

IRS Individual & Small Business Taxpayer Protections  

  • Apply common law protections to revert burden of proof back onto the IRS in all tax court and arbitration proceedings.  

  • Require the IRS to directly communicate to taxpayers their rights and protections under the law at the onset of an enforcement action (similar to Miranda warnings).  

  • Require the IRS to cover the cost of taxpayers' legal and commercial accounting fees when the IRS loses in tax court or arbitration proceedings.  

  • Eliminate IRS’s audit authority for disputes with individual taxpayers involving $10,000 or less and direct all cases involving small businesses with revenue under $1 million to arbitration.  

  • Allow taxpayers to fully resolve all remaining disputes in tax court and seek refunds owed to them when the IRS is proven wrong in tax court or arbitration proceedings (Gorsuch Rule).  

  • Prohibit the IRS from confiscating funds from any taxpayer retirement accounts unless taxpayer voluntarily approves it or is instructed by tax courts to do so to resolve a case.  

  • Increase penalties the IRS must pay to taxpayers if their private information is shared illegally.  

  • Classify and treat all federal, state, and local disaster relief funds provided to taxpayers as non-taxable income.  

  • Apply a single interest rate determined by Congress on an annual basis with respect to IRS penalties and underpayment of taxes.  

  • Establish benchmark customer service requirements to address longstanding IRS taxpayer assistance deficiencies and accountability issues (ex: service centers, kiosks, TIGTA independence).  

IRS Large Business Tax Protections  

  • Require the IRS to perform compliance cost projections prior to issuing any new regulations or rulemakings potentially having sizable material impact on businesses.  

  • Require a five-year safe harbor period preventing new rulemakings from altering tax treatment of previously recognized IRS compliance standards utilized by businesses.  

  • Require the IRS to fully explain any mathematical errors or changes clearly and specifically in advance of any investigations, enforcement actions, or arbitration proceedings involving businesses.  

  • Require the IRS to present supervisory approval prior to and during any presentation of penalties to businesses.  

  • Require the IRS to establish defined time limits with respect to any investigations and enforcement proceedings on businesses to conform to U.S. Supreme Court rulings (Boechler).

Real reform is rooted in integrity and accountability. The recommendations above provide a tactical approach to ridding the IRS of political weaponization and bureaucratic overreach. The Presumption of Rights Agenda is centered around our commitment to the American taxpayer and small businesses, emphasizing fairness and transparency. By implementing our recommendations, we are confident that the restoration of trust and the protection of taxpayer rights are well within reach.