NTA Annual Report to Congress, with Purple Book Recommendations for Legislation (1/8/26)

This post is a little late in coming, but the National Taxpayer Advocate issued the Annual Report to Congress-2025, here. The key portion of the report for tax procedure enthusiasts is the “Purple Book,” here, described as:

a concise summary of 71 legislative re1commendations that the National Taxpayer Advocate believes will strengthen taxpayer rights and improve tax administration. Most of the recommendations have been made in detail in prior reports, but others are presented in this book for the first time. The National Taxpayer Advocate believes that most of the recommendations presented in this volume are non-controversial, common-sense reforms that the tax-writing committees, other committees, and other members of Congress may find useful.

 There are many proposals in the Purple Book that could affect tax procedure. The discussions of current law and problems, with the proposed legislative solutions are quite good. Given that Congress has not acted on the proposals yet, I thought this would be just a “notice” blog offering the descriptions in the listing (like a table of contents): 

STRENGTHEN TAXPAYER RIGHTS
1. Elevate the Importance of the Taxpayer Bill of Rights by Redesignating It as Section 1 of the Internal Revenue Code
2. Require the IRS to Timely Process Claims for Credit or Refund
3. Require Notices of Claim Disallowance to Clearly State the Reasons for Disallowance, Explain Administrative and Judicial Appeal Options, and  Specify Applicable Timeframes

IMPROVE THE FILING PROCESS
4. Treat Electronically Submitted Tax Payments and Documents as Timely If Submitted on or Before the Applicable Deadline
5. Authorize the IRS to Establish Minimum Standards for Federal Tax Return Preparers and to Revoke the Identification Numbers of Sanctioned Preparers
6. Extend the Time for Small Businesses to Make Subchapter S Elections
7. Adjust Individual Estimated Tax Payment Deadlines to Occur Quarterly
8. Eliminate Duplicative Reporting Requirements Imposed by the Bank Secrecy Act and the Foreign Account Tax Compliance Act
9. Authorize the Use of Volunteer Income Tax Assistance Grant Funding to Assist Taxpayers With Applications for Individual Taxpayer Identification Numbers

IMPROVE ASSESSMENT AND COLLECTION PROCEDURES
10. Continue to Limit the IRS’s Use of “Math Error Authority” to Clear-Cut Categories Specified by Statute
11. Require Independent Managerial Review and Written Approval Before the IRS May Assert Multiyear Bans Barring Taxpayers From Receiving  Certain Tax Credits and Clarify That the Tax Court Has Jurisdiction to Review the Assertion of Multiyear Bans
12. Give Taxpayers Abroad Additional Time to Request Abatement of a Math Error Assessment
13. Give Taxpayers Abroad Additional Time to Request a Collection Due Process Hearing and to File a Petition Challenging a Notice of Determination in the Tax Court
14. Provide That Assessable Penalties Are Subject to Deficiency Procedures
15. Direct the IRS to Implement an Automated Formula to Identify and Protect Taxpayers at Risk of Economic Hardship
16. Allow Taxpayers to Dispute an Underlying Tax Liability in a Collection Due Process Hearing If They Have Not Had a Prior Opportunity to Dispute the Liability in the U.S. Tax Court
17. Prohibit the IRS from Withholding the Earned Income Tax Credit Portion of a Taxpayer’s Refund to Satisfy Federal Tax Liabilities
18. Eliminate Installment Agreement User Fees for Low-Income Taxpayers and Those Paying by Direct Debit
19. Improve Offer in Compromise Program Accessibility by Eliminating the Upfront Payment Requirements
20. Require the IRS to Consider a Taxpayer’s Current Income When Determining Whether to Waive or Reimburse an Installment Agreement User Fee
21. Modify the Requirement That the Office of Chief Counsel Review Certain Offers in Compromise
22. Require the IRS to Mail Notices at Least Quarterly to Taxpayers With Delinquent Tax Liabilities
23. Clarify When the Two-Year Period for Requesting Return of Levy Proceeds Begins So Persons Subject to Paper Levies and Persons Subject to Electronic Levies Are Similarly Treated
24. Protect Retirement Funds From IRS Levies, Including So-Called “Voluntary” Levies, Absent Flagrant Conduct by a Taxpayer
25. Provide Stronger Taxpayer Protections Before the IRS May Recommend the Filing of a Lien Foreclosure Suit on a Taxpayer’s Principal Residence
26. Provide Collection Due Process Rights to Third Parties Holding Legal Title to Property Subject to IRS Collection Actions
27. Extend the Time Limit for Taxpayers to Sue for Damages for Improper Collection Actions
28. Revise the Private Debt Collection Rules to More Accurately Identify and Protect Taxpayers With Incomes Below 200% of the Federal Poverty Level

REFORM PENALTY AND INTEREST PROVISIONS
29. Convert the Estimated Tax Penalty Into an Interest Provision to Properly Reflect Its Substance
30. Apply a Single Interest Rate to Underpayments of Estimated Tax in the Periods Between Each Installment Due Date
31. Extend the Reasonable Cause Defense for the Failure-to-File Penalty to Taxpayers Who Rely on Return Preparers to E-File Their Returns
32. Authorize a Penalty for Tax Return Preparers Who Engage in Fraud or Misconduct by Altering a Taxpayer’s Tax Return
33. Clarify That Supervisory Approval Is Required Under IRC § 6751(b) Before Proposing Penalties
34. Require an Employee to Determine and a Supervisor to Approve All Negligence Penalties Under IRC § 6662(b)(1)
35. Increase the Burden of Proof for Determining That a Failure to File a Report of Foreign Bank and Financial Accounts Was “Willful” and Reduce the Maximum Penalty Amount

STRENGTHEN TAXPAYER RIGHTS BEFORE THE OFFICE OF APPEALS
36. Require Taxpayers’ Consent Before Allowing IRS Counsel or Compliance Personnel to Participate in Appeals Conferences

STRENGTHEN THE OFFICE OF THE TAXPAYER ADVOCATE
37. Clarify That the National Taxpayer Advocate May Hire Legal Counsel to Enable Her to Advocate More Effectively for Taxpayers
38. Clarify the Authority of the National Taxpayer Advocate to Make Personnel Decisions to Protect the Independence of the Office of the Taxpayer Advocate
39. Clarify the Taxpayer Advocate Service’s Access to Files, Meetings, and Other Information
40. Authorize the National Taxpayer Advocate to File Amicus Briefs
41. Authorize the Office of the Taxpayer Advocate to Assist Certain Taxpayers Experiencing Economic Hardships During a Lapse in Appropriations
42. Repeal Statute Suspension Under IRC § 7811(d) for Taxpayers Seeking Assistance From the Taxpayer Advocate Service

STRENGTHEN TAXPAYER RIGHTS IN JUDICIAL PROCEEDINGS
43. Expand the U.S. Tax Court’s Jurisdiction to Hear Refund Cases
44. Authorize the Tax Court to Order Refunds or Credits in Collection Due Process Proceedings Where Liability Is at Issue
45. Promote Consistency With the Supreme Court’s Boechler Decision by Making the Time Limits for Bringing All Tax Litigation Subject to Equitable Judicial Doctrines
46. Extend the Deadline for Taxpayers to File a Refund Suit When They Request Appeals Reconsideration of a Notice of Claim Disallowance and the IRS Has Not Timely Decided Their Claim
47. Authorize the Tax Court to Sign Subpoenas for the Production of Records Held by a Third Party Prior to a Scheduled Hearing
48. Provide That the Scope of Judicial Review of Innocent Spouse Determinations Under IRC § 6015 Is De Novo
49. Clarify That Taxpayers May Raise Innocent Spouse Relief as a Defense in Collection, Bankruptcy, and Refund Cases
50. Fix the Donut Hole in the Tax Court’s Jurisdiction to Determine Overpayments by Non-Filers With Filing Extensions

MISCELLANEOUS RECOMMENDATIONS
51. Restructure the Earned Income Tax Credit to Make It Simpler for Taxpayers and Reduce Improper Payments
52 Adopt a Consistent and More Modern Definition of a “Qualifying Child” Throughout the Internal Revenue Code
53. Provide Consistent Tax Relief for Victims of Federally Declared Disasters
54. Permanently Give Taxpayers Affected by Federally Declared Disasters the Option of Using Prior Year Earned Income to Claim the Earned Income Tax Credit
55. Reinstate the Theft Loss Deduction So Scam Victims Are Not Taxed on Amounts Stolen From Them
56. Amend the Lookback Period for Allowing Tax Credits or Refunds to Include the Period of Any Postponement or Additional or Disregarded Time for Timely Filing a Tax Return
57. Protect Taxpayers in Federally Declared Disaster Areas Who Receive Filing and Payment Relief From Inaccurate and Confusing Collection Notices
58. Allow Taxpayers to Claim the Child Tax Credit and Earned Income Tax Credit for a Child Who Meets All Statutory Requirements Except Having a Social Security Number by the Due Date for the Tax Return
59. Allow Members of Certain Religious Sects That Do Not Participate in Social Security and Medicare to Obtain Employment Tax Refunds
60. Remove the Requirement That Written Receipts Acknowledging Charitable Contributions Must Be “Contemporaneous”
61. Establish a Uniform Standard Mileage Deduction Rate
62. Encourage and Authorize Independent Contractors and Service Recipients to Enter Into Voluntary Withholding Agreements
63. Require the IRS to Specify the Information Needed in Third-Party Contact Notices
64. Enable the Low Income Taxpayer Clinic Program to Assist More Taxpayers in Controversies With the IRS
65. Clarify That Late-Filed Tax Returns Qualify as “Returns” for Bankruptcy Discharge Purposes
66. Compensate Taxpayers for “No Change” National Research Program Audits
67. Improve Tax and Financial Literacy by Promoting Interagency Collaboration and Modernizing the Requirement That the IRS Publish Charts on Government Revenue and Outlays
68. Establish the Position of IRS Historian Within the Internal Revenue Service to Record and Publish Its History
69. Postpone Tax Deadlines for Hostages and Individuals Wrongly Detained Abroad
70. Strengthen Incentives for IRS Contractors to Ensure Their Employees Keep Taxpayer Return Information Confidential
71. Eliminate the IRS’s “Roadmap for Evading Tax Court Review” in Collection Due Process Cases

Appendix 1: Additional Reference Materials for Legislative Recommendations in This Volume

Appendix 2: Prior National Taxpayer Advocate Legislative Recommendations Enacted Into Law