Client Advisory: House Moves to Strengthen IRS Penalty Rules and Improve Tax Court Procedures

The House of Representatives recently approved two bills that aim to give taxpayers stronger protections when dealing with the IRS and the United States Tax Court. These changes are not law yet, but they are important steps that could make the tax process fairer and more predictable.

What’s Changing

1. IRS Penalty Approval Rules A bill called the Fair and Accountable IRS Reviews Act would require IRS agents to get written approval from their direct supervisor before assessing many penalties.This closes a long-criticized loophole that allowed agents to seek approval from someone who wasn’t actually supervising their case. For taxpayers, this means clearer oversight and fewer surprises.

2. Updates to Tax Court Procedures A second bill, the Tax Court Improvement Act, would give the Tax Court more flexibility and modern tools to handle cases. Key updates include:

• Allowing judges to issue subpoenas for documents earlier in the process

• Allowing more use of special trial judges to move cases along faster

• Applying the same recusal standards used by federal judges

• Letting the court extend filing deadlines in situations where timely filing isn’t practical

  
  

Together, these updates could make Tax Court proceedings smoother and more accessible for individuals and small businesses.

Why This Matters to You

If passed by the Senate, these bills would offer clearer safeguards during IRS audits and disputes. Clients may see:

• More accountability around penalties

• Better transparency in IRS communication

• Additional time and flexibility when resolving issues in Tax Court

• Faster case resolution in certain situations

  
  

For anyone dealing with a tax notice, penalty, or ongoing case, these reforms could make the process less stressful and more predictable.

What Happens Next

The bills now move to the Senate. We’ll continue monitoring their progress and will share updates as they develop. In the meantime, if you’ve received an IRS notice or want to understand how these potential changes might affect you, we’re here to help!