II 

112TH CONGRESS 

1ST SESSION S. 1289 

To amend the Internal Revenue Code of 1986 to reduce the tax gap, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 28, 2011 

Mr. CARPER (for himself and Mrs. BOXER) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to reduce 

the tax gap, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE, ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Taxpayer Advocacy and Government Accountability Pro6 motion Act of 2011’’ or the ‘‘TAX GAP Act of 2011’’. 

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend9 ment or repeal is expressed in terms of an amendment 

10 to, or repeal of, a section or other provision, the reference 


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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents for 

4 this Act is as follows: 

Sec. 1. Short title, etc. 

TITLE I—TAXPAYER SIMPLIFICATION, PROTECTION, AND 

FAIRNESS 

Sec. 101. Taxpayer assistance and tax simplification report. 

Sec. 102. Elimination of taxpayer obligation to pay credit and debit card processing fees for certain tax payments. 

Sec. 103. Make offer-in-compromise application rules less onerous for taxpayers. 

Sec. 104. Elimination of special rules modifying amount of estimated tax payments by corporation. 

Sec. 105. Repeal of special estimated tax payment provision for certain insurance companies. 

Sec. 106. Repeal of designation of nonqualified preferred stock. 

Sec. 107. De minimis apology payments pilot program. 

TITLE II—CLARIFICATION OF TAX FORMS AND FILING 

REQUIREMENTS 

Sec. 201. Clarification of information on Schedule C. 

Sec. 202. Increased electronic filing of returns. 

Sec. 203. Clarification of electronic filing requirements for paid preparers. 

Sec. 204. Requirement that electronically prepared paper returns include 2D 

barcode. 

Sec. 205. Authorization to require certain employee benefit plan information returns and reports to be filed electronically. 

TITLE III—ENHANCED INFORMATION REPORTING 

Sec. 301. Automatic reporting on certain government payments for property 

and services. 

Sec. 302. Additional information on returns relating to mortgage interest. 

Sec. 303. Improved information reporting on unreported and underreported financial accounts. 

TITLE IV—PAYMENTS TO CERTAIN CONTRACTORS 

Sec. 401. Requirements for withholding with respect to payments to contractors. 

Sec. 402. Continuous levy on payments to Medicaid providers and suppliers. 

Sec. 403. Levy authority for payments to Medicare providers with delinquent 

tax debt. 

Sec. 404. 100 percent levy for payments to Federal vendors relating to property. 

TITLE V—IMPROVED TAX ADMINISTRATION AND COORDINATION 


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Sec. 501. Requirement for prisons located in U.S. to provide information for 

tax administration. 

Sec. 502. Facilitation of tax compliance with Indian tribal governments. 

Sec. 503. Improvement in access to information in the National Directory of 

New Hires for tax administration purposes. 

Sec. 504. Clarification of taxpayer privacy by improvement of investigative disclosure statute. 

Sec. 505. Authorization for Financial Management Service retention of transaction fees from levied amounts. 

TITLE VI—CLARIFICATION OF PENALTIES AND LIABILITIES 

Sec. 601. Clarification of penalty for failure to comply with electronic filing requirements. 

Sec. 602. Increase in penalty on paid preparers who fail to comply with earned 

income tax credit due diligence requirements. 

Sec. 603. Increase in penalties for repeated and willful failure to file tax return. 

Sec. 604. Clarification of employee leasing companies liability for clients’ Federal employment taxes. 

Sec. 605. Extension of statute of limitations where State or local adjustment 

affects Federal tax liability. 

Sec. 606. Elimination of restriction on offsetting refunds from former residents. 

TITLE VII—UNDERSTANDING THE TAX GAP 

Sec. 701. Tax gap strategy and reports. 

Sec. 702. Studies on the impact of tax gap legislation. 

Sec. 703. Reports on worker misclassification. 

1 TITLE I—TAXPAYER SIMPLIFICA2 TION, PROTECTION, AND 

3 FAIRNESS 

4 SEC. 101. TAXPAYER ASSISTANCE AND TAX SIMPLIFICA5 TION REPORT. 

6 (a) IN GENERAL.—Not later than 2 years after the 

7 date of the enactment of this Act, the Secretary of the 

8 Treasury, in consultation with the Commissioner of the 

9 Internal Revenue Service, shall submit to Congress a re10 port on taxpayer assistance and tax simplification. 

11 (b) MATTERS INCLUDED.—The report required 

12 under subsection (a) shall be based on examinations of tax 


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1 policy and of tax compliance enforcement and shall include 

2 the following: 

3 (1) An assessment of the current and proposed 

4 efforts of the Internal Revenue Service with respect 

5 to the simplification of tax forms, publications, and 

6 filing requirements for individual taxpayers and for 

7 sole proprietor taxpayers, including additional, plain8 language guidance for taxpayers. Such assessment 

9 shall include specific recommendations on— 

10 (A) how these or additional efforts may be 

11 improved or expanded upon, including through 

12 paid preparers and tax preparation software, 

13 and 

14 (B) requiring or encouraging the Internal 

15 Revenue Service, to the maximum extent pos16 sible, to test its forms and publications on ac17 tual taxpayers prior to publication. 

18 (2) An assessment of the current efforts of the 

19 Internal Revenue Service— 

20 (A) to reduce the time between receipt of 

21 an electronically filed tax return and the 

22 issuance of a refund, and 

23 (B) to reduce the time between receipt of 

24 a manually filed tax return and the issuance of 

25 a refund. 


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1 (3) An assessment of the efforts of the Internal 

2 Revenue Service to induce voluntary compliance by 

3 individual taxpayers and sole proprietor taxpayers, 

4 with a particular focus on current efforts to reduce 

5 administrative and compliance burdens. Such assess6 ment shall include specific recommendations on how 

7 voluntary compliance may be improved or expanded 

8 upon, particularly in an environment where most 

9 taxpayers use paid preparers or tax preparation soft10 ware. 

11 (4) An assessment of the current efforts of the 

12 Internal Revenue Service to improve taxpayer serv13 ice, including through outreach programs, taxpayer 

14 education, preparer education, tax software industry 

15 coordination, and expanded availability of online, 

16 Internet-based tax information and filing services of17 fered by the Internal Revenue Service. Such assess18 ment shall include specific recommendations on how 

19 these or additional efforts may be improved or ex20 panded upon. 

21 (5) An assessment of the efficacy of previous 

22 Internal Revenue Service efforts with respect to set23 tlement initiatives, including the effect of such initia24 tives on improving compliance and reducing current 

25 and future revenues lost due to tax evasion. Such asVerDate Mar 15 2010 02:21 Jun 29, 2011 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1289.IS S1289

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1 sessment shall include specific recommendations on 

2 how, or whether, these or additional efforts may be 

3 improved or expanded upon. 

4 (6) An assessment of the personnel, infrastruc5 ture, information technology, and capabilities of the 

6 Internal Revenue Service with respect to ensuring 

7 and promoting taxpayer service, encouraging vol8 untary compliance, enforcing involuntary compliance. 

9 (c) USE OF DATA.—The report under subsection (a) 

10 shall, wherever possible, be based on empirical data, agen11 cy-conducted tests, and quantitative evidence. 

12 SEC. 102. ELIMINATION OF TAXPAYER OBLIGATION TO PAY 

13 CREDIT AND DEBIT CARD PROCESSING FEES 

14 FOR CERTAIN TAX PAYMENTS. 

15 (a) IN GENERAL.—Paragraph (2) of section 6311(d) 

16 is amended to read as follows: 

17 ‘‘(2) AUTHORITY TO ENTER INTO CON18 TRACTS.—Notwithstanding section 3718(f) of title 

19 31, United States Code— 

20 ‘‘(A) IN GENERAL.—The Secretary is au21 thorized to enter into contracts to obtain serv22 ices related to receiving payment by other 

23 means where cost beneficial to the Government. 

24 Except as provided in subparagraph (B), the 

25 Secretary may not pay any fee or provide any 


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1 other consideration under any such contract for 

2 the use of credit, debit, or charge cards for the 

3 payment of taxes imposed by subtitle A. 

4 ‘‘(B) SERVICES PROVIDED BY FINANCIAL

5 AGENTS OF THE GOVERNMENT.—The Secretary 

6 is authorized to utilize services provided by a fi7 nancial agent of the Government to receive pay8 ment of delinquent tax liability made by credit, 

9 debit, or charge card, and to pay such financial 

10 agent any contracted fees or other consideration 

11 for the acceptance and processing of card trans12 actions in connection with such services.’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 this section shall apply to payments made after the date 

15 of the enactment of this Act. 

16 SEC. 103. MAKE OFFER-IN-COMPROMISE APPLICATION 

17 RULES LESS ONEROUS FOR TAXPAYERS. 

18 (a) IN GENERAL.—Section 7122 is amended by strik19 ing subsection (c) and by redesignating subsections (d), 

20 (e), (f), and (g) as subsections (c), (d), (e), and (f), respec21 tively. 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Paragraph (3) of section 7122(c), as redes24 ignated by subsection (a), is amended by striking 

25 subparagraph (C), by striking ‘‘, and’’ at the end of 


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1 subparagraph (B) and inserting a period, and by 

2 adding ‘‘and’’ at the end of subparagraph (A). 

3 (2) Subsection (f) of section 6159 is amended 

4 by striking ‘‘section 7122(e)’’ and inserting ‘‘section 

5 7122(d)’’. 

6 (c) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to offers-in-compromise submitted 

8 after the date of the enactment of this Act. 

9 SEC. 104. ELIMINATION OF SPECIAL RULES MODIFYING 

10 AMOUNT OF ESTIMATED TAX PAYMENTS BY 

11 CORPORATION. 

12 The Corporate Estimated Tax Shift Act of 2009 (and 

13 any modification of such section contained in any other 

14 provision of law) and section 561 of the Hiring Incentives 

15 to Restore Employment Act (and any modification of such 

16 section contained in any other provision of law) shall not 

17 apply with respect to any installment of corporate esti18 mated tax for any taxable year beginning after December 

19 31, 2013. 

20 SEC. 105. REPEAL OF SPECIAL ESTIMATED TAX PAYMENT 

21 PROVISION FOR CERTAIN INSURANCE COM22 PANIES. 

23 (a) IN GENERAL.—Section 847 is repealed, effective 

24 for taxable years beginning after December 31, 2012. 

25 (b) TRANSITION RULES.— 


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1 (1) EXISTING SPECIAL LOSS DISCOUNT AC2 COUNTS.— 

3 (A) IN GENERAL.—In the case of a com4 pany that has a special loss discount account 

5 (within the meaning of section 847(a)(3) of the 

6 Internal Revenue Code of 1986, as in effect on 

7 the date of the enactment of this Act) on De8 cember 31, 2012, the entire amount of such ac9 count shall be subtracted from such account 

10 and, unless the company makes the election 

11 under subparagraph (B), shall be included in 

12 gross income for such company’s first taxable 

13 year beginning after such date. 

14 (B) ELECTION TO INCLUDE AMOUNTS RAT15 ABLY OVER 4 YEARS.—If a company makes the 

16 election under this subparagraph, in such time 

17 and manner as the Secretary may prescribe, the 

18 amount of such company’s special loss discount 

19 account which is subtracted from such account 

20 by reason of subparagraph (A) shall be included 

21 in gross income ratably over the 4-taxable-year 

22 period beginning with such company’s first tax23 able year beginning after December 31, 2012. 

24 (2) ACCUMULATED SPECIAL ESTIMATED TAX

25 PAYMENTS.— 


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1 (A) IN GENERAL.—Unless the company 

2 makes the election under paragraph (1)(B), the 

3 amount of any special estimated tax payments 

4 made by such company under section 847 of 

5 the Internal Revenue Code of 1986 in taxable 

6 years beginning before December 31, 2012, 

7 which have not previously been applied to re8 duce tax liability shall be applied to reduce any 

9 additional tax liability resulting from the appli10 cation of paragraph (1)(A) for the company’s 

11 first taxable year beginning after December 31, 

12 2012. 

13 (B) COMPANIES ELECTING 4-YEAR INCOME

14 INCLUSION.—In the case of a company that 

15 makes the election under paragraph (1)(B), the 

16 amount of any special estimated tax payments 

17 made by such company under section 847 of 

18 such Code in taxable years beginning before 

19 December 31, 2012, which have not previously 

20 been applied to reduce tax liability shall be ap21 plied on a year-by-year basis to reduce any ad22 ditional tax liability resulting from the applica23 tion of paragraph (1)(B) for the taxable years 

24 in the 4-taxable-year period under such para25 graph. 


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1 (C) EXCESS SPECIAL ESTIMATED TAX PAY2 MENTS.—If the amount of special estimated tax 

3 payments to which subparagraph (A) or (B) ap4 plies exceeds— 

5 (i) the additional tax liability resulting 

6 from the application of paragraph (1)(A) 

7 for the company’s first taxable year begin8 ning after December 31, 2012, or 

9 (ii) the total additional tax liability re10 sulting from the application of paragraph 

11 (1)(B) for the company’s first 4 taxable 

12 years beginning after such date, 

13 whichever is applicable, such excess amount 

14 shall be treated as a payment of the company’s 

15 estimated tax under section 6655 of such Code, 

16 beginning with the first quarter of the first tax17 able year beginning after such date or, in the 

18 case of an election under paragraph (1)(B), the 

19 first quarter of the 4th taxable year beginning 

20 after such date. 

21 SEC. 106. REPEAL OF DESIGNATION OF NONQUALIFIED 

22 PREFERRED STOCK. 

23 (a) IN GENERAL.—Section 351 is amended by strik24 ing subsection (g) and by redesignating subsection (h) as 

25 subsection (g). 


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1 (b) CONFORMING AMENDMENTS.— 

2 (1) Section 45D(b)(6)(A) is amended by strik3 ing ‘‘(other than nonqualified preferred stock as de4 fined in section 351(g)(2))’’. 

5 (2) Section 354(a)(2) is amended— 

6 (A) by striking ‘‘(including nonqualified 

7 preferred stock, as defined in section 

8 351(g)(2))’’ in subparagraph (B), and 

9 (B) by striking subparagraph (C). 

10 (3) Section 354(a)(3) is amended by striking 

11 ‘‘nonqualified preferred stock and’’. 

12 (4) Section 355(a)(3) is amended— 

13 (A) by striking ‘‘(including nonqualified 

14 preferred stock, as defined in section 

15 351(g)(2))’’ in subparagraph (C), and 

16 (B) by striking subparagraph (D). 

17 (5) Section 355(a)(4) is amended by striking 

18 ‘‘nonqualified preferred stock and’’. 

19 (6) Section 356 is amended by striking sub20 section (e) and by redesignating subsections (f) and 

21 (g) as subsections (e) and (f), respectively. 

22 (7) Section 1036 is amended by striking sub23 section (b) and by redesignating subsection (c) as 

24 subsection (b). 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to transactions after December 31, 

3 2012. 

4 SEC. 107. DE MINIMIS APOLOGY PAYMENTS PILOT PRO5 GRAM. 

6 (a) IN GENERAL.—Section 7811(b) is amended by 

7 striking ‘‘or’’ at the end of paragraph (1), by striking the 

8 period and inserting ‘‘, or’’ at the end of paragraph 

9 (2)(D), and adding at the end the following new para10 graph: 

11 ‘‘(3) to make an apology payment under sub12 section (h) in the case of any order issued during 

13 2012 or 2013, upon the determination that such 

14 order— 

15 ‘‘(A) has been accepted, or 

16 ‘‘(B) if challenged, has been administra17 tively sustained.’’. 

18 (b) APOLOGY PAYMENT.—Section 7811 is amended 

19 by adding at the end the following new subsection: 

20 ‘‘(h) APOLOGY PAYMENT PROGRAM.— 

21 ‘‘(1) IN GENERAL.—A taxpayer assistance order 

22 may require the Secretary to provide an apology 

23 payment on behalf of the Internal Revenue Service 

24 to the taxpayer under this subsection in any case in 

25 which the National Taxpayer Advocate determines 


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1 that any action or inaction by the Internal Revenue 

2 Service has caused excess expense or undue burden 

3 on a taxpayer. 

4 ‘‘(2) TAXPAYER LIMITATIONS.—In the case of 

5 any apology payment required under this subsection 

6 to any taxpayer with respect to any taxable year— 

7 ‘‘(A) such payment shall not be less than 

8 $100, and 

9 ‘‘(B) such payment shall not exceed 

10 $1,000. 

11 ‘‘(3) AGGREGATE YEARLY LIMITATION.—The 

12 amount of apology payments which the National 

13 Taxpayer Advocate may require to be paid for any 

14 fiscal year shall not exceed $250,000.’’. 

15 (c) REPORTS.—Clause (ii) of section 7803(c)(2)(B) 

16 is amended by striking ‘‘and’’ at the end of subclause (X), 

17 by redesignating subclause (XI) as subclause (XII), and 

18 by inserting after subclause (X) the following new sub19 clause: 

20 ‘‘(XI) contain a summary of all 

21 Taxpayer Assistance Orders which re22 quire an apology payment under sec23 tion 7811(h), and’’. 

24 (d) EXCLUSION OF APOLOGY PAYMENTS FROM

25 GROSS INCOME.— 


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1 (1) IN GENERAL.—Part III of subchapter B of 

2 chapter 1 is amended by inserting before section 140 

3 the following new section: 

4 ‘‘SEC. 139F. INTERNAL REVENUE SERVICE APOLOGY PAY5 MENTS. 

6 ‘‘Gross income shall not include any apology payment 

7 received by a taxpayer as a result of a Taxpayer Assist8 ance Order described in section 7811(h).’’. 

9 (2) CLERICAL AMENDMENT.—The table of sec10 tions for part III of subchapter B of chapter 1 is 

11 amended by inserting before the item relating to sec12 tion 140 the following new item: 

‘‘Sec. 139F. Internal Revenue Service apology payments.’’. 

13 (e) EFFECTIVE DATES.— 

14 (1) IN GENERAL.—The amendments made by 

15 subsections (a) and (b) shall apply to orders issued 

16 after December 31, 2011. 

17 (2) REPORTS.—The amendments made by sub18 section (c) shall apply to reports required to be sub19 mitted after December 31, 2011. 

20 (3) EXCLUSION.—The amendments made by 

21 subsection (d) shall apply to taxable years beginning 

22 after December 31, 2011. 

23 (f) STUDY AND REPORT ON APOLOGY PAYMENTS

24 PROGRAM.—Not later than December 31, 2013, the Sec25 retary of the Treasury shall submit to Congress a report 


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1 on the apology payments program under the amendments 

2 made by this section. Such report shall contain— 

3 (1) an evaluation of— 

4 (A) the merits and effects of such program 

5 on— 

6 (i) taxpayers who received payments 

7 under section 7811(h), and 

8 (ii) the Internal Revenue Service, and 

9 (B) the impact of the program on all tax10 payers and the public, and 

11 (2) recommendations whether the program 

12 should be extended, and, if so, whether and how it 

13 should be improved. 

14 TITLE II—CLARIFICATION OF 

15 TAX FORMS AND FILING RE16 QUIREMENTS 

17 SEC. 201. CLARIFICATION OF INFORMATION ON SCHEDULE 

18 C. 

19 (a) REVISION OF SCHEDULE C.—Not later than De20 cember 31, 2012, the Secretary of the Treasury shall re21 vise Schedule C to Form 1040 (hereafter in this section 

22 referred to as ‘‘Schedule C’’) to require that taxpayers en23 gaged in a trade or business provide the information re24 quired under this subsection. 


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1 (1) ADDITIONAL GROSS RECEIPTS INFORMA2 TION.—With respect to the gross receipts of the tax3 payer from any trade or business, Schedule C shall 

4 require the taxpayer to provide the following: 

5 (A) The total of amount of gross receipts 

6 or sales reported to the taxpayer through payee 

7 statements (as defined in section 6724(d)(2) of 

8 the Internal Revenue Code of 1986) and the 

9 number of such payee statements received by 

10 the taxpayer. 

11 (B) The total of amount of gross receipts 

12 or sales not included under subparagraph (A). 

13 (2) ADDITIONAL EXPENSE INFORMATION.— 

14 With respect to payments made by the taxpayer in 

15 connection with any trade or business, Schedule C 

16 shall require the taxpayer to provide the following: 

17 (A) The total of amounts reported by the 

18 taxpayer through payee statements (as so de19 fined). 

20 (B) The number of payee statements (as 

21 so defined) furnished by the taxpayer. 

22 (C) Such other information as required by 

23 the Secretary with respect to payments in con24 nection with— 

25 (i) goods, and 


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1 (ii) services. 

2 (b) REPORT ON IMPROVING VOLUNTARY COMPLI3 ANCE BY SOLE PROPRIETORS.— 

4 (1) IN GENERAL.—Not later than 3 years after 

5 the date of the enactment of this Act, the Secretary 

6 of the Treasury shall submit to Congress a report 

7 setting forth recommendations on— 

8 (A) whether the Internal Revenue Service 

9 should provide additional assistance to first10 time Schedule C filers by means of regular com11 munications, a small business hotline, a pub12 lished resource guide, or automatic or com13 puter-generated ‘‘soft’’ notices, 

14 (B) ways in which the Internal Revenue 

15 Service can work with small businesses, trade 

16 representatives, tax preparation software firms, 

17 and paid preparer representatives to determine 

18 whether and how specific changes to existing 

19 education and guidance would help those filing 

20 the Schedule C, 

21 (C) ways to clarify the instructions for 

22 Schedule C to indicate that information returns 

23 may be required to be filed by sole proprietors 

24 who deduct expenses for wages, fees, and com25 missions, 


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1 (D) suggested changes to the Internal Rev2 enue Service’s electronic and computer-based 

3 system for filing information returns to accom4 modate those filing information returns on pay5 ments made to sole proprietors, including 

6 whether the Internal Revenue Service should 

7 develop an Internet-based system for filing in8 formation returns, 

9 (E) identification and analysis of the best 

10 practices that are utilized by States and by for11 eign governments with respect to encouraging 

12 voluntary tax compliance by sole proprietors, 

13 and ways these best practices may be adopted 

14 by the Internal Revenue Service, 

15 (F) whether, in the case of tax returns 

16 containing income from a trade or business, the 

17 inclusion of a checkbox or other indicator indi18 cating whether the taxpayer had a 1099–MISC 

19 filing requirement would affect voluntary com20 pliance by taxpayers, and 

21 (G) such other improvements with respect 

22 to improving voluntary compliance by sole pro23 prietors as the Secretary determines is appro24 priate. 


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1 (2) USE OF DATA.—The recommendations sub2 mitted in the report under paragraph (1) shall, 

3 wherever possible, be based on empirical data, agen4 cy-conducted tests, and quantitative evidence. 

5 SEC. 202. INCREASED ELECTRONIC FILING OF RETURNS. 

6 (a) PERSONS REQUIRED TO FILE SCHEDULE M– 

7 3.—Paragraph (2) of section 6011(e) is amended— 

8 (1) by redesignating subparagraphs (A) and 

9 (B) as subparagraphs (B) and (C), respectively, 

10 (2) by inserting before subparagraph (B), as so 

11 redesignated, the following new subparagraph: 

12 ‘‘(A) shall require any corporation or part13 nership that has assets in excess of 

14 $10,000,000 on the last day of the taxable year 

15 to file returns on magnetic media,’’, and 

16 (3) by inserting ‘‘except as provided in subpara17 graph (A),’’ before ‘‘shall not require’’ in subpara18 graph (B), as so redesignated. 

19 (b) REDUCTION OF THRESHOLD.—Subparagraph 

20 (B) of section 6011(e)(2), as redesignated by subsection 

21 (a), is amended by striking ‘‘at least 250 returns’’ and 

22 inserting ‘‘more than a de minimis number of returns (as 

23 determined by the Secretary)’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years ending after De3 cember 31, 2012. 

4 SEC. 203. CLARIFICATION OF ELECTRONIC FILING RE5 QUIREMENTS FOR PAID PREPARERS. 

6 (a) LOWER THRESHOLD FOR PAID PREPARERS.— 

7 Section 6011(e)(3)(B) is amended by striking ‘‘10’’ and 

8 inserting ‘‘5’’. 

9 (b) THRESHOLD BASED ON RETURNS PREPARED.— 

10 Paragraph (3) of section 6011(e) is amended— 

11 (1) by striking ‘‘filed’’ in subparagraph (A)(i) 

12 and inserting ‘‘prepared’’, and 

13 (2) by striking ‘‘file’’ in subparagraph (B) and 

14 inserting ‘‘prepare’’. 

15 (c) PENALTY.—Section 6695 is amended by adding 

16 at the end the following new subsection: 

17 ‘‘(h) FAILURE TO FILE RETURN ON MAGNETIC

18 MEDIA.—Any person who is a tax return preparer with 

19 respect to any individual income tax return and who must 

20 file such return on magnetic media pursuant to the re21 quirement of section 6011(e)(3) and fails to comply with 

22 the requirements of section 6011(e)(3) shall pay a penalty 

23 of $50 for such failure unless it is shown that such failure 

24 is due to reasonable cause and not due to willful neglect. 

25 The maximum penalty imposed under this subsection on 


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1 any person with respect to individual income tax returns 

2 filed during any calendar year shall not exceed $25,000.’’. 

3 (d) TECHNICAL AMENDMENT.—Section 

4 6011(e)(3)(A) is amended by striking ‘‘than’’ and insert5 ing ‘‘that’’. 

6 (e) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to returns filed for taxable years 

8 beginning after December 31, 2011. 

9 SEC. 204. REQUIREMENT THAT ELECTRONICALLY PRE10 PARED PAPER RETURNS INCLUDE 2D 

11 BARCODE. 

12 (a) IN GENERAL.—Subsection (e) of section 6011 is 

13 amended by adding at the end the following new para14 graph: 

15 ‘‘(5) SPECIAL RULE FOR RETURNS PREPARED

16 ELECTRONICALLY AND SUBMITTED ON PAPER.—The 

17 Secretary shall require that any return of tax which 

18 is prepared electronically, but is printed and filed on 

19 paper, bear a matrix code or 2D barcode which can, 

20 when scanned, convert such return to electronic for21 mat.’’. 

22 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

23 section 6011(e) is amended by striking ‘‘paragraph (3)’’ 

24 and inserting ‘‘paragraphs (3) and (5)’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to returns of tax the due date for 

3 which (including extensions) is after December 31, 2012. 

4 SEC. 205. AUTHORIZATION TO REQUIRE CERTAIN EM5 PLOYEE BENEFIT PLAN INFORMATION RE6 TURNS AND REPORTS TO BE FILED ELEC7 TRONICALLY. 

8 (a) IN GENERAL.—Paragraph (2) of section 6011(e), 

9 as amended by this Act, is amended by adding at the end 

10 the following new sentence: ‘‘Subparagraph (B) shall not 

11 apply in the case of a return or report required by section 

12 6057, 6058, or 6059.’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 this section shall apply to plan years beginning after De15 cember 31, 2012. 

16 TITLE III—ENHANCED 

17 INFORMATION REPORTING 

18 SEC. 301. AUTOMATIC REPORTING ON CERTAIN GOVERN19 MENT PAYMENTS FOR PROPERTY AND SERV20 ICES. 

21 (a) IN GENERAL.—Section 6041, as amended by the 

22 Comprehensive 1099 Taxpayer Protection and Repayment 

23 of Exchange Subsidy Overpayments Act of 2011, is 

24 amended by adding at the end the following new sub25 section: 


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1 ‘‘(h) APPLICATIONS TO GOVERNMENTAL UNITS.— 

2 For purposes of this section— 

3 ‘‘(1) TREATED AS PERSONS.—The term ‘per4 son’ includes any governmental unit (and any agency 

5 or instrumentality thereof). 

6 ‘‘(2) SPECIAL RULES.—In the case of any pay7 ment by a governmental entity or any agency or in8 strumentality thereof— 

9 ‘‘(A) subsection (a) shall be applied with10 out regard to the trade or business requirement 

11 contained therein, and 

12 ‘‘(B) any return under this section shall be 

13 made by the officer or employee having control 

14 of the payment or appropriately designated for 

15 the purpose of making such return. 

16 ‘‘(3) EXCEPTIONS.—This subsection shall not 

17 apply to such payments as the Secretary may specify 

18 in regulations prescribed after the date of the enact19 ment of this subsection. Such regulations may in20 clude— 

21 ‘‘(A) payments of interest, 

22 ‘‘(B) payments for real property, 

23 ‘‘(C) payments to entities exempt from tax 

24 or foreign governments, 

25 ‘‘(D) intergovernmental payments, 


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1 ‘‘(E) payments made pursuant to classified 

2 or confidential contracts, including contracts 

3 described in section 6050M(e)(3) with respect 

4 to which the requirements of section 

5 6050M(e)(2) are met, and 

6 ‘‘(F) any other payment with respect to 

7 which reporting is required under another pro8 vision of this title.’’. 

9 (b) CONFORMING AMENDMENTS TO RETURNS BY

10 GOVERNMENTS REGARDING PAYMENTS OF REMUNERA11 TION FOR SERVICES AND DIRECT SALES TO CORPORA12 TIONS.—Paragraph (3) of section 6041A(d) is amended— 

13 (1) by striking ‘‘BY FEDERAL EXECUTIVE

14 AGENCIES’’ in the heading, 

15 (2) by striking ‘‘by any Federal executive agen16 cy (as defined in section 6050M(b))’’ in subpara17 graph (A) and inserting ‘‘by any governmental entity 

18 or any agency or instrumentality thereof’’, and 

19 (3) by inserting ‘‘classified or confidential con20 tracts, including’’ after ‘‘services under’’ in subpara21 graph (B)(i). 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to payments made after December 

24 31, 2012. 


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1 SEC. 302. ADDITIONAL INFORMATION ON RETURNS RELAT2 ING TO MORTGAGE INTEREST. 

3 (a) IN GENERAL.—Paragraph (2) of section 

4 6050H(b) is amended by striking ‘‘and’’ at the end of sub5 paragraph (C), by redesignating subparagraph (D) as sub6 paragraph (G), and by inserting after subparagraph (C) 

7 the following new subparagraphs: 

8 ‘‘(D) the unpaid balance with respect to 

9 such mortgage, 

10 ‘‘(E) the address of the property securing 

11 such mortgage, and 

12 ‘‘(F) information with respect to whether 

13 the mortgage is a refinancing that occurred in 

14 such calendar year.’’. 

15 (b) PAYEE STATEMENTS.—Subsection (d) of section 

16 6050H is amended by striking ‘‘and’’ at the end of para17 graph (1), by striking the period at the end of paragraph 

18 (2) and inserting ‘‘, and’’, and by inserting after para19 graph (2) the following new paragraph: 

20 ‘‘(3) the information required to be included on 

21 the return under subparagraphs (D), (E), and (F) 

22 of subsection (b)(2).’’. 

23 (c) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to returns and statements the due 

25 date for which (determined without regard for extensions) 

26 is after December 31, 2012. 


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1 SEC. 303. IMPROVED INFORMATION REPORTING ON UNRE2 PORTED AND UNDERREPORTED FINANCIAL 

3 ACCOUNTS. 

4 (a) ELIMINATION OF MINIMUM INTEREST REQUIRE5 MENT.— 

6 (1) IN GENERAL.—Section 6049(a) is amended 

7 by striking ‘‘aggregating $10 or more’’ each place it 

8 appears. 

9 (2) CONFORMING AMENDMENTS.—Subpara10 graph (C) of section 6049(d)(5) is amended— 

11 (A) by striking ‘‘which involves the pay12 ment of $10 or more of interest’’, and 

13 (B) by striking ‘‘IN THE CASE OF TRANS14 ACTIONS INVOLVING $10 OR MORE’’ in the head15 ing. 

16 (3) EFFECTIVE DATE.—The amendments made 

17 by this subsection shall apply to returns filed after 

18 December 31, 2012. 

19 (b) REPORTING OF NON-INTEREST BEARING DEPOS20 ITS.— 

21 (1) IN GENERAL.—Subpart B of part III of 

22 subchapter A of chapter 61 is amended by inserting 

23 after section 6049 the following new section: 


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1 ‘‘SEC. 6049A. RETURNS REGARDING NON-INTEREST BEAR2 ING DEPOSITS. 

3 ‘‘(a) REQUIREMENT OF REPORTING.—Every person 

4 who holds a reportable deposit during any calendar year 

5 shall make a return according to the forms or regulations 

6 prescribed by the Secretary, setting forth the name and 

7 address of the person for whom such deposit was held. 

8 ‘‘(b) REPORTABLE DEPOSIT.—For purposes of this 

9 section— 

10 ‘‘(1) IN GENERAL.—The term ‘reportable de11 posit’ means— 

12 ‘‘(A) any amount on deposit with— 

13 ‘‘(i) a person carrying on the banking 

14 business, 

15 ‘‘(ii) a mutual savings bank, a savings 

16 and loan association, a building and loan 

17 association, a cooperative bank, a home18 stead association, a credit union, an indus19 trial loan association or bank, or any simi20 lar organization, 

21 ‘‘(iii) a broker (as defined in section 

22 6045(c)), or 

23 ‘‘(iv) any other person provided in 

24 regulations prescribed by the Secretary, or 

25 ‘‘(B) to the extent provided by the Sec26 retary in regulations, any amount held by an 


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1 insurance company, an investment company (as 

2 defined in section 3 of the Investment Company 

3 Act of 1940), or held in other pooled funds or 

4 trusts. 

5 ‘‘(2) EXCEPTIONS.—Such term shall not in6 clude— 

7 ‘‘(A) any amount with respect to which a 

8 report is made under section 6049, 

9 ‘‘(B) any amount on deposit with or held 

10 by a natural person, 

11 ‘‘(C) except to the extent provided in regu12 lations, any amount— 

13 ‘‘(i) held with respect to a person de14 scribed in section 6049(b)(4), 

15 ‘‘(ii) with respect to which section 

16 6049(b)(5) would apply if a payment were 

17 made with respect to such amount, or 

18 ‘‘(iii) on deposit with or held by a per19 son described in section 6049(b)(2)(C), or 

20 ‘‘(D) any amount for which the Secretary 

21 determines there is already sufficient reporting. 

22 ‘‘(c) STATEMENTS TO BE FURNISHED TO PERSONS

23 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 

24 ‘‘(1) IN GENERAL.—Every person required to 

25 make a return under subsection (a) shall furnish to 


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1 each person whose name is required to be set forth 

2 in such return a written statement showing— 

3 ‘‘(A) the name, address, and phone num4 ber of the information contact of the person re5 quired to make such return, and 

6 ‘‘(B) the reportable account with respect to 

7 which such return was made. 

8 ‘‘(2) TIME AND FORM OF STATEMENT.—The 

9 written statement under paragraph (1)— 

10 ‘‘(A) shall be furnished at a time and in a 

11 manner similar to the time and manner that 

12 statements are required to be filed under sec13 tion 6049(c)(2), and 

14 ‘‘(B) shall be in such form as the Sec15 retary may prescribe by regulations. 

16 ‘‘(d) PERSON.—For purposes of this section, the term 

17 ‘person’, when referring to the person for whom a deposit 

18 is held, includes any governmental unit and any agency 

19 or instrumentality thereof and any international organiza20 tion and any agency or instrumentality thereof.’’. 

21 (2) ASSESSABLE PENALTIES.— 

22 (A) FAILURE TO FILE RETURN.—Subpara23 graph (B) of section 6724(d)(1) is amended by 

24 striking ‘‘or’’ at the end of clause (xxii), by 

25 striking ‘‘and’’ at the end of clause (xxiv) and 


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1 inserting ‘‘or’’, and by inserting after clause 

2 (xxiv) the following new clause: 

3 ‘‘(xxvi) section 6049A (relating to re4 turns regarding non-interest bearing de5 posits), and’’. 

6 (B) FAILURE TO FILE PAYEE STATE7 MENT.—Paragraph (2) of section 6724(d) is 

8 amended by striking ‘‘or’’ at the end of sub9 paragraph (GG), by striking the period at the 

10 end of subparagraph (HH) and inserting ‘‘, or’’ 

11 and by inserting after subparagraph (HH) the 

12 following new subparagraph: 

13 ‘‘(II) section 6049A(c) (relating to returns 

14 regarding non-interest bearing deposits).’’. 

15 (3) CLERICAL AMENDMENT.—The table of sec16 tion for subpart B of part III of subchapter A of 

17 chapter 61 is amended by inserting after the item 

18 relating to section 6049 the following new item: 

‘‘Sec. 6049A. Returns regarding non-interest bearing deposits.’’. 

19 (4) EFFECTIVE DATE.—The amendments made 

20 by this subsection shall apply to returns filed after 

21 December 31, 2012. 


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1 TITLE IV—PAYMENTS TO 

2 CERTAIN CONTRACTORS 

3 SEC. 401. REQUIREMENTS FOR WITHHOLDING WITH RE4 SPECT TO PAYMENTS TO CONTRACTORS. 

5 (a) IN GENERAL.— 

6 (1) REQUIREMENT.—Paragraph (1) of section 

7 3406(a) is amended by striking ‘‘or’’ at the end of 

8 subparagraph (C), by inserting ‘‘or’’ at the end of 

9 subparagraph (D), and by inserting after subpara10 graph (D) the following new subparagraph: 

11 ‘‘(E) the Secretary has not provided 

12 verification to the payor that the TIN furnished 

13 by the payee is correct,’’. 

14 (2) APPLICATION ONLY TO CERTAIN TRANS15 ACTIONS.—Subsection (a) of section 3406 is amend16 ed by adding at the end the following new para17 graph: 

18 ‘‘(3) SUBPARAGRAPH (E) OF PARAGRAPH (1) 

19 APPLIES ONLY TO CERTAIN OTHER REPORTABLE

20 PAYMENTS.—Subparagraph (E) of paragraph (1) 

21 shall only apply to other reportable payments de22 scribed in subparagraph (B) of subsection (b)(3).’’. 

23 (3) PERIOD OF WITHHOLDING.— 

24 (A) IN GENERAL.—Section 3406(e) is 

25 amended by redesignating paragraph (5) as 


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1 paragraph (6) and by inserting after paragraph 

2 (4) the following new paragraph: 

3 ‘‘(5) NO MATCHING TIN.—In any case in which 

4 the Secretary has not provided verification to the 

5 payor that the TIN furnished by the payee is correct 

6 pursuant to subsection (a)(1)(E), subsection (a) 

7 shall apply to such payment and any subsequent 

8 such payment made by the payor after the date such 

9 TIN was submitted to the Secretary for verification 

10 until the payee furnishes another TIN in the manner 

11 required and such TIN is verified by the Secretary 

12 as correct.’’. 

13 (B) CONFORMING AMENDMENT.—Para14 graph (2) of section 3406(e) is amended by in15 serting ‘‘pursuant to subsection (a)(1)(B),’’ 

16 after ‘‘is incorrect’’. 

17 (b) VOLUNTARY WITHHOLDING.—Section 3402(p) is 

18 amended by redesignating paragraph (3) as paragraph (4) 

19 and by inserting after paragraph (2) the following new 

20 paragraph: 

21 ‘‘(3) CERTAIN PAYMENTS TO CONTRACTORS.— 

22 ‘‘(A) IN GENERAL.—If, at the time of any 

23 specified payment to any person, a request by 

24 such person is in effect that such payment be 

25 subject to withholding under this chapter, the 


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1 person making such payment shall deduct and 

2 withhold from such payment an amount equal 

3 to the rate in effect under such request. 

4 ‘‘(B) SPECIFIED PAYMENT.—For purposes 

5 of this paragraph, the term ‘specified payment’ 

6 means any payment described in subparagraph 

7 (A) or (B) of section 3406(b)(3). 

8 ‘‘(C) REQUEST.—A request to subject a 

9 specified payment to withholding shall be made 

10 at such time and in such manner as the Sec11 retary may by regulations prescribe, and shall 

12 specify a uniform percentage of withholding 

13 which is equal to any rate at which tax is im14 posed under subsection (a), (b), (c), or (d) of 

15 section 1, as appropriate,’’. 

16 (c) EFFECTIVE DATE.— 

17 (1) IN GENERAL.—Except as provided in para18 graph (2), the amendments made by this section 

19 shall apply to payments made after December 31, 

20 2012. 

21 (2) CERTIFICATION.—The amendments made 

22 by subsection (a) shall not take effect before the 

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1 ing the verification of taxpayer identification num2 bers submitted pursuant to section 3406(a)(1)(E) of 

3 the Internal Revenue Code of 1986 (as added by 

4 subsection (a)). 

5 SEC. 402. CONTINUOUS LEVY ON PAYMENTS TO MEDICAID 

6 PROVIDERS AND SUPPLIERS. 

7 (a) IN GENERAL.—Section 6331(h)(2) is amended by 

8 striking ‘‘and’’ at the end of subparagraph (B), by striking 

9 the period at the end of subparagraph (C) and inserting 

10 ‘‘, and’’, and by adding at the end the following new sub11 paragraph: 

12 ‘‘(D) any payment to any Medicaid pro13 vider or supplier under a State plan under title 

14 XIX of the Social Security Act.’’. 

15 (b) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to levies issued after December 31, 

17 2012. 

18 SEC. 403. LEVY AUTHORITY FOR PAYMENTS TO MEDICARE 

19 PROVIDERS WITH DELINQUENT TAX DEBT. 

20 (a) IN GENERAL.—Section 6331(h)(2), as amended 

21 by this Act, is amended by striking ‘‘and’’ at the end of 

22 subparagraph (C), by striking the period at the end of 

23 subparagraph (D) and inserting ‘‘, and’’, and by adding 

24 at the end the following new subparagraph: 


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1 ‘‘(E) any payment to any Medicare pro2 vider or supplier under title XVIII of the Social 

3 Security Act.’’. 

4 (b) 100 PERCENT LEVY.—Section 6331(h)(3) is 

5 amended by inserting ‘‘or to a provider or supplier de6 scribed in paragraph (2)(E)’’ after ‘‘Government’’. 

7 (c) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to payments after the date of the 

9 enactment of this Act. 

10 SEC. 404. 100 PERCENT LEVY FOR PAYMENTS TO FEDERAL 

11 VENDORS RELATING TO PROPERTY. 

12 (a) IN GENERAL.—Section 6331(h)(3) is amended by 

13 striking ‘‘goods or services’’ and inserting ‘‘property, 

14 goods, or services’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to levies issued after the date of 

17 the enactment of this Act. 

18 TITLE V—IMPROVED TAX AD19 MINISTRATION AND COORDI20 NATION 

21 SEC. 501. REQUIREMENT FOR PRISONS LOCATED IN U.S. TO 

22 PROVIDE INFORMATION FOR TAX ADMINIS23 TRATION. 

24 (a) IN GENERAL.—Subchapter B of chapter 61 is 

25 amended by redesignating section 6116 as section 6117 


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1 and by inserting after section 6115 the following new sec2 tion: 

3 ‘‘SEC. 6116. REQUIREMENT FOR PRISONS LOCATED IN 

4 UNITED STATES TO PROVIDE INFORMATION 

5 FOR TAX ADMINISTRATION. 

6 ‘‘(a) IN GENERAL.—Not later than September 15, 

7 2011, and annually thereafter, the head of the Federal 

8 Bureau of Prisons and the head of any State agency 

9 charged with the responsibility for administration of pris10 ons shall provide to the Secretary in electronic format a 

11 list with the information described in subsection (b) of all 

12 the inmates incarcerated within the prison system for any 

13 part of the prior 2 calendar years or the current calendar 

14 year through August 31. 

15 ‘‘(b) INFORMATION.—The information with respect 

16 to each inmate is— 

17 ‘‘(1) first, middle, and last name, 

18 ‘‘(2) date of birth, 

19 ‘‘(3) institution of current incarceration or, for 

20 released inmates, most recent incarceration, 

21 ‘‘(4) prison assigned inmate number, 

22 ‘‘(5) the date of incarceration, 

23 ‘‘(6) the date of release or anticipated date of 

24 release, 

25 ‘‘(7) the date of work release, 


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1 ‘‘(8) taxpayer identification number and wheth2 er the prison has verified such number, 

3 ‘‘(9) last known address, and 

4 ‘‘(10) any additional information as the Sec5 retary may provide. 

6 ‘‘(c) FORMAT.—The Secretary shall determine the 

7 electronic format of the information described in sub8 section (b).’’. 

9 (b) CLERICAL AMENDMENT.—The table of sections 

10 for such subchapter is amended by striking the item relat11 ing to section 6116 and by adding at the end the following 

12 new items: 

‘‘Sec. 6116. Requirement for prisons located in United States to provide information for tax administration. 

‘‘Sec. 6117. Cross reference.’’. 

13 SEC. 502. FACILITATION OF TAX COMPLIANCE WITH INDIAN 

14 TRIBAL GOVERNMENTS. 

15 (a) IN GENERAL.—Paragraph (5) of section 6103(b) 

16 is amended— 

17 (1) by striking ‘‘and’’ at the end of clause 

18 (ii)(III), 

19 (2) by striking the period at the end of clause 

20 (iii)(II) and inserting ‘‘, and’’, and 

21 (3) by adding at the end the following new 

22 clause: 

23 ‘‘(iv) for purposes of subsections 

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1 ment which imposes a tax on any income, 

2 wages, or other activity or transaction 

3 which is also taxed under any chapter of 

4 this title described in such subsection.’’. 

5 (b) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to disclosures made after the date 

7 of the enactment of this Act. 

8 SEC. 503. IMPROVEMENT IN ACCESS TO INFORMATION IN 

9 THE NATIONAL DIRECTORY OF NEW HIRES 

10 FOR TAX ADMINISTRATION PURPOSES. 

11 (a) IN GENERAL.—Paragraph (3) of section 453(i) 

12 of the Social Security Act (42 U.S.C. 653(i)) is amended 

13 to read as follows: 

14 ‘‘(3) ADMINISTRATION OF FEDERAL TAX

15 LAWS.—The Secretary of the Treasury shall have 

16 access to the information in the National Directory 

17 of New Hires for purposes of administering the In18 ternal Revenue Code of 1986.’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 this section shall take effect on the date of the enactment 

21 of this Act. 


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1 SEC. 504. CLARIFICATION OF TAXPAYER PRIVACY BY IM2 PROVEMENT OF INVESTIGATIVE DISCLO3 SURE STATUTE. 

4 (a) IN GENERAL.—Paragraph (6) of section 6103(k) 

5 is amended— 

6 (1) by inserting ‘‘(A) IN GENERAL.—’’ before 

7 ‘‘An internal revenue officer’’, and 

8 (2) by adding at the end the following new sub9 paragraph: 

10 ‘‘(B) IDENTITY DISCLOSURE.—Nothing in this 

11 section shall be construed to prohibit agents of the 

12 Department of the Treasury from identifying them13 selves, their organizational affiliation, the identity of 

14 the subject of an investigation, and the nature of 

15 such investigation when contacting third parties ei16 ther in writing or otherwise.’’. 

17 (b) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to disclosures after the date of the 

19 enactment of this Act. 

20 SEC. 505. AUTHORIZATION FOR FINANCIAL MANAGEMENT 

21 SERVICE RETENTION OF TRANSACTION FEES 

22 FROM LEVIED AMOUNTS. 

23 Notwithstanding any other provision of law, the Fi24 nancial Management Service may charge the Internal Rev25 enue Service, and the Internal Revenue Service may pay 

26 the Financial Management Service, a fee sufficient to 


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1 cover the full cost of implementing a continuous levy pro2 gram under subsection (h) of section 6331 of the Internal 

3 Revenue Code of 1986. Any such fee shall be based on 

4 actual levies made and shall be collected by the Financial 

5 Management Service by the retention of a portion of 

6 amounts collected by levy pursuant to that subsection. 

7 Amounts received by the Financial Management Service 

8 as fees under that subsection shall be deposited into the 

9 account of the Department of the Treasury under section 

10 3711(g)(7) of title 31, United States Code, and shall be 

11 collected and accounted for in accordance with the provi12 sions of that section. 

13 TITLE VI—CLARIFICATION OF 

14 PENALTIES AND LIABILITIES 

15 SEC. 601. CLARIFICATION OF PENALTY FOR FAILURE TO 

16 COMPLY WITH ELECTRONIC FILING RE17 QUIREMENTS. 

18 (a) IN GENERAL.—Part I of subchapter B of chapter 

19 68 is amended by inserting after section 6720C the fol20 lowing new section: 

21 ‘‘SEC. 6720D. FAILURE TO FILE CERTAIN RETURNS ELEC22 TRONICALLY. 

23 ‘‘(a) IN GENERAL.—Any person who fails to file a 

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1 tronic form as required under section 6011(e) shall pay 

2 a penalty equal to— 

3 ‘‘(1) $5,000, in the case of an organization re4 quired to file the return described in section 

5 6033(a)(1), and 

6 ‘‘(2) $25,000, in any other case. 

7 ‘‘(b) NO PENALTY FOR ADDITIONAL FAILURES.—No 

8 person shall pay more than one penalty under this section 

9 in a taxable year. 

10 ‘‘(c) EXCEPTION WHERE NO RETURN FILED.—If a 

11 penalty is imposed under section 6651(a)(1) or 6652(c)(1) 

12 with respect any failure, the penalty under subsection (a) 

13 shall not apply. 

14 ‘‘(d) DEFICIENCY PROCEDURES NOT TO APPLY.— 

15 Subchapter B of chapter 63 shall not apply in respect of 

16 the assessment or collection of any penalty imposed by this 

17 section.’’. 

18 (b) CLERICAL AMENDMENT.—The table of sections 

19 for part I of subchapter B of chapter 68 is amended by 

20 inserting after the item relating to section 6720C the fol21 lowing new item: 

‘‘Sec. 6720D. Failure to file certain returns electronically.’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to returns required to be filed on 

24 or after January 1, 2013. 


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1 SEC. 602. INCREASE IN PENALTY ON PAID PREPARERS WHO 

2 FAIL TO COMPLY WITH EARNED INCOME TAX 

3 CREDIT DUE DILIGENCE REQUIREMENTS. 

4 (a) IN GENERAL.—Section 6695(g) is amended by 

5 striking ‘‘$100’’ and inserting ‘‘$500’’. 

6 (b) EFFECTIVE DATE.—The amendment made by 

7 this section shall apply to returns required to be filed after 

8 December 31, 2012. 

9 SEC. 603. INCREASE IN PENALTIES FOR REPEATED AND 

10 WILLFUL FAILURE TO FILE TAX RETURN. 

11 (a) IN GENERAL.—Section 7203 is amended— 

12 (1) in the first sentence, by striking ‘‘Any per13 son’’ and inserting the following: 

14 ‘‘(a) IN GENERAL.—Any person’’, 

15 (2) in the third sentence, by striking ‘‘section’’ 

16 and inserting ‘‘subsection’’, and 

17 (3) by adding at the end the following new sub18 section: 

19 ‘‘(b) AGGRAVATED FAILURE TO FILE.— 

20 ‘‘(1) IN GENERAL.—In the case of any failure 

21 described in paragraph (2), the first sentence of sub22 section (a) shall be applied by substituting— 

23 ‘‘(A) ‘felony’ for ‘misdemeanor’, 

24 ‘‘(B) ‘$250,000 ($500,000’ for ‘$25,000 

25 ($100,000’, and 

26 ‘‘(C) ‘5 years’ for ‘1 year’. 


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1 ‘‘(2) FAILURE DESCRIBED.—A failure described 

2 in this paragraph is— 

3 ‘‘(A) a failure to make a return described 

4 in subsection (a) for any 3 taxable years occur5 ring during any period of 5 consecutive taxable 

6 years if the aggregate tax liability for such pe7 riod is not less than $50,000, or 

8 ‘‘(B) a failure to make a return by any 

9 person who has income attributable to conduct 

10 punishable as a felony under State or Federal 

11 law, where such income gives rise to a require12 ment to make a return.’’. 

13 (b) PENALTY MAY BE APPLIED IN ADDITION TO

14 OTHER PENALTIES.—Section 7204 is amended by strik15 ing ‘‘the penalty provided in section 6674’’ and inserting 

16 ‘‘the penalties provided in sections 6674 and 7203(b)’’. 

17 (c) EFFECTIVE DATE.—The amendments made by 

18 this section shall apply to returns required to be filed after 

19 December 31, 2012. 

20 SEC. 604. CLARIFICATION OF EMPLOYEE LEASING COMPA21 NIES LIABILITY FOR CLIENTS’ FEDERAL EM22 PLOYMENT TAXES. 

23 With respect to employment tax returns required to 

24 be filed with respect to wages paid on or after January 


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1 1, 2013, the Secretary of the Treasury shall issue regula2 tions establishing— 

3 (1) standards for holding employee leasing com4 panies jointly and severally liable with their clients 

5 for Federal employment taxes under chapters 21, 

6 22, 23, and 24 of the Internal Revenue Code of 

7 1986, and 

8 (2) standards for holding such companies solely 

9 liable for such taxes. 

10 SEC. 605. EXTENSION OF STATUTE OF LIMITATIONS WHERE 

11 STATE OR LOCAL ADJUSTMENT AFFECTS 

12 FEDERAL TAX LIABILITY. 

13 (a) IN GENERAL.—Subsection (c) of section 6501 is 

14 amended by adding at the end the following new para15 graph: 

16 ‘‘(11) STATE AND LOCAL TAX ADJUSTMENTS

17 AFFECTING FEDERAL TAX LIABILITY.—If any re18 turn, amended return, or other adjustment with re19 spect to State or local taxes results in an increase 

20 of Federal tax liability for a taxable year (as re21 ported by the taxpayer in an amended Federal re22 turn or as determined by the Secretary on the basis 

23 of information sharing with State or local revenue 

24 authorities), the period for the assessment of such 

25 increase shall not expire until the later of— 


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1 ‘‘(A) 1 year after the date the taxpayer 

2 first files an amended Federal return reflecting 

3 such increase, or 

4 ‘‘(B) 2 years after the date the Secretary 

5 first receives information relating to such in6 crease from State or local revenue authorities. 

7 Any further amended returns or information sharing 

8 with respect to such increase shall not further ex9 tend the period specified in the preceding sentence.’’. 

10 (b) CREDITS AND REFUNDS.— 

11 (1) IN GENERAL.—Subsection (b) of section 

12 6511 is amended by adding at the end the following 

13 new paragraph: 

14 ‘‘(3) STATE AND LOCAL TAX ADJUSTMENTS AF15 FECTING FEDERAL TAX LIABILITY.—If any return, 

16 amended return, or other adjustment with respect to 

17 State or local taxes results in an increase of Federal 

18 tax liability for a taxable year (as reported by the 

19 taxpayer in an amended Federal return or as deter20 mined by the Secretary on the basis of information 

21 sharing with State or local revenue authorities), the 

22 period during which the taxpayer may claim a credit 

23 or refund offsetting such increase shall not expire 

24 until the later of— 


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1 ‘‘(A) 1 year after the date the taxpayer 

2 first files an amended Federal return reflecting 

3 such increase and stipulating that such amend4 ment relates to an adjustment with respect to 

5 State or local tax, or 

6 ‘‘(B) 2 years after the date the Secretary 

7 first receives information relating to such in8 crease from State or local revenue authorities. 

9 Any further amended returns or information sharing 

10 with respect to such increase shall not further ex11 tend the period specified in the preceding sentence.’’. 

12 (2) CONFORMING AMENDMENT.—Paragraph (1) 

13 of section 6511(b) is amended by striking ‘‘No cred14 it’’ and inserting ‘‘Except as provided in paragraph 

15 (3), no credit’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to returns the due date for which 

18 is after December 31, 2012. 

19 SEC. 606. ELIMINATION OF RESTRICTION ON OFFSETTING 

20 REFUNDS FROM FORMER RESIDENTS. 

21 (a) IN GENERAL.—Section 6402(e) (relating to col22 lection of past-due, legally enforceable State income tax 

23 obligations) is amended by striking paragraph (2) and by 

24 redesignating paragraphs (3), (4), (5), (6), and (7) as 

25 paragraphs (2), (3), (4), (5), and (6), respectively. 


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1 (b) ELIMINATION OF 10-YEAR RESTRICTION.—Sub2 paragraph (B) of section 6402(e)(5) is amended— 

3 (1) by striking ‘‘, and which has not been delin4 quent for more than 10 years’’, and 

5 (2) by inserting ‘‘and’’ after ‘‘not collected,’’. 

6 (c) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to refunds payable for taxable 

8 years ending after the date of the enactment of this Act. 

9 TITLE VII—UNDERSTANDING 

10 THE TAX GAP 

11 SEC. 701. TAX GAP STRATEGY AND REPORTS. 

12 (a) COMPREHENSIVE STRATEGY FOR REDUCING THE

13 TAX GAP.— 

14 (1) IN GENERAL.—The Secretary of the Treas15 ury shall submit to Congress comprehensive and de16 tailed reports on a strategy for reducing the tax gap. 

17 Such reports shall include— 

18 (A) a detailed assessment of the major 

19 sources and causes of the tax gap, and 

20 (B) a goal for reducing the tax gap and 

21 components of the tax gap. 

22 (2) TIME FOR SUBMITTING REPORTS.— 

23 (A) INITIAL REPORT.—The first report re24 quired under paragraph (1) shall be submitted 

25 not later than December 31, 2012. 


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1 (B) SUBSEQUENT REPORTS.—The Sec2 retary of the Treasury shall submit additional 

3 reports under paragraph (1) not later than 5 

4 years after the date on which the most recent 

5 preceding report was submitted under para6 graph (1). 

7 (3) USE OF DATA.—Any report submitted 

8 under this subsection shall, wherever possible, be 

9 based on empirical data, agency-conducted tests, and 

10 quantitative evidence. 

11 (b) ANNUAL TAX GAP REPORT.— 

12 (1) IN GENERAL.—Not later than December 31 

13 of each year beginning after 2012, the Secretary of 

14 the Treasury shall submit to Congress a report on 

15 the most recent estimates of the tax gap. 

16 (2) MATTERS INCLUDED.—The report sub17 mitted under paragraph (1) shall include— 

18 (A) an update on any studies and pilot 

19 projects of the Internal Revenue Service associ20 ated with specific areas of the tax gap, 

21 (B) an assessment of how the Internal 

22 Revenue Service has aligned its enforcement 

23 and compliance efforts with the goals and rec24 ommendations set forth in the most recent re25 port submitted under subsection (a), 


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1 (C) a detailed assessment of how effec2 tively the Internal Revenue Service is making 

3 full use of the collected information to deter4 mine the causes of, and potential solutions for, 

5 the tax gap, 

6 (D) a detailed assessment of the benefits 

7 gained from the tax gap estimation and analysis 

8 efforts, including service and enforcement im9 provements, regulatory changes, and statutory 

10 changes resulting from those efforts, and 

11 (E) an update and detailed assessment of 

12 enforcement initiatives of the Internal Revenue 

13 Service, including information sharing between 

14 the Internal Revenue Service and State revenue 

15 agencies. 

16 (c) TAX GAP.—For purposes of this section, the term 

17 ‘‘tax gap’’ means, with respect to any tax year, the dif18 ference between— 

19 (1) the amount of taxes owed by taxpayers 

20 under the Internal Revenue Code of 1986 for such 

21 tax year, and 

22 (2) the amount of revenue paid voluntarily and 

23 timely by taxpayers under such Code for such tax 

24 year. 


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1 SEC. 702. STUDIES ON THE IMPACT OF TAX GAP LEGISLA2 TION. 

3 (a) STUDY OF RETURN ON INVESTMENT.— 

4 (1) MATTERS STUDIED.— 

5 (A) IN GENERAL.—The Secretary of the 

6 Treasury shall conduct a study on— 

7 (i) the revenue increases, and 

8 (ii) the costs, 

9 with respect to tax gap legislation. 

10 (B) TAX GAP LEGISLATION.—For purposes 

11 of this section, the term ‘‘tax gap legislation’’ 

12 means the provisions of, and amendments made 

13 by— 

14 (i) this Act, 

15 (ii) section 403 of the Energy Im16 provement and Extension Act of 2008 (re17 lating to broker reporting of customer’s 

18 basis in securities transactions), 

19 (iii) section 3091 of the Housing As20 sistance Tax Act of 2008 (relating to re21 turns relating to payments made in settle22 ment of payment card and third party net23 work transactions), and 

24 (iv) such other Acts, as determined 

25 appropriate by the Secretary of the Treas26 ury. 


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1 (2) REVENUE INCREASES.—The revenue in2 creases considered in the study conducted under 

3 paragraph (1) shall include— 

4 (A) revenue collected from enforcement ef5 forts, 

6 (B) revenue increases from voluntary com7 pliance by taxpayers in response to tax gap leg8 islation (including cases in which the Internal 

9 Revenue Service has not yet effectively or fully 

10 implemented a data matching system), and 

11 (C) any other revenue, administrative, or 

12 other cost savings to the Government and to 

13 taxpayers. 

14 (3) COSTS.—The costs considered in this study 

15 conducted under paragraph (1) shall include— 

16 (A) administrative and other costs of the 

17 Internal Revenue Service, 

18 (B) compliance costs to taxpayers, and 

19 (C) compliance costs to any affected third 

20 parties, such as persons required to file infor21 mation returns. 

22 (b) REPORTS.— 

23 (1) INITIAL REPORT.— 

24 (A) IN GENERAL.—Not later than 4 years 

25 after the date of the enactment of this Act, the 


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1 Secretary of the Treasury shall submit to Con2 gress a report on the matters studied under 

3 subsection (a). 

4 (B) ASSESSMENT WITH RESPECT TO DATA

5 LIMITATIONS.—The report under subparagraph 

6 (A) shall include— 

7 (i) an assessment of the limitations of 

8 the Internal Revenue Service with respect 

9 to the collection of data used to assess the 

10 matters studied under subsection (a), and 

11 (ii) recommendations regarding steps 

12 to overcome any such limitations. 

13 (2) FOLLOW-UP REPORT.— 

14 (A) IN GENERAL.—Not later than 3 years 

15 after the date on which the report under para16 graph (1) is submitted, the Secretary of the 

17 Treasury shall submit to Congress a follow-up 

18 report on the matters studied under subsection 

19 (a). 

20 (B) ASSESSMENT WITH RESPECT TO IM21 PLEMENTATION OF RECOMMENDATIONS.—The 

22 report under subparagraph (A) shall include an 

23 assessment on the implementation of the rec24 ommendations included in the report submitted 

25 under paragraph (1). 


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1 SEC. 703. REPORTS ON WORKER MISCLASSIFICATION. 

2 (a) IN GENERAL.—The Secretary of the Treasury 

3 shall submit to Congress the following reports on worker 

4 misclassification: 

5 (1) A report each fiscal year on worker classi6 fication which shall include the total number of ex7 aminations of employers initiated because of sus8 pected worker classification issues, the total number 

9 of examinations that included determinations on 

10 worker classification issues, the amount of additional 

11 tax liabilities associated with worker classification 

12 enforcement actions, the number of workers reclassi13 fied as a result of these actions, the number of re14 quests for Determination of Worker Status (Form 

15 SS–8), and technical guidance on how to understand 

16 the data provided in the report. 

17 (2) A report each fiscal year in which new sta18 tistically valid data is compiled and interpreted on 

19 worker classification, prepared on the basis of infor20 mation gathered during an Employment Tax Study 

21 conducted by the National Research Program (NRP) 

22 of the Internal Revenue Service. Such report shall 

23 provide statistical estimates of the number of em24 ployers misclassifying workers, the number of work25 ers misclassified, the industries involved, data inter26 pretations and conclusions, and a description of the 


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1 impact of improper worker classification on the em2 ployment tax gap. 

3 (b) TIME FOR SUBMITTING REPORTS.—The first re4 ports required under subsection (a) shall be submitted not 

5 later than 3 years after the date of the enactment of this 

6 Act. 

Æ 


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