The U.S. House of Representatives voted unanimously this week to pass a bipartisan bill that would stop the Internal Revenue Service from contacting a taxpayer’s bank or employer without first giving that individual a clear chance to provide the records themselves.
The Taxpayer Notification and Privacy Act, led by Representative Greg Steube (R-Fla.) and Representative Jimmy Panetta (D-Calif.), seeks to close a long-standing loophole in how the federal government conducts financial investigations.
Under current rules, the IRS is technically required to notify people before reaching out to third parties like neighbors, vendors, or banks. However, lawmakers argue these notices are often so vague that taxpayers have no idea what the agency is actually looking for.
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The new legislation, H.R. 6495, would force the IRS to identify specific items of information they want and grant taxpayers a minimum of 45 days to resolve the matter before the agency goes behind their backs.
“At its core, this common-sense legislation is a simple due-process idea,” Rep. Steube said following the vote. “Before the IRS goes to your bank, your employer, your vendor, or another third party for information about you—when you can reasonably provide that information yourself—you should be told what they’re looking for and given a fair chance to respond.”
The bill’s supporters emphasize that the current system can unfairly damage a person’s professional reputation or credit standing.
Ways and Means Committee Chairman Jason Smith (R-Mo.) noted that the IRS currently has the power to solicit sensitive data without a taxpayer’s knowledge, which he called “unacceptable.” He argued that the bill protects a person’s livelihood by ensuring the agency is held accountable to principles of fairness.
Rep. Panetta pointed out that even honest Americans can be “blindsided” by the agency’s current tactics. He explained that the act ensures taxpayers are informed through “carefully tailored, detailed notices” so they have sufficient time to provide documentation.
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“Taxpayers who have followed the law shouldn’t fear the IRS soliciting sensitive information behind their backs,” Panetta added.
While the House move marks a major hurdle cleared, the bill now moves to the Senate. Senator John Barrasso (R-Wyo.), who introduced the companion version in the upper chamber, praised the leadership shown in the House and vowed to continue the push to turn the bill into law.
“This bill will safeguard the rights of hardworking Americans and small businesses by preventing the IRS from going behind their backs to solicit personal financial information,” Barrasso said.
The legislation has also gained formal backing from the National Taxpayers Union. If signed into law, the new requirements for specific notices would take effect 12 months after the date of enactment, providing a transition period for the agency to update its protocols.
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