The 2026 Purple Book presents a concise summary of 71 legislative recommendations 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.

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We highlight the following legislative recommendations for particular attention, in no specific order:

• Authorize the IRS to establish minimum standards for federal tax return preparers and to revoke the identification numbers of sanctioned preparers (Recommendation #5). The IRS receives over 160 million individual income tax returns each year, and most are prepared by paid tax return preparers. While some tax return preparers must meet licensing requirements (g., certified public accountants, attorneys, and enrolled agents), most tax return preparers are not credentialed. Numerous studies have found that non-credentialed preparers disproportionately prepare inaccurate returns, causing some taxpayers to overpay their taxes and other taxpayers to underpay, which subjects them to penalties and interest charges. Non-credentialed preparers also drive much of the high improper payment rate attributable to wrongful Earned Income Tax Credit (EITC) claims. In FY 2024, 27.3% of EITC payments, amounting to $15.9 billion, were estimated to be improper, and among tax returns claiming the EITC prepared by paid tax return preparers, 96% of the total dollar amount of EITC audit adjustments was attributable to returns prepared by non-credentialed preparers. Federal and state laws generally require lawyers, doctors, securities dealers, financial planners, actuaries, appraisers, contractors, motor vehicle operators, barbers, and beauticians to obtain licenses or certifications. The Obama, first Trump, and Biden administrations each recommended that Congress authorize the Treasury Department to establish minimum standards for federal tax return preparers. To protect taxpayers and the public fisc, we likewise recommend that Congress provide this authorization as well as authorization for the Treasury Department to revoke the Preparer Tax Identification Numbers (PTINs) of preparers who have been sanctioned for improper conduct.
• Expand the Tax Court’s jurisdiction to hear refund cases (Recommendation #43). Under current law, taxpayers seeking to challenge an IRS tax due adjustment can file a petition in the U.S. Tax Court, while taxpayers who have paid their tax and are seeking a refund must file suit in a U.S. district court or the U.S. Court of Federal Claims. Litigating in a U.S. district court or the Court of Federal Claims is generally more challenging – filing fees are more costly, rules of civil procedure are complex, the judges generally do not have tax expertise, and proceeding without a lawyer is difficult and uncommon. By contrast, taxpayers litigating their cases in the Tax Court face a low $60 filing fee, face less formal procedural rules, are generally assured their positions will be fairly considered, even if they don’t present them well, because of the tax expertise of the Tax Court’s judges, and thus can more easily represent themselves without a lawyer. For these reasons, the requirement that refund claims be litigated in a U.S. district court or the Court of Federal Claims effectively deprives many taxpayers of the right to judicial review of an IRS refund disallowance. In FY 2024, about 97% of all tax-related litigation was adjudicated in the Tax Court. We recommend Congress expand the jurisdiction of the Tax Court to give taxpayers the option to litigate all tax disputes, including refund claims, in that forum.
• Enable the Low Income Taxpayer Clinic Program to assist more taxpayers in controversies with the IRS (Recommendation #64). The Low Income Taxpayer Clinic (LITC) program assists low-income taxpayers and taxpayers who speak English as a second language. When the LITC program was established as part of the IRS Restructuring and Reform Act of 1998, the law limited annual grants to no more than $100,000 per clinic. The law also imposed a 100% “match” requirement so a clinic cannot receive more in grants than it raises from other sources. The nature and scope of the LITC Program have evolved considerably since 1998, and those requirements are preventing the program from expanding assistance to a larger universe of eligible taxpayers. We recommend Congress remove the per-clinic cap and allow the IRS to reduce the match requirement to 25%, where doing so would expand coverage to additional taxpayers.
• Require the IRS to timely process claims for credit or refund (Recommendation #2). Millions of taxpayers file refund claims with the IRS each year. Under current law, there is no requirement that the IRS pay or deny them. It may simply ignore them. The taxpayers’ only remedy is to file suit in a U.S. district court or the U.S. Court of Federal Claims. For many taxpayers, that is not a realistic or affordable option. The absence of a processing requirement is a poster child for non-responsive government. While the IRS generally does process refund claims, the claims can and sometimes do spend months and even years in administrative limbo within the IRS. We recommend Congress require the IRS to act on claims for credit or refund within one year and impose certain consequences on the IRS for failing to do so.
• 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 (Recommendation #58). For taxpayers to claim their children for purposes of the Child Tax Credit (CTC) or EITC, their children must have Social Security numbers (SSNs) by the tax return filing deadline. The intent of this requirement is to limit the tax credits to U.S. persons, but in a variety of circumstances, taxpayers cannot or do not obtain SSNs for their children in time and lose out on thousands of dollars of tax credits for which they otherwise qualify. For example, a taxpayer may otherwise be eligible to claim a child born on December 31 but not receive the child’s SSN by April 15 and therefore miss out on the credits. Among taxpayers who lose out on the credits: military and other expatriate families stationed overseas who must take additional steps to obtain SSNs; parents who don’t obtain SSNs in time when a birth takes place outside a hospital setting and the parents don’t file a timely SSN application, a hospital misplaces the paperwork, the Social Security Administration (SSA) makes a processing error, or the parents move and their mail isn’t forwarded; parents of adopted children who have not yet received SSNs; parents of children who are born and die before the SSA issues an SSN; and taxpayers who do not obtain SSNs for their children due to religious beliefs (g., some Amish sects). In these circumstances, U.S. citizens are being denied valuable benefits intended by Congress. We recommend Congress allow taxpayers who obtain SSNs after the filing deadline to timely file amended returns to claim CTC and EITC benefits or, in the case of those opposed to SSNs for religious reasons, to submit other forms of substantiation.
• Provide consistent tax relief for victims of federally declared disasters (Recommendation #53). After a hurricane, flood, wildfire, or other natural disaster has destroyed homes or businesses, Congress often passes legislation to provide tax relief to those affected. But there is no consistency regarding whether or which forms of tax relief are granted. Taxpayers may receive extensive relief, some relief, or no relief at all. Relief, even when granted, generally is not authorized until months later. The current ad hoc approach creates uncertainty for disaster victims and their communities and often means that similarly situated taxpayers receive different results. We recommend Congress determine which forms of tax relief to grant in the case of federally declared disasters and provide that relief automatically. In the alternative, and recognizing that different types of disasters may warrant different forms of relief, we recommend Congress authorize a menu of relief options and direct the Treasury Department to prescribe regulations for determining which forms of relief to provide based on the nature and severity of the disaster.
• Extend reasonable cause defense for the failure-to-file penalty to taxpayers who rely on return preparers to e-file their returns (Recommendation #31). The tax law imposes a penalty of up to 25% of the tax due for failing to file a timely tax return, but the penalty is waived where a taxpayer can show the failure was due to “reasonable cause.” Most taxpayers pay tax return preparers to prepare and file their returns for them. In 1985, when all returns were filed on paper, the Supreme Court held that a taxpayer’s reliance on a preparer to file a tax return did not constitute reasonable cause to excuse the failure-to-file penalty if the return was not timely filed. In 2023, a U.S. Court of Appeals held that reasonable cause is also not a defense when a taxpayer relies on a preparer to file a tax return electronically. For several reasons, it is often much more difficult for taxpayers to verify that a return preparer has e-filed a return than to verify that a return has been paper-filed. Unfortunately, many taxpayers are not familiar with the electronic filing process and do not have the tax knowledge to ask for the right document or proof of filing. Penalizing taxpayers who engage preparers and do their best to comply with their tax obligations is grossly unfair and undermines the congressional policy to encourage e-filing. Under the court’s ruling, astute taxpayers would be well advised to ask their preparers to give them paper copies of their prepared returns and then transmit the returns by certified mail themselves so they can ensure compliance. We recommend Congress clarify that reliance on a preparer to e-file a tax return may constitute reasonable cause for penalty relief and direct the Secretary to issue regulations detailing what constitutes ordinary business care and prudence for purposes of evaluating reasonable cause requests.
• Promote consistency with the Supreme Court’s Boechler decision by making the time limits for bringing all tax litigation subject to equitable judicial doctrines (Recommendation #45). Taxpayers who seek judicial review of adverse IRS determinations generally must file petitions in court by statutorily imposed deadlines. The courts have split over whether filing deadlines may be waived under extraordinary circumstances. Most tax litigation takes place in the U.S. Tax Court, where taxpayers are required to file petitions for review within 90 days of the date on a notice of deficiency (150 days if addressed to a person outside the United States). The Tax Court has held it lacks the legal authority to waive the 90-day (or 150-day) filing deadline even, to provide a stark example, if the taxpayer had a heart attack on Day 75 and remained in a coma until after the filing deadline. The Supreme Court has held that filing deadlines are subject to “equitable tolling” in the context of Collection Due Process hearings. We recommend Congress harmonize the conflicting court rulings by providing that all filing deadlines to challenge the IRS in court are subject to equitable tolling where timely filing was impossible or impractical.
• Strengthen incentives for IRS contractors to ensure their employees keep taxpayer return information confidential (Recommendation #70). The IRS annually receives about 11 million paper-filed Forms 1040, U.S. Individual Income Tax Return, nine million paper-filed Forms 941, Employer’s Quarterly Federal Tax Return, and two million paper-filed Forms 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. In the past, IRS employees have transcribed these returns on IRS campuses. Beginning in 2026, the IRS plans to send a large portion of these returns to private contractors to scan in their own facilities. Particularly in light of the recent case involving Charles Littlejohn, a contractor’s employee who stole the tax return information of thousands of taxpayers and provided it to news organizations, we recommend Congress strengthen penalties applicable to government contractors whose employees improperly inspect or disclose tax return information to incentivize them to implement and maintain more stringent systemic safeguards.
• Provide that assessable penalties are subject to deficiency procedures (Recommendation #14). The IRS ordinarily must issue a notice of deficiency giving taxpayers the right to appeal an adverse IRS determination in the U.S. Tax Court before it may assess tax. In limited situations, however, the IRS may assess penalties without first issuing a notice of deficiency. These penalties are generally subject to judicial review only if a taxpayer first pays the penalties and then sues for a refund. Assessable penalties can be substantial, sometimes running into the millions of dollars. Under current IRS interpretation, these penalties include but are not limited to international information reporting penalties under IRC §§ 6038, 6038A, 6038B, 6038C, and 6038D. The inability of taxpayers to obtain judicial review on a preassessment basis and the requirement that taxpayers pay the penalties in full to obtain judicial review on a post-assessment basis can effectively deprive taxpayers of the right to judicial review. To ensure taxpayers have an opportunity to obtain judicial review before they are required to pay often-substantial penalties they do not believe they owe, we recommend Congress require the IRS to issue a notice of deficiency before imposing assessable penalties.