Ways and Means Approves Bipartisan Tax Relief For Vulnerable Americans, Key Reforms to Make IRS More Taxpayer Friendly

WASHINGTON, D.C. - Natural disaster victims and survivors of sexual assault will receive much needed tax relief, pre-school teachers will be able to deduct certain out-of-pocket classroom expenses, and the IRS will modernize its customer service and improve the agency's treatment of tax fraud whistleblowers thanks to legislation approved today by the Ways and Means Committee.

Five bills aimed at supporting Americans in need of relief and making the IRS more taxpayer-friendly received strong bipartisan support.

Ways and Means Committee Chairman Jason Smith (MO-08) released the following statement:

"The Ways and Means Committee continues to champion bipartisan solutions to address key challenges facing the American people. Whether it is ending the unfair tax treatment of sexual assault survivors, supporting early-childhood educators, or helping victims of natural disasters have more resources to rebuild, the Committee has taken important steps to support Americans most in need of assistance. At the same time, reforms to the IRS Whistleblower Program will help maintain the integrity of our tax code and combat fraud, a key priority of this Committee. Customer service upgrades and more online access to information will go a long way toward modernizing the IRS and providing the type of experience American taxpayers deserve. I commend my colleagues for working across the aisle to find common cause on these critical reforms."

Survivor Justice Tax Prevention Act (H.R. 2347)

• Excludes from gross income all compensatory damages awarded to sexual assault victims, regardless of proof of physical injury.
  • This exclusion applies to all compensatory damages and settlements attributable to a sexual act or sexual contact.
• Makes it easier for victims to prove to the IRS that a sexual assault occurred by allowing a victim to present a court decision or settlement agreement as presumptive evidence.
  • Ensures victims are not forced to relitigate their case with the IRS, should the claim be audited.
  • Prohibits the IRS from requiring a sexual assault victim to provide medical records in order to substantiate the claim.
• Not all sexual assaults result in observable physical injuries; therefore, under current law, some victims of sexual assault may be required to pay taxes on the damages they receive.

Read a fact sheet on the bill here.

The bill passed the Committee 41-0.

Doug LaMalfa Federal Disaster Tax Relief Certainty Act (H.R. 5366)

• Extends a more generous treatment of personal casualty losses to disasters that occurred prior to January 1, 2027.
  • Under current law, taxpayers can deduct personal casualty losses, subject only to minor limitations, for disasters that occurred between December 28, 2019, and July 4, 2025. However, this rule expires for disasters after July 4, 2025 - meaning fewer disaster victims are currently eligible for a deduction when they suffer disaster-related losses.
• Excludes wildfire relief payments from taxable income regardless of when they are received, so long as the wildfire disaster declaration occurs after December 31, 2014, and before January 1, 2027.
• As a result of this legislation, more taxpayers who have been harmed by disasters and wildfires will be eligible for these tax benefits.

Read a fact sheet on the bill here.

The bill passed the Committee 43-0.

Supporting Early-childhood Educators' Deductions Act (SEED Act) (H.R. 5334)

• Expands the definition of "eligible educators" to include early childhood educators, including early childhood teachers, instructors, counselors, principals, and aides.
  • As a result of this change, individuals who teach or care for children ages 0 to 5 would be able to deduct out-of-pocket professional expenses - including expenditures for participation in professional development courses, and supplementary education materials used in the classroom, such as books, supplies, and equipment.
• The deduction is available for up to $350 of expenses per year for taxpayers who take the standard deduction; additionally, taxpayers that itemize deductions may also deduct expenses above $350.

Read a fact sheet on the bill here.

The bill passed the Committee 43-0.

Taxpayer Experience Improvement Act (H.R. 7971)

• Requires the IRS to establish a user-friendly real-time dashboard on IRS.gov to provide taxpayers with information on call volume, backlogs, wait times, and the availability of callbacks.
• Requires upgrades to the IRS's "Where's my Refund?" tool, "Where's my Amended Return?" tool, and individual online accounts.
  • Providing more individualized information to taxpayers about the status of their refunds, reducing taxpayer questions and confusion.
• Expands online accounts so taxpayers can view their balance due, tax transcript, and certain returns, and allows them to make payments and see whether certain notices were issued.
• Clarifies that by 2028 the IRS should provide taxpayers with the option to receive a callback when calls are not answered within 5 minutes.
• In 2023, GAO found that about 33% of IRS information technology (IT) applications and 23% of IRS IT software ranged from 25 to 64 years old.
  • With this updated technology, the IRS is able to focus more resources on combatting fraud in real time.

Read a fact sheet on the bill here.

The bill passed the Committee 43-0.

IRS Whistleblower Program Improvement Act (H.R. 7959)

• Provides a more favorable standard of review in whistleblower appeals before the U.S. Tax Court, allowing new evidence to be admitted to the record.
• Protects whistleblowers from being compelled to identify themselves publicly when pursuing appeals before the court - allowing them to proceed anonymously when challenging an IRS action.
• Encourages timely award payments to whistleblowers by imposing interest if the IRS fails to issue a preliminary award recommendation within 12 months.
• Aligns the tax treatment of attorney's fees for IRS whistleblowers with the standard applied under other federal whistleblower programs.
• The IRS Whistleblower Program is a critical anti-fraud tool that leverages insider knowledge to recover billions in unpaid taxes, deterring noncompliance and closing a tax gap that the IRS cannot fully address through its own audit capacity.
  • Since 2007, the IRS has collected over $7.37 billion attributable to whistleblower information.

Read a fact sheet on the bill here.

The bill passed the Committee 41-0.