IRS must get supervisor sign-off before proposing any tax penalty
H.R. 5346 — Fair and Accountable IRS Reviews Act · Filed by Glenn Grothman (R-WI) · 1 cosponsor · Introduced Sep 15, 2025 · Passed chamber
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What it does
This bill amends the tax code to require that before the IRS proposes any penalty to a taxpayer, a supervisor must personally approve the penalty determination in writing. It defines 'immediate supervisor' as the person to whom the IRS employee making the determination reports. The requirement applies to penalties assessed after December 31, 2025.
Why we flagged it
The bill is a narrow procedural amendment to tax administration, requiring supervisory approval before penalty assessment. It does not change substantive tax law, rates, or liability—only the administrative process by which penalties are reviewed and communicated.
What the text implies
- Supervisory approval requirement may create bottlenecks in IRS penalty processing, potentially delaying collection of legitimate penalties and reducing enforcement deterrence.
- The definition of 'immediate supervisor' as 'the person to whom such individual reports' may be ambiguous in matrix or decentralized IRS organizational structures, creating litigation risk over who qualifies.
The full analysis lists 4 implications of this text.
Who it affects
Taxpayers gain a procedural safeguard requiring supervisory review before penalties are proposed, which may reduce arbitrary or erroneous penalties and increase transparency in IRS decision-making. However, the requirement may also delay legitimate penalty assessments, reduce IRS enforcement capacity, and shift compliance costs to the agency—effects that could indirectly reduce tax compliance or increase audit burden on compliant taxpayers.