This act mandates personal approval by a supervisor or higher-level official before the IRS can issue written communication regarding a tax penalty assessment.
Glenn Grothman
Representative
WI-6
The Fair and Accountable IRS Reviews Act mandates a new layer of oversight for tax penalty assessments. This legislation requires that before any penalty notice is sent to a taxpayer, the initial decision must receive personal approval from the employee's immediate supervisor or a higher-level Treasury official. These procedural changes aim to ensure greater fairness and accountability in the penalty process.
IRS Penalty Notices Must Get Supervisor Approval Starting 2026: What It Means For Your Tax Bill
The “Fair and Accountable IRS Reviews Act” is taking aim at how the IRS decides to hit you with a tax penalty. If you’ve ever gotten a confusing or seemingly random penalty notice, this bill is designed to add a layer of checks and balances before that letter ever lands in your mailbox.
The New Paperwork Trail for Penalties
This bill inserts a mandatory step into the penalty assessment process (SEC. 2). Currently, an IRS employee might determine that a penalty is due based on their review. Under this proposed law, before the IRS can send you any written communication about a penalty—whether it’s a failure-to-file fine or an accuracy-related penalty—the initial decision to assess it must be personally approved by that employee’s immediate supervisor. If the supervisor isn’t available, the approval can come from a designated higher-level official.
In plain English, this means no more solo penalty decisions. Every fine has to pass the desk of a second person—the boss (SEC. 2. Approval Process for Penalty Assessments). The goal here is sound: catch mistakes and ensure the penalty is properly justified before the taxpayer is notified, potentially saving everyone the headache of dealing with an erroneous fine. These new rules are set to kick in for penalties assessed after December 31, 2025 (SEC. 2. Effective Date).
The Trade-Off: Fairness vs. Speed
For the average taxpayer, this sounds great. If you’re a small business owner who occasionally deals with complex tax filings, this extra step could mean fewer unjustified penalties and a smoother experience overall. It adds a procedural safeguard, making the IRS more accountable for the penalties it assesses. That’s the fairness part of the equation.
However, there’s a practical challenge here. The IRS already deals with millions of returns and complex cases. Mandating supervisory sign-off on every initial penalty assessment—from small late-filing fees to complex corporate penalties—is a massive administrative lift. This is where the potential slowdown comes in. If the IRS doesn't hire enough supervisors to handle this increased workload, the entire penalty process could bottleneck.
What does a bottleneck mean for you? If you’re disputing a penalty, or if you’re waiting for the IRS to resolve a tax issue that involves a penalty (like an audit outcome), the extra mandatory review step could add significant time to the process. While the intent is to protect taxpayers from bad penalties, the unintended consequence could be protecting taxpayers from timely resolution. We’ve all been in lines at the DMV; imagine that level of administrative friction applied to every single tax penalty decision across the country. It’s a classic policy trade-off: increased procedural protection versus increased processing time.