The IRS has a reputation for being a bit stern, and popular culture has helped conjure an image of the IRS as a group of faceless, authoritarian auditors handing down ironclad judgements against powerless taxpayers. Would you be surprised to learn that not only is the IRS not as heartless as some would have you believe, but that you also aren’t powerless? And that perhaps your best ally in protecting your rights is a division of the IRS themselves?
The Taxpayer Advocate Service (TAS) is an affiliated, but separately run entity from the IRS whose purpose is to be the taxpayer’s voice before the IRS. The TAS is responsible for ensuring the IRS follows the Taxpayer Bill of Rights, which was adopted in 2014. The Taxpayer Bill of Rights consists of ten rights, each of which the IRS is required to follow.
The Right to be Informed
In addition to informing you of actions being taken against you, the IRS is also subject to the Freedom of Information Act (FOIA). This means you have the right to access the IRS’ records regarding your situation, including any transcripts or notes related to your case. You also have a right to receive any written notice or guidance in plain language.
The Right to Quality Service
The IRS must treat you with courtesy and respect. They may not contact you at unreasonable hours, and if they contact you in a manner or place which is considered intrusive (i.e. at work), you have the right to request they cease contacting you in that manner.
The Right to Pay No More Than the Correct Tax Due
The IRS may not impose interest caused by their own delays and errors. It also means that if you believe you are being assessed an incorrect amount due, you have the right to contest it.
The Right to Challenge the IRS’ Position and Be Heard
You have the right to contest any IRS decision within 60 days of being notified. If the IRS rules against you, then you then have 90 days to challenge them in Tax Court.
The Right to Appeal an IRS Decision in an Independent Forum
There are several avenues for appeal, from Tax Court to filing an Administrative Appeal.
The Right to Finality
The statute of limitations varies depending on the infraction, but taxpayers have the right to know that, after a certain period of time, what’s in the past will stay in the past. The exceptions to this are for false, fraudulent, or missing (never filed) returns – there is no statute of limitations on these cases.
The Right to Privacy
The collections process initiated by the IRS may be no more intrusive than necessary. This means they can’t call your work and disclose information to your employer, post on your Facebook page, or other intrusive acts that violate your privacy.
The Right to Confidentiality
The IRS may not disclose your private information to a third party without your consent. The only exception to this is for requests from law enforcement.
The Right to Retain Representation
If the IRS requests you attend a meeting or hearing, they may not either require or prohibit you from bringing representation – this choice is up to you. You may attend without representation, then stop the hearing at any time to seek representation. For low-income taxpayers, IRS Publication 4134 lists Low-Income Tax Clinics that can assist you at little or no cost.
The Right to a Fair and Just Tax System
Just because a mistake was made, that doesn’t necessarily mean the IRS must impose a penalty. If imposing a penalty on you would somehow be an unjust or unfair outcome, you have the right to contest this in Tax Court. An example of this would be the Lohan case: during an audit, all of the defendant’s business expenses were disallowed by the IRS. The defendant took the IRS to Tax Court and argued that it was unreasonable to assume that his business had $0 in expenses, when his revenue was well over $1 million USD. The Tax Court agreed and ruled against the IRS, saying that their position was both unreasonable and unjust.
The Taxpayer’s Bill of Rights is a good illustration of how the IRS conducts their business. The ultimate goal of the IRS is not to collect as much money as possible, but to collect the correct amount of tax. Likewise, penalties issued by the IRS are not about revenue, but are simply their method to encourage future tax compliance. Sometimes the IRS may lose sight of these objectives, which is where the Taxpayer Advocate Service can step in to help ensure you are treated fairly and equitably. For more information on the Taxpayer Advocate Service, take a look at their website here. And remember, these rights only apply if you take action – they don’t come to you!