Taxpayers rights: A work in progress

If death and taxes are indeed life’s only certainties, at least one has terms we can control. Well, Congress can anyway, and does give taxpayers a bill of rights, however minimal.

Don’t get me wrong; politics aside we all need to pay dues, because we all share in the benefits of pooled resources — government, armies, roads, education, law enforcement. Yet those who’ve been audited know the associated feeling of helplessness.

I once practiced with a Harvard-educated tax attorney. Getting even basic answers out of the IRS (what’s going on with my exam? What are the agency’s issues with my return? How long will this take?) could be extremely frustrating, sometimes fruitless even with expert help.

That shouldn’t be the case. Congress passed the first Taxpayer Bill of Rights in 1988, giving citizens the right to sue the IRS, pay in installments (on IRS terms), and have representation. Congress reformed the law several times over the ensuing 10 years, but it wasn’t enough. After two decades of heated citizen testimony about abusive agency behavior, Congress passed reforms in 2014. Yet another reform bill was introduced last year.

The pending legislation is called the Taxpayer Bill of Rights Enhancement (a.k.a. TBORE, S. 1578) proposing what should be elementary. It would require IRS employees to be familiar with those rights, and follow them. Despite the existence of the old bill of rights, it wasn’t necessarily true that agency personnel knew or applied them. Since the 2014 reforms the agency has apparently made a bigger effort to train staff regarding these rights, and added fact sheets to its website outlining them. TBORE would also require the IRS to pay interest, just like taxpayers, rather than having 45 days to refund overpayments without it.

As it stands the Taxpayer Bill of Rights currently includes:

The right to be informed. Taxpayers are entitled to know what they need to do to comply with tax laws, and be informed of IRS decisions, with clear explanations. That applies to all tax forms, instructions, publications, notices, and correspondence. Notices must explain why amounts are owed, actions are being taken, or claims are denied. The entire process must be explained in initial notices.

Quality service. That means prompt, courteous, and professional assistance, using language that’s easy to understand, and speaking to a supervisor about inadequate service. No calls before 8 a.m. or after 9 p.m.

The right to pay only what you owe. Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, with payments applied properly. This includes not having to pay interest for time delays caused by the IRS, such as employees out of the office on workdays.

The right to challenge the IRS. Raising timely objections, providing additional proof in response to actions or proposed actions, and the right to expect the IRS to consider and respond to them promptly and fairly. If they issue a decision disagreeing with you, you generally have 90 days to file a petition in tax court without paying.

Independent appeal. The first layer is administrative (agency) appeal of IRS decisions/penalties; this has to happen before courts can consider an appeal. This right rather murkily states that the appeals office can’t discuss a case with the IRS “to the extent that those communications appear to compromise the independence of Appeals.” Online videos, podcasts, and publications at IRS.gov help explain the appeals process.

Finality. No timeline mysteries or non-answers; taxpayers will know the maximum amount of time allowed to challenge the IRS’s position, and how long the IRS has to audit a particular tax year or collect. Those limits generally are:

• Additional tax owed: Three years from the date you file (exceptions include failing to file and fraudulent returns)

• Collections: 10 years from the assessment date (note, assessment generally later than filing). The 10 years don’t include certain court delays such as bankruptcy, or installment agreement terms which extend it

• Taxpayer claims for overpayment/refund: Three years from date original return filed, or two years from date originally paid, whichever is later.

Privacy. That’s “no more intrusive than necessary,” respecting due process rights, including search and seizure protections and collection hearings (at taxpayer request). The amount of wages and type and extent of assets the IRS can seize are limited. Limitations include certain personal, furniture, and household items; as well as a residence (but value isn’t unlimited, and there are court-approved exceptions).

Here’s an interesting statement from the IRS fact sheet:

“The IRS should not seek intrusive and extraneous information about your lifestyle during an audit if there is no reasonable indication that you have unreported income.”

Confidentiality. Taxpayers have the right to expect that any information provided won’t be disclosed unless authorized by the taxpayer or by law. Can they call employers and neighbors? Yes, but not without advance notice. The fact sheet likens the taxpayer-agency relationship to attorney-client privilege, but attorneys don’t have the confidentiality exceptions the IRS has. Still, the list of rights includes criminal sanctions for agency employees who violate the rules.

The right to representation. Taxpayers have the right to retain an authorized representative of their choice (generally a lawyer or CPA), whose fees may be less than the amount saved in negotiations. Low-income taxpayers may use a Low Income Taxpayer Clinic representative. Generally the IRS must suspend an interview if consultation with a representative is requested.

Finally, taxpayers have the right to expect a fair and just tax system which considers all facts, circumstances, or hardships that might affect their underlying liabilities, ability to pay, or ability to provide information. That translates to payment plans, compromise offers, and of course, nondiscrimination.

The taxpayer-agency relationship by its very nature will never be friendly, but it should be well-defined, clear, courteous, and consistent. Here’s hoping.

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Sholeh Patrick, J.D. is a columnist for the Hagadone News Network. Contact her at [email protected].