Keeping Your Money and Peace of Mind
Step 2 – Your Rights
The Tax Code includes a Taxpayer Bill of Rights
The right to be informed
- You have the right to be informed about the amount of tax you owe and any interest and penalties you owe. The IRS must also explain why you owe these amounts.
- If the IRS makes changes to the tax you calculated on your tax return, they have to tell you why.
- If the IRS audits your tax return, they have to explain the process to you in their initial letter. The letter should also inform you of your right to appeal any decision made by the auditor.
- If you enter into an installment payment agreement with the IRS, they must send you an annual statement. This gives you a record of balances and payments.
The right to quality service
The IRS has had a difficult time with this one. Budget cuts imposed by Congress left them seriously understaffed. The results can be very bad for people trying to deal with the IRS. For example, if an automatic levy has been imposed on government payments such as Medicare payments made to health care providers or payments under government contracts, it can be difficult to stop the process.
The right to pay no more tax than the correct amount owed.
The problem with this one is that the tax law can be extremely difficult to understand. Most IRS auditors I have dealt with over the years have made every attempt to work toward the correct amount of tax due. However, they would be something other than human if they were not at least somewhat biased in favor of the government, since they work for the government.
The right to challenge the IRS’s position and to be heard.
In the context of an IRS audit, you have the right to present whatever evidence you have to prove that the numbers on your tax return are correct. The IRS has the burden of proof to show your tax return is wrong, but it’s not automatic. You have to respond to reasonable requests for relevant documents such as bank statements. See Understanding the Burden of Proof.
The right to appeal to an independent forum
If you don’t agree with the final decision made by an IRS auditor, you can appeal, and if you can’t reach an agreement with the appeals officer, you can take your case to the United States Tax Court, or you can pay the tax and file for a refund in federal district court.
The right to finality.
The IRS has time limits for auditing returns and collecting taxes. They also have to let you know when they have completed an audit of your tax return.
The right to privacy.
The IRS is required to conduct audits and collections activities in a way that is no more intrusive than necessary. They can’t just walk into your house, and they can’t take your stuff without due process of law. However, the IRS sometimes takes people by surprise by seizing pay checks or bank accounts. They are required to give you notice before doing this. You don’t want to ignore letters from them. You need to know if they’re about to seriously impact your life.
The right to confidentiality
Disclosing confidential taxpayer information to third parties is one of the surest ways an IRS employee can get into trouble. Anyone who disobeys this strict rule can face criminal fines or even prison. Naturally there are hackers trying to gain access to IRS servers, and the service constantly works to upgrade cyber security.
The right to representation
You always have the right to retain a lawyer, CPA, or Enrolled Agent to represent you. In ordinary cases you do not even have to show up at an office or field audit. You can have your representative meet with the IRS auditor instead.
The right to a fair and just tax system
Well, you can’t win them all. Few people consider federal tax laws to be fair and just, but the system is fair in that there are certain procedures the IRS has to follow, such as sending you a Notice of Intent to Levy before seizing your bank account, giving you a chance to work out an installment payment plan.
