The majority of taxpayers have long held the belief that they have no rights before the IRS, according to IRS National Taxpayer Advocate Nina Olson. IRS surveys have confirmed this view, despite the fact that Congress has passed multiple bills over the years titled “Taxpayer Bill of Rights.”
The Taxpayer Advocate Service, an independent office within the IRS since 2007, has worked with the agency to adopt an official Taxpayer Bill of Rights based on existing rights in the tax code.
The Taxpayer Bill of Rights was unveiled in June 2014 and will be included as part of IRS Publication 1, which is regularly included with IRS correspondence with taxpayers. The IRS plans to make the document available in English, Spanish, Chinese, Korean, Vietnamese, and Russian. IRS Commissioner John Koskinen believes it is important that taxpayers read and understand their rights.
Here is what the Taxpayer Bill of Rights says, plus some additional explanation:
The Right to Be Informed: Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.
Communications between the IRS and you must clearly include the amount (if any) of tax that you owe, as well as any additional interest and penalties. Notices must also explain why you owe the amounts specified. Notices stating that part or all of your claim or refund is being denied must explain why. The IRS provides a web page that provides explanations of codes to help you better understand IRS notices.
The Right to Quality Service: Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.
Even though most people don’t think of the IRS as customer service representatives, but the agency takes customer service seriously. Agents are required to speak with taxpayers in a polite and courteous manner and answer any questions truthfully and in terms the taxpayer can understand. Agents are also required to provide their name, phone number and unique ID number in all phone calls and correspondence.
If you feel you haven’t been treated properly or had your questions answered to your satisfaction, you can request to speak with a supervisor. It is also important to know that the IRS does not contact taxpayers by phone without having first sent a letter.
The Right to Pay No More Than the Correct Amount of Tax: Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.
This right affirms the fact that you cannot and will not be asked to pay any amount that is greater than your actual tax due plus any interest and penalties. Penalties and interest are not determined by individual agents but are assessed according to a preset schedule. Penalties for failing to pay on time are 5% per month of the amount owed up to a maximum of 25%. The IRS interest rate for individuals is 3%.
The Right to Challenge the IRS’s Position and Be Heard: Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.
The IRS not only allows you to object to and ask questions about its decisions, it encourages you to do so. At any point in the process of an IRS action, you are also permitted to submit new or additional documentation in support of your objection. If the IRS finds your objection or documentation has merit, it can take steps that range from voiding the entire decision or parts of it.
You can search the IRS website for information about every aspect of the tax code. In addition, you can also search the Internal Revenue Manual, which is used by agents to research decisions, opinions, and rules.
The Right to Appeal an IRS Decision in an Independent Forum: Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.
The IRS Office of Appeals is an independent organization that was created in 1927 to resolve tax disputes without the expense of having to go to court. More than 100,000 taxpayers engage with the office each year to resolve their tax disputes. If all other means of reaching a settlement have been exhausted, taxpayers may also take their case to federal tax court. Federal tax courts are independent of the IRS.
The Right to Finality: Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.
Like criminal and civil matters, there are established statutes of limitations on all IRS actions, including audits. Audits are not common and most taxpayers will never be audited. In fact, if you earn less than $100,000 per year, you have less than a 1% chance of being audited. If you earn between $100,000 and $200,000, your chances of being audited are only 1%.
If you are audited, the IRS can only look back a maximum of six years and you must be notified when they are done and the result. All other IRS collection efforts are limited to 10 years from the date of a tax assessment.
The Right to Privacy: Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.
In most cases, the IRS is forbidden by law from disclosing enforcement and collection actions without the taxpayer’s written permission unless a levy has been granted by a court, in which case, like all civil levies, they are a matter of public record. The IRS is not allowed to take your property, including bank accounts, without first asking a court to issue a levy.
The Right to Confidentiality: Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect that appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.
IRS agents are not allowed to share information and documentation that you provide them with outside entities, such as collection agencies or credit bureaus. IRS agents are not permitted to speak with a CPA or tax attorney on your behalf without your written permission. In the event you believe your confidentiality has been breached by any IRS employee, you should file a complaint with the IRS.
The Right to Retain Representation: Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.
Taxpayers have the right to enlist the help of a third party, such as a CPA or tax attorney, to dispute any actions by the IRS. Authorization in the form of a Power of Attorney Declaration must be signed by you and submitted to the IRS before it can act on your behalf. Low-income individuals can receive representation free or get low-cost assistance through the Low Income Taxpayer Clinics. The clinics can help with everything from collections issues to tax litigation.
The Right to a Fair and Just Tax System: Taxpayers have the right to expect the tax system to consider the facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide timely information. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.
Taxpayers have a right to fair and equitable treatment by the IRS, which means agents and representatives must consider all facts and circumstances that affect your tax liability or your ability to pay. The independent office of the Taxpayer Advocate Service is available for free to assist any taxpayer who needs assistance in resolving disputes with the IRS. The Taxpayer Advocate Service can also provide assistance if you feel you have not been treated fairly or in a reasonable time frame.