The Taxpayer's Bill of Rights
To ensure that the IRS does not abuse their authority to collect taxes, Congress enacted the first Taxpayers' Bill of Rights in 1988. The IRS was directed to let taxpayers know that they have some rights when facing the agency by requiring the IRS to publish a pamphlet summarizing these rights. This pamphlet became IRS Publication 1, Your Rights as a Taxpayer. Since 1988, the Taxpayers' Bill of Rights has been amended twice, first in 1996 with Part II and again in 1998 with Part III. You should receive this two-page bill whenever you receive any kind of notice from the IRS. The purpose of this bill is to explain the appeals process, make suggestions as to where you can find more free information pertaining to the subject matter and to assure you that you are entitled to courtesy and consideration from the IRS. The following is a summarization of all three parts of the Taxpayers' Bill of Rights. For a complete version of the bill, please see IRS Publication 1, Your Rights as a Taxpayer.
- If at anytime during an audit or interview, you feel uncomfortable or would like to speak with an enrolled agent, CPA or attorney, the IRS must stop what they are doing and allow this.
- The IRS may not take money or property from you on the same day that you comply with a summons. For example, the IRS cannot take the car you drive to the meeting in when you get to their office.
- Abates the penalty for failing to deposit payroll taxes for first time filers of employment tax returns.
- Starting with 1997 returns, you may file a joint return after a separate return has been filed without having to pay the full joint tax.
- Requires that Form 1099s have the name, address and phone number of whom to contact incase investigation is needed.
- Allows the return of levied properties. Under old rules, once the IRS took your money or property, they could not return it. Now, if you have an installment payment agreement and the IRS' taking of your money causes unnecessary hardship, they can return it to you.
- Per a taxpayers request, the IRS is required to make every reasonable effort to inform private creditors when a Notice of Tax Lien has been removed.
- If you prevail in a suit with the IRS, the IRS now carries the burden of having to prove that its position was substantially justified. If they do not prove this, you may be entitled to collect legal fees and court costs from the IRS. In the past, the taxpayer had to prove that the IRS was not substantially justified.
- The IRS is required to notify taxpayers if they receive a payment that cannot be applied to the taxpayers account instead of depositing it and holding it in limbo.
- If you owe the IRS, they must send you at least one bill a year, computing all the interest charged.
- Innocent spouse rules have been made more lenient in a number of ways.
- For taxes owed by you and an ex-spouse, you have the right to have the IRS tell what they are doing to ensure the ex is paying the bill. You are also entitled to know how much of the bill has been paid.
- Should the IRS act with reckless or intentional disregard to the rules of collecting tax, you may collect up to $1,000,000 in damages. If the IRS is only negligent, the amount is $100,000.
- Starting with 1997 tax returns, the IRS is given the authority, but is not required, to abate interest because of delays caused by the IRS, illness, loss of records or transfer of personnel, among other things.
- If you are issued a fraudulent 1099, you may sue for up to $5,000 in damages.
- Audits that scrutinize a taxpayer's lifestyle are only allowed when a prior examination has established the likelihood of unreported income.
- Taxpayers have a 30-day period to appeal a lien or levy.
- The IRS cannot seize your residence unless authorized in writing by a US district court judge.
- The IRS cannot seize your business assets unless authorized in writing by a district or assistant district director.
- The rejection of an Offer in Compromise or a request for an installment agreement can be appealed.
- While an Offer of Compromise or a request for an installment agreement is pending or on appeal, the IRS cannot issue a levy against the taxpayer.