The new taxpayer bill of rights

USA Today (Society for the Advancement of Education), July, 1996 by Jeff A. Schnepper

SOMETIMES, we get more government than we need, want, or even pay for. Sometimes, rather than being the solution, government is the problem. Sometimes, when the bureaucracy is granted almost unchecked power, the arrogance of that power, coupled with the perceived helplessness of those made subject to incomprehensible regulation, creates a cauldron of unrest and an aura of insecurity. Government should be the servant, not the master, of its citizenry.

Nowhere is this dichotomy more evident than with the Internal Revenue Service. To most American taxpayers, receiving correspondence from the IRS is on a par with spending three weeks in a dentist's chair. The IRS defines an audit as "an impartial review of the taxpayer's return to determine its completeness and accuracy." Former Sen. Edward V. Long of Missouri did not agree. He compared the Internal Revenue Service to a "Gestapo preying upon defenseless citizens." His Senate committee found IRS audit and investigative techniques to include defying court orders, picking locks, stealing records, illegally tapping telephones, intercepting and reading personal mail, using hidden microphones to eavesdrop on the private conversations of taxpayers with their lawyers, employing undercover agents with assumed identities, and using sexual entrapment.

On April 26, 1982, in a hearing before the House Ways and Means Subcommittee on Oversight, Rep. George Hansen of Idaho alleged the existence of "IRS Hit Lists, Snooping and Spying Operations, political retaliatory audits ... and arbitrary assessments and seizures for punitive rather than tax collection purposes...." The case against the IRS, however, was presented more strikingly by the alleged victims of Internal Revenue Service brutality, who methodically testified to individual confrontations in great detail, including descriptions of forced detention, physical force, and the use of weapons for intimidation.

As a result of such reports, the Technical and Miscellaneous Revenue Act of 1988 created a consolidated statutory system that addressed a wide range of procedural subjects, including extensive changes in collection procedures. The intent was to promote a better balance between taxpayers' rights and the IRS's authority in administering the Federal tax system. The bill enhanced many safeguards and remedies previously available to taxpayers and established several new restrictions on the procedures governing the assessment and collection of taxes.

While an excellent first step, the 1988 Taxpayer's Bill of Rights left many problems unresolved. IRS actions, according to Sen. Joseph Lieberman (D.-Conn.), still show "a lack of sensitivity." He was referring specifically to a tax deficiency notice of $6,400,000 sent in 1994 to the estate executor of a Pan Am 103 crash victim, before the family had received any compensation or reached a settlement in a pending suit against the airline and its insurer.

As a result of these perceived deficiencies, the new Taxpayer's Bill of Rights is aimed at giving Americans greater leverage in their dealings with the IRS. Components include the following:

* The establishment of a taxpayer advocate within the IRS and the expansion of authority to issue taxpayer assistance orders. This new position replaces the current Taxpayer Ombudsman, who had been selected by the IRS Commissioner and served at his discretion. The Taxpayer Ombudsman was a career civil servant, and there has been a perception that the position was not really an independent advocate for taxpayers. To ensure that Congress systematically is made aware of recurring and unresolved problems and difficulties taxpayers encounter in dealing with the IRS, the Advocate should have the authority and responsibility to make independent reports to advise the tax-writing committees. In addition, the Advocate is given broader authority to take any action permitted by law with respect to taxpayers who would otherwise suffer a significant hardship as a result of the manner in which the IRS is administering the tax laws.

* The IRS currently can enter into an installment agreement with a taxpayer to facilitate the collection of tax liabilities. If he or she fails to make a timely payment, gives incorrect or incomplete information, fails to provide updated financial information upon request, or the IRS independently determines that the financial condition of the taxpayer has changed significantly or believes the collection is in jeopardy, the IRS can terminate or modify the agreement with 30 days notice. The new bill requires it to notify taxpayers 30 days before altering, modifying, or terminating any installment agreement for any reason other than if the collection of the tax is determined to be in jeopardy. Moreover, the IRS must include an explanation of why it intends to take this action.

* The bill would permit the IRS to abate interest with respect to any unreasonable error or delay resulting from managerial acts such as loss of records by the IRS, personnel transfers, extended illness, etc. In addition, the bill would grant the Tax Court jurisdiction to determine whether the IRS's failure to abate interest for an eligible taxpayer was an abuse of discretion.