Your rights under the Taxpayer Bill of Rights 2

National Public Accountant, The, Dec, 1996

CREATION OF A TAXPAYER ADVOCATE

The bill creates a new position at the IRS to assist taxpayers in resolving tax problems, identifying areas where taxpayers have problems communicating with the IRS, proposing changes in IRS administrative practice and identifying potential legislative changes to mitigate those problems. The Taxpayer Advocate will be appointed by the Commissioner of Internal Revenue and will report at least twice annually to Congress with recommendations to improve taxpayer services and resolve problems.

The bill empowers the Taxpayer Advocate to take action by issuing a Taxpayer Assistance Order (TAO) to help those who would otherwise suffer significant hardship as a result of IRS decisions. The Taxpayer Advocate has expanded authority to intercede on behalf of you, the taxpayer, because only the IRS Commissioner, the Deputy Commissioner or the Taxpayer Advocate may modify or rescind the TAO, and in so doing must give you a written explanation for the recision.

INSTALLMENT AGREEMENTS

Effective January 31, 1997, you have the right to be notified in writing 30 days before the IRS alters, modifies or terminates any installment agreement for any reason, unless the collection of the tax is in jeopardy. If your installment agreement is terminated by the IRS, you have the right to request a review, effective January 1, 1997. TBOR2 requires that the IRS establish new procedures for independent administrative review of terminated installment agreements.

ABATEMENT OF INTEREST AND PENALTIES

The new bill permits the IRS to abate interest from any unreasonable error or delay resulting from managerial acts, such as IRS loss of records or personnel transfers. You are eligible for a Tax Court review of the IRS's failure to abate your interest or penalties if you have a net worth of $2 million or less. The net worth provision is expanded to $7 million for small business owners, partnerships or corporations with fewer than 500 employees. If you receive a notice and demand for payment of a tax liability of under $100,000, you now have an interest-free period of ten business days to respond to the notice and pay the tax due.

JOINT RETURNS

If you and your spouse file jointly, each of you is separately liable for the full amount of tax on the return. TBOR2 requires that the Department of Treasury analyze changes in the "joint and several liability" standard and recommend specific legislative and administrative remedies. One proposal is to change to a "proportionate liability standard," in which each spouse would be liable only for his or her own tax. The new law also eliminates the requirement of full payment of tax liability before switching filing status from married filing separately to married filing jointly. It also requires the IRS to respond to a written request from an individual facing a tax deficiency as to whether there have been attempts to collect the tax from the other spouse signing the joint return.

PRIVATE DELIVERY SERVICES

Until now, only a certified mailing receipt was considered proof of the timely filing of a tax return. TBOR2 allows the IRS to authorize the Secretary of the Treasury to set criteria and designate private delivery services to act as official recipients for tax returns.

INFORMATION RETURNS

TBOR2 allows a person who has been the victim of a fraudulently filed information return, such as a 1099-MISC, to bring suit and recover the greater of $5,000 or actual damages, including legal fees. If you believe an information report has been filed in error, you may request that the IRS take reasonable steps to investigate the accuracy of the report.

ATTORNEY'S FEES

Another provision in the bill indicates that once a taxpayer prevails over the IRS in a tax proceeding, the IRS has the burden of establishing that it was justified in its position against the taxpayer. The IRS must show that it substantially followed its own published regulations or procedures, or the taxpayer will be entitled to an award of attorney's fees up to a maximum of $110 per hour. Taxpayers can be awarded up to $1 million for damages caused by an IRS employee who recklessly disregarded provisions of the Internal Revenue Code or Regulations.

RESPONSIBLE PERSONS

Some employees may not be fully aware of their personal liability for any failure to pay over taxes withheld from company employees and held "in trust" until paid in payroll tax deposits. The penalty is known as the trust fund penalty and equals 100% of the amount owed. Under the new law, the IRS must notify taxpayers who are determined to be "responsible persons" at least 60 days in advance of issuing a notice and demand for payment of the penalty. In addition, the IRS must disclose, in reply to a written request, the name of any other responsible person that is subject to the liability. Responsible persons generally include officers and employees of companies who have authority to direct disbursement of funds. If you are determined to be a responsible person who must pay trust fund taxes and penalties, you now have the right to sue to recover a proportionate amount from other responsible persons who have not paid their fair share.