While every effort has been taken to ensure that the information contained herein is accurate as of the time of publication, tax laws and regulations are constantly changing.
If legal or expert assistance is required, the services of a professional should be sought. The author and publisher specifically disclaim any liability incurred from the use or application of the contents of this post.
CHAPTER 1: OVERVIEW OF THE IRS AND YOUR RIGHTS AS A TAXPAYER
Overview of the IRS
The Internal Revenue Service (IRS) is, in its simplest form, a collection agency. It collects tax revenue for the federal government of the United States of America. In addition to collecting tax revenue, it also administers the Internal Revenue Code, which is the broader federal statutory law of the United States.
That statutory law governs how and when individual taxpayers and businesses are expected to pay their taxes and report those taxes through tax filings. They also have the right to conduct an examination of past tax filings and amount paid, as well as trying to identify fraudulent taxpayers.
The IRS also governs how practitioners (like me) and other Enrolled Agents, tax attorneys, and CPAs represent their clients before the IRS.
With regards to their main role as a collection agency, the IRS collects these types of taxes for the federal government:
- Individual Income Tax
- Corporation Income Tax
- Employment Taxes (also known as Trust Fund taxes),
- Estate and Gift Taxes
- Excise Taxes
From time to time, the U.S. Congress passes certain tax measures that are added to the Internal Revenue Code and then are governed by the IRS. For example, when the Affordable Care Act (Obamacare) was put into law in 2010, the IRS was put in charge of administering the premium tax credits and enforcing the individual mandate requiring individuals to hold health insurance.
Another example is when the Tax Cuts and Jobs Act of 2017 (TCJA) drastically changed the revenue act of the United States that amended the Internal Revenue Code in 1986. Many elements of the tax code changed and were put into law for the 2018 fiscal year.
Most of the Internal Revenue Code is static but keeping up with minor tweaks like adjustments to tax deductions and credits can become quite the chore.
At the end of the day, knowing that the IRS is a collection agency is extremely important. It is vital to look at them from that perspective because it will shed some light and illuminate greater understanding into what they do and why they do it.
The good news is that there is a specific voice at the IRS that will help protect your rights if you do not want (or are not able) to utilize a professional representative before the IRS.
Your Voice at the IRS
The IRS Taxpayer Advocate Service is your voice at the IRS. The Office of the Taxpayer Advocate is an independent office of the IRS. They work together closely, but it is under different supervision than the IRS and acts in a completely different manner than the IRS that you are familiar with.
The Taxpayer Advocate Service (TAS) is predominantly used to support and assist taxpayers in resolving their problems with the IRS. They can help:
- Individuals and businesses with tax problems that are creating financial difficulty
- Those that have attempted to resolve tax problems through conventional ways and have not been able to reach a resolution or conclusion
- By providing a specific Advocate that gets assigned to your case and will work with you every step of the way
- Discover large-scale or systemic problems that affect many taxpayers and work to get those problems corrected.
Your Rights as A Taxpayer
You have many rights as a U.S. taxpayer that you may not be aware of. The IRS has an entire Taxpayer Bill of Rights that we will go through briefly here:
1. The right to be Informed.
Taxpayers have a right to know what needs to be done to comply with the current tax laws. Clear explanations of the law, procedures, instructions, should be provided. You also have the right to be informed of IRS decisions regarding your tax account along with outcome explanations.
2. The right to quality service.
You have the right to receive professional and courteous assistance while dealing with the IRS. You should be spoken to in a way that is easy to understand, and to receive understandable communication from the IRS. Lastly, you should have a way to file complaints about service that is less than good.
3. The right to pay no more than the correct amount of tax.
Taxpayers should never be paying more than what they are legally obligated to pay as their official tax liability. The IRS should apply all tax payments properly and can be held accountable to this.
4. The right to challenge the IRS’s position and be heard.
You can raise objections and provide additional documentation that will help challenge the IRS’s position regarding a formal IRS action or proposed action. You can expect the IRS to consider your challenge in a timely way and will receive a response in a timely manner.
5. The right to appeal an IRS decision in an independent forum.
Taxpayers are entitled to an impartial administrative appeal of most IRS decisions and can utilize the Office of Appeals’ decision in tax matters. Taxpayers generally also have the right to take their case to court.
6. The right to finality.
You have the right to know the statutory time limits regarding filings, taxes, audits, collection, and so forth. Taxpayers also have the right to know the maximum amount of time they must challenge the IRS’s position and when they have completed an audit.
7. The right to Privacy.
Privacy is a big deal, especially at the IRS. Inquiries, examinations, or enforcement action will comply with the law and be no more intrusive than necessary. They will respect all due process rights.
8. The right to confidentiality.
You have the right to confidentiality regarding any information you provide the IRS and will not be disclosed unless authorized by the taxpayer or by law. The IRS will investigate and take appropriate action against employees, return preparers, and others who wrongfully use or disclose your information.
9. The right to retain representation.
Taxpayers have the right to retain an authorized representative of their choice to represent them in any dealings with the IRS. Those that are authorized representatives are Enrolled Agents (EA), tax attorneys, and CPA’s. If you cannot afford to hire a representative, you may be eligible for assistance from a Low-Income Taxpayer Clinic.
10. The right to a fair and just tax system.
Lastly, you have the right to expect the tax system to consider all facts that might affect liabilities, ability to pay, ability to provide information timely, and so on. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service.
Tax Resolution Resource
If you would like to get in touch with the TAS, you can call them toll-free at 877-777-4778.
Additionally, here are several resources that will provide additional information about this unique, independent office within the IRS:
Taxpayer Advocate Services – https://taxpayeradvocate.irs.gov/
Local Locations – https://www.irs.gov/advocate/local-taxpayer-advocate
Taxpayer Bill of rights – https://taxpayeradvocate.irs.gov/About-TAS/Taxpayer-Rights/What-the-Taxpayer-Bill-of-Rights-Means-for-You