Your Rights As A Taxpayer

by: ken & daria dolan

After years of complaints from taxpayers about abuse of power and poor treatment from the IRS, Congress passed two taxpayer bill of rights in the 1990’s. They cover the basic rules, such as spousal protection and putting the burden of proof in tax disputes on the IRS (not the taxpayer).  That’s all well and good, but it’s not the full story.
Today, personal finance experts Ken and Daria Dolan reveal what you really need to know about your rights as a taxpayer … the rights that will help you actually deal with the IRS should you get that dreaded letter or phone call from the IRS about a tax matter.
Should the need arise, knowing these taxpayers’ rights can help keep you from becoming another tax collection statistic.
No. 1: The Right to Challenge a Tax Auditor’s Findings
Don’t hold your breath waiting for the IRS to tell you this, but your rights go way beyond just “the right to remain silent!”
The idea of saying “no” to an IRS auditor’s findings may terrify you, but it shouldn’t. Why? Because the auditor never has any final authority over you or how much you owe. As much as they may huff and puff, you have the right to challenge his or her decision.
Here’s the best part: If you do challenge, the IRS’ own statistics reveal you will win your case about 64% of the time. We’ll take those odds any day!
No. 2: The Right to Eliminate Penalties
A common issue taxpayers tangle over with the IRS is penalties — probably because the IRS has a penalty for every day of the week. In fact, there are over 150 different penalties contained in the tax law, and the IRS can find one to hit you with at every turn.
On the plus side, each penalty is subject to cancellation … though the IRS generally “forgets” to tell you this (surprise, surprise). That means that all penalties can be canceled when you can show you acted in good faith and not out of an effort to deceive the IRS. In most cases, a simple letter of explanation setting out all the appropriate facts will do the job.
No. 3: The Right NOT to Meet With the IRS
Do you dread the thought of facing the IRS in an audit? Our advice is simple then: Don’t! We’re not telling you to hop the first plane to the Bahamas, but we are saying you have the right to conduct a correspondence audit through the mail. Think of the benefits: You avoid the stress of a face-to-face meeting, the hassle and expense of taking time off work, and the possibility you will say something that can be misconstrued by the agent.
Simply ask for a “correspondence” audit and take some of the pressure off.
No. 4: The Right to an “Installment” Agreement
If you do end up owing the IRS money, things can get ugly … and fast. Their notices make it clear they want the money now — all of it. What they don’t make clear is your right to an installment agreement.
To negotiate a reasonable payment, get a copy of IRS Form 433-A, the Financial Statement. This lists your income, expenses, assets and liabilities, and will accurately present how much you’re able to handle paying.
Unfortunately, the IRS charges a $52 user fee on installment plans that use direct debit (where payments are automatically deducted from your bank account) and $105 for other installment agreements.
No. 5: The Right to Challenge IRS Notices
The IRS mails tens of millions of notices each year, most of which are demands for more money. But don’t automatically reach for your checkbook! According to the Government Accounting Office, 48% of these notices are “incorrect or incomplete.” So why does the IRS keep sending them? Because research has shown that, rather than fight the IRS, most taxpayers would rather just cough up the money.
Don’t let Uncle Sam pull one over on you. You can challenge and cancel those notices if you disagree and act promptly.
No. 6: The Right to Use the Problems Resolution Office
The IRS is a huge bureaucracy, which can make it incredibly frustrating to deal with, even to get the most obvious errors corrected. If you are ever backed into a corner by the IRS and no one seems willing or able to help, your best bet is to contact the Taxpayer Advocate Service (also known as the Problems Resolution Office).
The TAS was created to assist citizens whose problems seem to fall through the gaping cracks in the floor of the IRS’ “We Care” Department. The service is free and confidential. You can find your local advocate in the phone book and on the IRS web site at Contact Your Advocate, or you can call 877-777-4778 to speak with an advocate.

No. 7: The Right to Make Audio Recordings of Any Meeting With the IRS
If you’re audited by the IRS or are subject to a tax collection procedure, you are allowed to tape record the meeting. However, you have to notify the IRS 10 days in advance of your meeting.
Taking advantage of this right prevents the IRS from changing the rules midway through the audit. It also helps control the meeting — it limits discussions of irrelevant and unnecessary issues as far as the topic at hand (your potential tax liability) goes.
No. 8: The Right to Appeal Any Decision Made by the IRS
This is one of your most important rights, so don’t forget it. Whether you’re faced with an audit, lien or some other judgment by the IRS, you have the right to appeal.
If you do get audited and you’re not satisfied with the results, you can appeal to the IRS appeals office. You’ll then have 30 days to exercise your appeal rights, though it could be a year or more before your IRS appeals audit is heard.

No. 9: The Right to Represent Yourself Before the IRS
This is one right you may NOT want to exercise. You can act as your own advisor when faced with an audit or with having to go to United States Tax Court, but tread carefully here.
The only way you should consider representing yourself is if you’re audited for something fairly simple, confident in your tax knowledge, familiar with all of the most current IRS tax laws and be prepared for any items of dispute that the IRS may question you on.
As far as standing up in U.S. Tax court, however, be mindful you’re walking on very thin ice. Tax laws can be very complex (and the judgment outcomes can be harsh), but that goes especially for matters brought before the U.S. Tax Court.