Useful Tax Rights!

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.

— Benjamin Franklin, in a letter to Jean-Baptiste Le Roy, 1789

As the year wraps up, many of us are looking at how to best finish off the year with our taxes. As with anything else, there is no substitute for a professional here, but I present this useful information from the perspective of a self-employed sole practitioner, inspired by my valued accountant.

In the 1990’s, Congress passed multiple Taxpayers Bill of Rights laws because people were afraid of the IRS and its power. Those laws shifted the burden of proof in tax disputes on the IRS and provided many useful rights to include:

The Right NOT to Meet with the IRS
You have the right to conduct a correspondence audit through the mail. This allows you to avoid the stress of an in-person 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 off some of the pressure.


The Right to Eliminate Penalties
A common issue taxpayers have with the IRS is penalties – probably because there are many different penalties contained in the tax law. On the positive side, each of those penalties can be subject to cancellation. That means that penalties
have the possibility of being canceled when you can show you
acted in good faith and not out of an effort to deceive the IRS.


The Right to Appeal Any Decision Made by the IRS
Whether you’re faced with an audit, lien, or some other judgment by the IRS, you have the right to appeal. If you get audited and you’re not satisfied with the results, you have the right to challenge an auditor’s decision. You then have 30 days to exercise your appeal rights (though it could be a year or more before your appeal is heard). If you do challenge, the IRS’s own statistics reveal you will win your case over 60% of the time.


The Right to an “Installment” Agreement
If you do end up owing the IRS money, you have a right to pay by an installment agreement. To negotiate a reasonable
payment, you’ll need to fill out IRS Form 433-A known as the Collections Information Statement. This lists your income, expenses, assets, and liabilities, and will accurately present how much you’re able to handle paying. You’ll also need to file Form 9465, the Installment Agreement Request. The IRS does however charge a fee on installment plans that ranges from $31 to $225 depending on how the application is filed and the payments are made. As mentioned previously, these fees too can be eliminated given certain circumstances.


The Right to Challenge IRS Notices
According to the Government Accounting Office, 48% of IRS notices are “incorrect or incomplete.” The IRS keeps sending them anyway because research has shown that, rather than fight the IRS, most taxpayers would rather just pay the money. Challenge those notices if you disagree, but act promptly.


The Right to Use the Taxpayer Advocate Service
Since the IRS is a huge bureaucracy, it is very frustrating to deal with them, even to get the most obvious errors corrected. If you are ever dealing with the IRS and no one seems willing or able to help, your best bet is to contact the Taxpayer Advocate Service (formerly known as the Problems Resolution Office). The TAS was created to assist citizens whose problems seem to fall through the cracks of the IRS’s “We Care” Department. It is free and confidential. You can find your local advocate in the phone book, on the IRS web site or you can call 877-777-4778.


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. Take advantage of this right to prevent the IRS from changing the rules midway through the audit. It also helps control the meeting and limit discussions of irrelevant and unnecessary issues as far as your potential tax liability goes.


The Right to Represent Yourself Before the IRS
One can act as one’s own advisor when faced with an audit or with having to go to United States Tax Court, but 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 are prepared for any items of dispute on which the IRS may question you. Tax laws can be very complex (and the judgment outcomes can be harsh), especially for matters brought before the U.S. Tax Court.


The takeaway here is that there are many options, rights, and possibilities when the tax people come knocking. Don’t put it off until later and hope they won’t notice; and know that you aren’t alone!

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