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Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Taxpayer Bill of Rights

What it is:

The Taxpayer Bill of Rights is a list of the protections available to all taxpayers when dealing with the Internal Revenue Service.

How it works (Example):

In 1988, Congress passed the first Taxpayer Bill of Rights. Congress then updated it in 1996 with the passage of the Taxpayer Bill of Rights II. 

According to the Taxpayer Bill of Rights II, taxpayers are entitled to:

  • Receive 30 days notice and an explanation from the IRS before it alters, modifies or terminates an agreement you have to pay your taxes in installments.
  • Receive an abatement of interest if the IRS delays your case or makes unreasonable errors due to losing records, transferring personnel or working with IRS personnel who leave for extended illnesses, training, or time off.
  • Receive 10 business days to 21 calendar days (depending on the amount owed) to meet any demands for tax payment by the IRS without incurring interest penalties.
  • Postpone making a full payment of tax in order to switch from married filing separately to married filing jointly. If the IRS has tried to collect taxes from an estranged spouse, the IRS must disclose whether it has attempted to collect form the spouse, how it has tried to collect and what it has collected.
  • Have IRS liens withdrawn if the IRS filed them prematurely, not according to procedure or after the taxpayer has entered into an installment agreement. The IRS must also withdraw a lien if doing so will facilitate the collection of tax or "would be in the best interests of both the taxpayer (as determined by the Taxpayer Advocate) and the Government."
  • Get your property back, including money, if the IRS determines that the levy was premature, not done according to procedure or placed after the taxpayer entered into an installment agreement to satisfy the levy. The IRS must also return property if doing so will facilitate collection of tax or "would be in the best interests of both the taxpayer (as determined by the Taxpayer Advocate) and the Government."
  • Get an offer in compromise with the IRS without needing written approval from the IRS Chief Counsel if the amount is under $50,000.
  • Sue a person who has filed fraudulent W-2, 1099s, or other information returns about payments made to that person. 
  • Require the IRS to prove its case against you or else pay your attorneys' fees.
  • Collect up to $1 million from the IRS in any civil suits you win that demonstrate "reckless or intentional disregard for guidelines by IRS employees in connection with the collection of a taxpayer's Federal tax."
  • Receive at least 60 days notice of an assessment of a Trust Fund Recovery Penalty.
  • Avoid most penalties the IRS imposes on tax-exempt organizations if you are a volunteer, unpaid member of the board of trustees or board of directors. You must not be participating in day-to-day financial activities of the charity.
  • Challenge a summons issued to your tax preparer if the person is an enrolled agent. An IRS Regional Counsel must review the summons first.
  • Receive $500,000 from the IRS in a civil suit if an IRS employee compromises the "determination of or collection of tax liability" in exchange for information about the taxpayer.
  • A reasonable effort from the IRS to contact you within 60 days if it is unable to associate a payment you made with a balance you owe.
  • Receive an annual reminder notice of liability if you are a delinquent taxpayer.
  • Make nonwritten requests to the IRS (though verbal requests are still unacceptable).

The full Taxpayer Bill of Rights can be found here: http://www.irs.gov/pub/irs-utl/doc7394.pdf

Why it Matters:

The Taxpayer Bill of Rights ensures that taxpayers know what the IRS may and may not do when it attempts to assess or collect taxes. The document is a guideline for all taxpayers, though research has found that few people know what their rights are.

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