Posted by Abundant Wealth Planning LLC

Fundamentals of the Taxpayer Bill of Rights (TABOR)

Fundamentals of the Taxpayer Bill of Rights (TABOR)

A federal or state law provides taxpayers with procedural and substantive safeguards when dealing with a Department of Revenue in a tax collection dispute.

Perceived abuses by the IRS during tax audits led to the publication of the "Omnibus Taxpayer Bill of Rights" in 1988 (Pub. L. n. 100-647). The second set of provisions was passed in 1996 (Pub. L. No. 104-168) to give taxpayers more leverage in negotiations with the IRS. The 1988 law also prompted many states to pass similar taxpayer billing laws.

Although taxpayers' rights under these federal laws do not reduce their ability to be audited or diminish the IRS' power to penalize taxpayers for inaccuracy or fraud in their returns, the provisions correct many perceived cases of abuse in the IRS collection and auditing procedure. The Bill of Rights is intended to free taxpayers from the unlimited discretion of IRS agents. Congress said the purpose of the 1988 law was "to inject reason and the protection of individual rights into the tax collection process."

The taxpayer's bill of rights mandates the IRS to explain the auditing and collection process to the taxpayer before any initial auditing or collection interview and include a description of the tax base, interest, or penalties due in all tax communications. The bill also mandates the IRS to notify taxpayers of their rights, including the right to be represented by an attorney or accountant, whenever an audit notice is sent. The bill of rights permits the taxpayer to make an audio recording of the discussion with the IRS agent, provided they receive advance notice. A real audit interview can be interrupted without prejudice so that the taxpayer can consult a lawyer or an accountant. Another important provision prohibits the IRS from imposing taxes or targets on agents in terms of the number of returns it audits and the amount of taxes and penalties collected.

The 1988 law created the Office of the Taxpayers' ombudsman, which served as the primary advocate for taxpayers within the IRS. The 1996 law transferred this function to the newly created tax administration. This office helps taxpayers resolve issues with the IRS, identifies areas where taxpayers have difficulty dealing with the IRS, proposes changes to IRS administrative practices, and suggests potential legislative changes that might reduce these issues. . To ensure the independence of the IRS and the Taxpayer Advocate reports directly to Congress twice a year.

The taxpayer's advocate also has broad authority to issue taxpayer assistance orders. These orders may release assets or require the IRS to cease or desist from any action that causes significant difficulty in administering state tax laws.

According to the Bill of Rights, before the IRS can strike or seize a taxpayer's property, it must give the taxpayer thirty (30) days' notice instead of ten days. Taxpayers can sue the tax administration for damages suffered as a result of tax or real estate recovery actions or refusal to release a lien; they may receive court costs and administrative and legal fees if they win an administrative or legal action against the IRS.

Under the bill, the IRS is empowered to enter into installment agreements with taxpayers to ease the burden of a taxpayer who would face financial hardship if they were to make a lump sum payment. The Internal Revenue Service must give thirty days' notice before changing, modifying, or terminating a previously agreed-upon rate agreement unless the change is caused by a determination of loss of tax collection.

Another provision of the law provides that if the IRS determines that additional fees are owed, the agency is required to send the taxpayer a written notice explaining and identifying all amounts owed. The IRS must also outline the procedures it will use to collect amounts owed. Previously, the IRS usually explained the basis for a tax deficiency but was not required to explain fines or how they were to be collected. Instead, the IRS sued the taxpayer.

The Bill of Rights gives the IRS the power to reduce interest on delays or unreasonable errors caused by IRS non-discretionary acts or IRS administrative acts, such as loss of IRS records or transfers, prolonged illness, IRS leave, or training of IRS personnel.



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