Expanded Protection For Taxpayers

Now it's easier to challenge the IRS over your tax bill.

In 1998, Congress passed the IRS Restructuring and Reform Act, which gives U.S. taxpayers more rights than ever before. Under this law, it's now much easier to challenge an IRS ruling that you owe more tax than you think you do. In the past, taxpayers who had their returns questioned by the IRS had the burden of proof. This means that the IRS was presumed to be correct when it differed with you about a tax matter. The new law shifts that burden to the IRS in a court proceeding, provided you have credible evidence to support your position.

A couple of other conditions must also be met. First, you must have complied with requirements of the Tax Code and regulations governing record keeping requirements. Second, you must cooperate with the IRS, which means you must respond to reasonable requests for meetings and interviews, and provide the IRS with access to witnesses, documents, and other information under your control. It also means you need to use up all available administrative remedies within the IRS before going to court.

The 1998 Act also extends confidentiality privilege in tax matters to any "federally authorized tax practitioner." These include attorneys, accountants, enrolled agents, and enrolled actuaries. This means that none of these professionals hired by you can be required to testify against you or disclose any confidential information received from you to the IRS.

The new law also requires the IRS to keep you notified of its actions, and give you a way in which to make contact by telephone. It must explain why it is denying a refund or disallowing a deduction, and provide you with the telephone number of the IRS employee handling your case.

The Act also makes it harder for the IRS to seize your property for failure to pay taxes, and limits the collection procedures the IRS can use, making it subject to the same restrictions that apply to private debt collection agencies. And finally, you can also sue the IRS for up to $100,000 in civil damages suffered by you as a result of the agency's negligence, along with attorney fees and costs.