Ask the Payroll Expert: What Are My Taxpayer Rights?

Have you ever wondered why so many people are afraid of the Internal Revenue Service (IRS)? Or better yet, if you even have any rights before the IRS? Oftentimes, a letter from the IRS has the power to strike fear in even the most careful of taxpayers, and words like audit, collections, and tax levies and liens are almost considered “bad words.” It may even feel like the IRS holds all the power and you are helpless and at their mercy. According to Forbes, a 2012 taxpayer survey found only 46 percent of taxpayers believe they have any rights when it comes to the IRS. This fear is why scams where criminals pretend to be IRS agents continue to work so well. Herman McDaniel, Axcet HR Solutions Payroll Administrator, discusses the Taxpayer Bill of Rights in this “Ask the Payroll Expert”.

How did we become so afraid of the IRS?

It’s pretty simple - the tax code is extremely complex. In fact, the U.S. tax code was estimated to contain 4 million words in 2013 and that number has only increased since then, adding to its complexity. It requires more than simply being intelligent and good at math to figure your own taxes. Unfortunately, even small mistakes come with big consequences and tax mistakes happen a lot. In fact, one in three small business owners get penalized by the IRS each year for payroll errors! That said, the IRS strives to be fair when it comes to your taxes and the laws.

The History of the Taxpayer Bill of Rights

In 2014, National Taxpayer Advocate Nina E. Olson’s efforts brought the “Taxpayer Bill of Rights” to all U.S. taxpayers. While these rights were already present in the Tax Code, they weren’t in one central location nor easy to find. The goal of the Taxpayer Bill of Rights was to bring these dozens of existing rights together, grouped into ten fundamental rights, state them clearly and make them easily accessible. The IRS includes these rights on their website, in their offices and in IRS notices. Their hope is for all taxpayers and IRS employees to know and understand these fundamental rights.

Your 10 Fundamental Taxpayer Rights

Straight for the IRS, here are your 10 fundamental rights included in the Taxpayer Bill of Rights:

1. The Right to Be Informed: Taxpayers have the right to know what they need to do to comply with tax laws. They are entitled to clear explanations of the law and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.
2. The Right to Quality Service: Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to have a way to file complaints about inadequate service.
3. The Right to Pay No More Than the Correct Amount of Tax: Taxpayers have the right to pay only the amount of tax legally due and to have the IRS apply all tax payments properly.
4. The Right to Challenge the IRS’s Position and Be Heard: Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.
5. The Right to Appeal an IRS Decision in an Independent Forum: Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.
6. The Right to Finality: Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year. Taxpayers have the right to know when the IRS has finished an audit.
7. The Right to Privacy: Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and a collection due process hearing where applicable.
8. The Right to Confidentiality: Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect the IRS to investigate and take appropriate action against its employees, return preparers, and others who wrongfully use or disclose taxpayer return information.
9. The Right to Retain Representation: Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to be told that if they cannot afford to hire a representative they may be eligible for assistance from a Low Income Taxpayer Clinic.
10. The Right to a Fair and Just Tax System: Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

Are you inviting an IRS audit? Download our free report to find out the top five tax mistakes small businesses make.