Senate Panel OKs Safeguards for Taxpayers in IRS Dealings

The Senate Finance Committee approved a “taxpayer bill of rights” Friday that would require the Internal Revenue Service to waive any penalty that resulted from erroneous written advice from the IRS.

The watered-down bill is designed to respond to what Sen. Lloyd Bentsen (D-Tex.) called “a bully mentality” among some IRS officials.

The future of the legislation, sponsored chiefly by Sen. David Pryor (D-Ark.), is uncertain. The Reagan Administration opposes several parts, as do some members of the House Ways and Means Committee.

The Finance Committee approved the bill by voice vote and without dissent.

Key provisions would:

--Require the IRS to waive any penalty that was imposed because of underpayment of tax if the underpayment was caused by erroneous written IRS advice. The IRS generally follows such a rule already if the taxpayer can prove the agency was at fault.

This change would not affect a taxpayer who asks the IRS for advice by telephone; neither would it allow the waiver of interest charges on any late payment.

--Increase from 10 days to 30 days the written notice the IRS generally must give a taxpayer before seizing property.

--Prohibit the IRS from judging employees on the basis of how much tax they collect.

--Generally bar the IRS from backing out of any agreement to settle a tax obligation on the installment plan.