YOUR TAXES : Taxes Can Be Your Friend : Bill of Rights : New rules can help if you feel the IRS has done you wrong.

<i> Times Staff Writer </i>

It’s still an unequal contest when the lone individual comes up against the mighty Internal Revenue Service, but the new taxpayer bill of rights offers some long-awaited defenses and protections.

For the first time, the law forbids the use of quotas or dollar goals to measure the efficiency of IRS agents. No longer can an agent be promoted on the basis of his seizures of property and bank accounts.

IRS policy forbids any quotas, but local agents and managers often ignored Washington’s mandate. They can’t do it anymore--managers will be required to sign a statement twice a year that they don’t use quotas to rate their agents’ performance.

“By making such a prohibition part of law, rather than a mere policy, it cannot be so easily ignored, and it can be enforced in court,” said Sen. David Pryor (D-Ark.), the prime author of the legislation.


The audit and collection process will be stripped of some of its fearful nature for nervous citizens. A taxpayer calling for an interview at an IRS office may choose to stay home, sending a representative to speak for him. Before, the taxpayer had to attend the interview, even if his accountant did all the talking.

If a taxpayer goes to the interview personally, he can stop the discussion at any time. “Most people think they can handle things, but they go down on their own and often get in trouble,” said Paul W. Raymond, a Newport Beach tax attorney. “Talking too much is a common mistake.”

The taxpayer can say, “I don’t feel comfortable talking to you any further,” get up and walk out, and have all future contacts handled by his lawyer or accountant, Raymond said. Individuals always had this right--but now the IRS is obliged to inform them of this before the audit begins.

The individual can also make an audio or videotape recording of the interview. Previously, each IRS district had its own policy on taping.


The bill of rights, which took effect Jan. 1, greatly expands the powers of the ombudsmen, the officially appointed protectors of the taxpayers within the IRS system itself. These protectors are known as problem resolution officers. They negotiate on behalf of aggrieved taxpayers with the complex IRS bureaucracy. For example, an officer might ask that a proposed seizure be stopped because it would cause hardship to a taxpayer.

Under the new law, ombudsmen can do more than ask: They are given the legal powers to order a halt to the collection process.

“This is extremely important for taxpayers,” Raymond said. “We now have a significant bargaining chip in dealing with the collections (division). We can say, ‘This guy needs the money for an operation, or his house payment, or for his daughter’s college tuition.’ ” These would be defined as hardships and the ombudsman could stop the seizure of bank accounts or wages, according to Raymond.

Pryor had praised IRS Commissioner Lawrence B. Gibbs for creating the ombudsman process, but insisted on making it part of the law to give the protection a permanent place in the IRS structure.

IRS district offices now have available Form 911, the application for taxpayer assistance, a request for emergency intervention by an ombudsman to prevent a taxpayer from suffering a hardship. The orders “would cut through bureaucratic red tape to suspend any action of the IRS,” noted Pryor. The ombudsman decides if the IRS acted correctly, or if its decision should be rescinded.

These expanded protections continue through the entire collection process and into the final step, the seizure of a taxpayer’s assets. Previously, the IRS could confiscate bank accounts and other assets 10 days after giving a final warning to the taxpayer. The waiting period for liens is extended to 30 days, giving the individual a slightly longer grace period to try raising the money to pay the tax bill.

For the first time, taxpayers can sue the IRS when its employees “recklessly or carelessly” ignore the Internal Revenue Code during collection activity. “This is another very important protection,” Raymond said. The aggrieved taxpayer can collect damages up to $100,000 for the misconduct of IRS employees. Supporters of the legislation say this will cause some overzealous IRS agents to be much more careful and precise in their preparation of cases.

Taxpayers jousting with the government also are now permitted greater latitude in recouping legal and accounting fees if they win a case against the IRS. Traditionally, taxpayers could recover these expenses only in very limited circumstances in connection with court cases.


Now the fees can be recovered if the taxpayer demonstrates that the IRS acted unreasonably. The award isn’t just restricted to expenses in court but also covers the earlier charges for lawyers and accountants at the administrative appeals level of the IRS.

The IRS must recognize and rectify mistakes, the new law says. For example, the IRS previously enforced penalties against a taxpayer whose mistakes were based on bad advice from the IRS itself. Under the new law, the government can’t levy any penalties if the taxpayer got erroneous written advice from the IRS.

In addition, a taxpayer can recover damages if the IRS fails to remove an incorrect lien on his property. The taxpayer might have paid his full obligation, but the government neglected to remove a lien on his house. If the sale of the house falls through because of the lien, the individual could sue the IRS for damages.

IRS policy forbids any quotas, but local agents and managers often ignored Washington’s mandate. They can’t do it anymore--managers will be required to sign a statement twice a year that they don’t use quotas to rate their agents’ performance.