Dealing With IRS: It Pays to Know Your Rights

Ken and Gina Brown ran headlong into what the Internal Revenue Service says should never happen. The Los Angeles taxpayers, who asked that their real names not be used, received a “deficiency notice” from the IRS stating that Gina owed more than $1,400 in past-due taxes.

The form noted that the tax related to a 1986 return that Gina had filed with her ex-husband. It threatened further action if the bill wasn’t paid within 10 days.

Gina called the IRS service number listed on the form to ask how the IRS had come up with this amount and to find out why she hadn’t heard about the deficiency before. The IRS agent told her that the specifics didn’t matter. “You owe the tax,” the government official said. “Just pay it.”

The conversation went downhill from there. Gina’s husband finally took the phone and hung up on the IRS agent, who promptly called back and said: “Just for that, the tax is due immediately. Send a cashier’s check or we will tap your bank account.”

Petrified, the Browns complied.

It wasn’t until later that the Browns found out what they should have known all along: Taxpayers have rights.

In fact, a Taxpayer Bill of Rights was passed into law in 1988. It specifies just what the IRS can and cannot do when it comes to collecting tax and dealing with taxpayers. It requires the IRS to explain your rights in various situations, and it specifies how long taxpayers have to pay deficient tax bills.

Unfortunately, there is no single spot in the tax code that lists all of these rights. Instead, they are sprinkled throughout applicable tax laws, showing what rights you have in each situation.

The Browns have started to work through the system to get their situation resolved and, possibly, get some money back.

What protection does the Taxpayer Bill of Rights offer? How can you determine your rights when dealing with the IRS? The actual Taxpayer Bill of Rights is too lengthy to reprint here. However, here are some of the main provisions:

* You have the right to know that you have rights. When the IRS audits you or attempts to collect back taxes, it must inform you of your rights. Generally, the service does this by providing its Publication 1, a four-page brochure entitled “Your Rights as a Taxpayer.” (You can get a copy by calling (800) TAX-FORM.)

* Those who have been called in for an IRS “interview”--an in-person audit--have the right to tape-record the meeting, if they give the IRS advance notice.

* If you are concerned about the progress of an IRS interview, you can suspend the meeting at any time to hire a professional to represent you.

* Your representative may attend meetings on your behalf. Unless you have been officially summoned to appear, you need not attend these meetings in person.

* Taxpayers can rely on the IRS’ written advice. If this advice proves wrong, the IRS will abate taxes and penalties related to the error. This rule doesn’t apply if you failed to provide accurate or adequate information when asking the question. And it does not apply to advice given over the phone.

* Any notice demanding additional tax will contain a description of the basis for the notice and an identification of the amount of tax due, interest and penalties.

* The IRS must give 30 days’ notice before seizing funds in your bank account to pay back taxes.

* If you are threatened with an IRS lien or levy, the agency must explain the process--including how to appeal.

* Certain assets, including public assistance payments, cannot be levied to pay a tax bill.

* Banks must hold the assets in a levied bank account for 21 days before turning them over to the IRS to give taxpayers the ability to appeal.

* Taxpayers can appeal a federal tax lien when it has been erroneously filed. A filing would be erroneous if the tax has already been paid or if it could not be collected because of a statute of limitations or a bankruptcy. You can’t appeal a lien to challenge the underlying tax liability.

* If you fight the IRS in court and win, you can claim reasonable litigation and administrative costs. But administrative remedies must be exhausted before you sue.

* You can sue the federal government--but not individual service employees--if the IRS knowingly or negligently fails to release a tax lien when a release is warranted.

* You can sue the federal government--but not individual IRS employees--if the IRS intentionally or recklessly disregards the requirements of the tax code in the collection of tax. However, if the court determines your suit is frivolous or groundless, it can award the U.S. government nuisance damages of up to $10,000.