Bill Would Limit IRS Access to Taxpayer-Preparer Talks

The right of the Internal Revenue Service to seek information about taxpayers’ private conversations with their accountants would be sharply curtailed under legislation that a leading House Republican plans to unveil today.

The proposal, part of a bill sponsored by Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee, would acknowledge for the first time a confidential relationship between a taxpayer and a tax preparer.

Experts noted that, if approved, the provision would extend significant protections to low-income and middle-class taxpayers.

Until now, only conversations between an individual and a tax attorney have been off-limits to the IRS, a practice that essentially has given wealthy taxpayers represented by lawyers greater protection than individuals who rely on storefront tax preparers.

The proposal comes in the wake of increasingly strident attacks on the IRS in Congress for abuses of taxpayers and for the agency’s serious internal management problems.

Archer is throwing his weight behind a range of additional measures intended to enhance taxpayer rights. For instance, he also wants to stop so-called “lifestyle” audits on individuals who appear to be living above their means and shift the burden of proof to the IRS when tax disputes reach U.S. Tax Court.

Ari Fleischer, spokesman for the House Ways and Means Committee, said: “There is some information the U.S. government, with all its powers, should not be privileged to. The Senate Finance Committee hearings [into IRS abuses] were reminder enough about why we should go the extra mile to protect the privacy rights of taxpayers.”

Although these proposals would affect a small minority of taxpayers, their backers said they would strike at the widespread perception that taxpayers cannot win against the IRS.

Taxpayers often assume that their conversations with accountants and other tax preparers are private, but the IRS can introduce the substance of those conversations in later audits and court cases. The IRS also has sought in the past to try to determine a taxpayer’s “state of mind” when tax returns were prepared.